They bet the house in Vegas, and lost
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What do you say to a young couple who bought their dream house in Southern California in 2005 and then doubled down on real estate in 2006 by investing in a second home, in Las Vegas?
Michael and Esther Matson, pictured at right, talked about their personal finances for a story that appeared in yesterday’s Los Angeles Times. They owe $578,000 on their home in Walnut, which is probably worth $520,000 now. And they went in as investors on Las Vegas house (no-money-down, $328,000 at purchase) that’s now worth about $220,000:
‘Right now, we’re taking the money and throwing it in the trash,’ Michael said. ‘You can always look back and say you should have done something else. It’s a lesson learned.’ Initially, the Mastons figured they could hold onto the Las Vegas property for five or six years and make a profit. And if it didn’t work out, well, they were young and could recover. ... ‘It was a bad decision, but we’re ready to see what we can do about it,’ said Esther, a compliance officer with the state Department of Insurance. The couple pay $51,600 a year, nearly half of their combined income of $110,000, for mortgages on the Las Vegas property and their home in Walnut. There’s nothing left over to add to the $900 they’ve saved thus far for each of their 6-year-old children.
It’s tempting to make this personal and make judgments about the couple’s financial savvy, but let’s not. They gambled on real estate at a time when a lot of people were doing it -- every cul-de-sac in Southern California had at least one resident blowhard bragging about how much money he had made off the real estate market.
The Matsons’ options, as laid out by financial planners in the article, are: hope for a short sale in Vegas, let the Vegas house go into foreclosure, try to renegotiate the loan with the bank, or declare bankruptcy. I’m wondering your thoughts on the best course of action, for both the Matson’s and their two lenders in Las Vegas (first mortgage, $253,000, second, $75,000). Your thoughts? Your advice?
-- Peter Viles
Photo credit: Los Angeles Times