When Sarah from Seattle recently called into The Ramsey Show, Dave Ramsey described her situation as “a ticking time bomb."

She owns a condo in Seattle with a $2,300 monthly mortgage plus homeowners association (HOA) fees, and purchased a second property in Florida last year at the top of her budget.

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Now, the Florida mortgage costs her $4,000 a month, rental income of $2,700 doesn’t cover it and the property remains in negative equity.

Why she’s underwater

Originally from Florida, Sarah knew she eventually wanted to return to be near her aging parents.

She says she "freaked out because of the housing situation.” With prices going up, she worried that if she waited too long she’d get priced out of the market. So, she went ahead and bought the second property.

Unable to rent it out for more than a year, Sarah finally has tenants, but their rent falls $1,300 short of her monthly mortgage payment. She’s spent approximately $23,000 in closing costs and $50,000 more trying to sustain the property.

Despite having $50,000 in savings and a strong take-home pay of $8,600 a month, she simply can’t afford to live this way anymore.

Ramsey and cohost Jade Warshaw strongly recommended that Sarah sell the property.

“You have a problem here that is not going to get better … If you have to write a $10,000 check to get rid of your mistake, do it,” Ramsey asserted.

The pair recommended immediate action, first by quickly listing the home. Ramsey warned she’d pay some "stupid tax" for her mistake, but she needed to take a short-term loss to stop the financial crisis.

"You’re going to get some of your money back, but you’re not going to get all your money back," he said.

Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it

The sunk-cost fallacy and its dangers

Sarah’s reluctance to sell stems from the sunk-cost fallacy: the belief of having invested too much to walk away. Ramsey warned against this mindset.

"There may not be a way to get back the money that’s lost. You’re doing well if you can break even … Mistakes cost you,” he said.

Ramsey and Warshaw advised Sarah to focus on cash flow, not past expenses, cautioning against letting emotional attachment or fear keep her trapped.

If she keeps the home, they warned that the situation could get worse through things like insurance issues, vacancy cycles or emergency repairs.

"We’re trying to stop the bleeding, not reverse the fact that we had a car wreck."

Sellers in Florida markets like Miami are increasingly delisting homes rather than cutting prices, suggesting buyers are becoming scarce.

Meanwhile, Florida home prices dipped 2.2% year-over-year to a median of around $412,400 as of May 2025, according to Redfin. These conditions give all the more reason for Sarah to get out of the market sooner than later.

Plus, carrying the property risks continued price drops, increasing home insurance and HOA costs and the chance of foreclosure. Florida had 2,780 foreclosure starts in May 2025, among the highest in the U.S.

Homeowners there face rising insurance premiums, with the average cost increasing 45% from 2017 to 2022, alongside higher HOA fees and property taxes — all putting sellers at risk even in rising markets.

Nationwide, it’s not much better. In May across the U.S., housing prices were up just 0.6% to $440,910, while the number of homes sold was down 4.5% year over year. Affordability continues to suffer due to high mortgage rates and regional oversupply.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.