Underwater?

This lone, abandoned house-boat in an otherwise floating neighborhood of luxury yachts, elegant sailboats and university rowing teams, caught my imagination today. Though it sinks slowly alone in Marina del Rey, for me it is a most obvious, and poignant, metaphor for the predicament that many - very many - homeowners are experiencing today: carrying a mortgage balance that is more than their property is worth. Sometimes also referred to as "being upside-down", I feel that the term "underwater" is more accurate.

As a nation I don't need to tell you, we're three years into a huge financial crisis that has most notably affected employment and real estate for the worse. For those who've suffered the additional financial fall-outs of health crises, divorce, elder care and/or death of their partners, and more, the suffering has been magnified, often forcing liquidation of assets, or drawing on real estate equity.

Thus we have two type of homeowners with mortgage obligations greater than their property value.

"Up-side down" suggests that nothing less than a polar reversal, a total revolution, would set the situation "right-side up" once more. This is accurate for some homeowners. They cannot make their payments and they cannot sell to repay the full-debt owed their lenders. A few have successfully modified the terms of their home-loans, but many more have tried and failed, or more sadly, not tried at all and let their mortgages lapse into default, a.k.a. Foreclosure. If they haven't already walked away, the Short-Sale is their best option. Yes, it will hit their credit rating.... but not nearly as hard as bank repossession.

But "Underwater" describes a growing number of homeowners. "Stuck" might be an apt term for some of them, who would sell and move if they only could. These people meet their monthly loan obligations, but any equity they may once have had has been wiped out. They owe more than their home is worth. They are stuck. For those in this situation, let me extend the maritime metaphor further and offer this message of hope: tides change. In real estate, not nearly as often as the sea, so here are some tips for coping:

• Rennovate. Now's the time to do it. So this was the starter home? Make it your dream home now, so it will be someone else's passion when(if) you decide to sell later.
• Remodel. Also a good time. You'll be surprised how quickly you get a call-back from that contractor that didn't acknowledge you 4 years ago.
• Rent. You want to move up and elsewhere? Consider renting. You rent, and you rent your current home to someone else. Under current regulations, you can still take the tax advantages of selling your primary residence if you lived in it 2 out of the most recent 5 years. Check with your tax professional.

I would love to hear any other ideas on this topic. And, as ever, I welcome readers' questions!