Definition of House Poor (via Investopedia): “A situation that describes a person who spends a large proportion of his or her total income on home ownership, including mortgage payments, property taxes, maintenance and utilities. House poor individuals are short of cash for discretionary items and tend to have trouble meeting other financial obligations like vehicle payments.”
Investopedia goes on to explain that: “People typically become house poor because they buy more house than they can afford, but there are other ways that people can become house poor as well. For example, some people will become house poor after the birth of a child, when one spouse decides to stay at home with the new addition, rather than going back to work.”
After this recent post called In The Market For The American Dream – Home Ownership, a reader wrote in with a question. She asked,
“So what do you do if you ARE house poor? We’re underwater (have snorkels though) and would like to sell. However, six or seven houses in our neighborhood are up for sale too. Should we just wait it out? Walk away? What’s the best answer?”
I definitely don’t know the answer to everything and since I didn’t have an answer for her I wanted to talk to someone who could help guide her in the right direction.
I went straight to our real estate agent Jim Rodriguez to get his opinion on what she should do.
Jim said, “There is no question that they should attempt to sell. Even if they just break even on the sale, it would free them from the financial obligation without the negative credit impact of walking away.”
What do you think? Do you agree with Jim’s answer or have another idea or option that might help this reader?