‘Suck it up, buttercup!’: Raleigh man took a job in another state while his wife is pregnant and faces foreclosure on their $366k house. Here's what Dave Ramsey called ‘mathematical suicide’

Dream homes turn into nightmares

About 82% of Americans who purchased a home in 2023 or 2024 have at least one regret, according to a study by Clever Real Estate. The most common regret is buying a home that requires too much maintenance, and 23% of those with remorse said they spent too much for the home.

Forty-three percent of recent buyers said they've struggled to make their mortgage payment on time, and 44% said they've had to take on additional debt to maintain their standard of living.

Ted is certainly part of this cohort of regretful homeowners. He paid $366,500 for a house with just 5% down and a 7% interest rate, which means more than 50% of his after-tax income goes to the mortgage. Ramsey described this purchase as “mathematical suicide.”

Taking a new job in Nevada has compelled him to put the house on the market, but the only offers he has received have been below his purchase price. Ted estimates that he would owe $30,000 to the bank if he accepted the best offer he’s received in the recent months.

Negative equity — a situation where a property is worth less than the outstanding mortgage balance — is rare. As of the first quarter of 2024, only 1.2 million homes or 2.1% of all mortgaged properties in America were “underwater,” according to the latest CoreLogic Homeowner Equity Report.

As a forced seller on an underwater property, Ted now faces a range of unpleasant choices.

Invest in real estate without the headache of being a landlord

Imagine owning a portfolio of thousands of well-managed single family rentals or a collection of cutting-edge industrial warehouses. You can now gain access to a $1B portfolio of income-producing real estate assets designed to deliver long-term growth from the comforts of your couch.

The best part? You don’t have to be a millionaire and can start investing in minutes.

Learn More

Unpleasant choices

Ramsey recommended waiting a few months to see if the property sells for a breakeven price. If, by then, the property hasn’t sold for a reasonable valuation, Ted can offer the bank a short sale or deed in lieu of foreclosure. In either case, he must convince the bank to take a haircut on the mortgage.

Ramsey estimated that if the home gets foreclosed on and the bank sells it for around $200,000 they will sue Ted for the $110,000 deficit, including foreclosure fees and back payments.

However, Ramsey failed to suggest another solution that could potentially put Ted in a better position: staying in Raleigh. By quitting the Nevada job and looking for a similar role locally, Ted can make his pregnant wife much more comfortable, avoid a forced sale on the house and wait for the market to eventually offer him a breakeven price for the property.

In fact, taking multiple jobs — as 8.2 million Americans have done, according to the monthly Current Population Survey — could help Ted manage the mortgage and save up enough money to cover the negative equity if he chooses to sell later.