Denial Worst Enemy When Hard Times Hit

I have found in my short life that our "trending" chart can resemble a roller coaster rather than a blue chip company's profits chart and that can mean major challenges when it comes to homeownership.

There are times in our lives when we must come to grips with reality and make very difficult personal decisions to preserve our financial and mental well being. Job loss, sickness, death and divorce are all reasons for someone needing a home -- quick and for short term -- while they disperse with the property or find a more permanent housing situation.

The most common problem is when a homeowner loses a job (or in our double-income culture, just one of the two jobs is lost). For some folks, this is a liberating event that launches them into a different direction, professionally. If they have some savings, they may start a business. For many of my colleagues, that's exactly how they started up their real estate careers -- through a job loss. When the dot-coms melted down four years ago, the ranks of Realtor population locally in the national Capitol area swelled by nearly 20 percent per year. And now many of those former IT professionals are using their skills to make pretty good money in a growing industry.

Then I've seen the folks who live in denial. They think things will turn around -- sooner rather than later. And two to three missed mortgage payments later, they are facing late notices and threats of foreclosure.

Regardless of how you lost your job -- downsizing, health, whatever -- don't wait too long before making the tough decisions that need to be made about how to preserve your wealth in your home.

First of all -- cut all your expenses to the bone. You would think most people in this situation would do this, however, it's amazing how plastic gives people a false sense of security. Instead of paring down to the basics, they hang on to the extended cable, satellite, two cell phones, extra car payment, dinners out with friends and gift buying, because they just know their unemployed situation is not going to be a long-term problem. Hopefully, you're right -- but don't be foolish.

Obviously, you need a financial support team. Get over the embarrassment and call family, friends, clergy, etc., and let them know you've just lost your job or can't work because of your health and that you need help now or will in the near future. Then the real tough decision needs to be made … do you need to scale down in your living? This means either selling your house or renting it out and moving into something more affordable.

The average household spends more than 20 percent of its income on housing payments, according to the 2004 State of Housing report published by the Joint Center for Housing Studies at Harvard University. It is the first payment that should be made when you are faced with a drop of income. If you cannot make that payment -- reach out to your support team.

Other options include:


Moving out temporarily (leaving furniture in place) and rent your home out as furnished for a short-term rental. The good thing about furnished rentals is that you can charge a lot more than the going rate. Add on to the fact that it's a short term and you can charge a bit more. Check with a local real estate company that has a corporate or relocation division. They are regularly looking for temporary housing for corporate clients moving in to your area or who need a place to stay while on assignment.

Scale down into a smaller, less expensive home and rent out your house for a year. Go ahead and take the plunge, pack up and move into a smaller dwelling or in with family/friends while you're getting back on your feet. Check with your local housing services, churches, synagogues, mosques, etc., for community support.

Sell. If you're in a robust market, it may be time to sell and take your equity to purchase another home outright with cash. Or -- find the temporary housing as described above and use the equity to live on until you can get back on your feet.
There are plenty of resources available to those who have hit the downside in life. Remember -- most likely, this is a temporary situation. Don't let pride and denial stand in the way of making the hard, but wise decisions.