Below, we look at the predicament of a typical family. The "Smiths" are making payments on a house that lost one-third of its value over the past three years. We then ask three Certified Financial Planners for solutions, which they provide in their own words.
Meet the Smiths
John and Sandy Smith, in their late 30s, are current on their house payments. They married last year. Sandy has a daughter, age 12, from a previous marriage. Near the market peak in 2005, Sandy purchased a two-bedroom/two-bath condo in lovely Boca Raton, Fla., for $225,000. It seemed like a good buy at the time.
Because John and Sandy married, they discovered that the space in the 1,500-square foot condo is not optimal for a family of three, so they put it on the market eight months ago. Their asking price is $199,900 -- significantly less than what Sandy paid for it.
John and Sandy's real estate agent held an open house on two consecutive Sundays recently. No one showed up -- not even a nosy neighbor.
Their asking price is not low enough. Several neighbors have since put their condo units on the market, with asking prices ranging from $145,000 to $290,000. (John says the latter figure is way too high because no units have ever sold for that much).
A handful of units have sold since January; their listing prices ranged from $150,000 to $175,000. Three sold for in the neighborhood of $150,000. A fourth sold for $132,500. Some of the sellers owned their units for a very long time, so they sold at a profit, John says.