My wife and I are in trouble...anyway, we bought a house in November and I lost my job this month. We are looking to go back to Texas and sell our home but we are going to lose money...even if we sell the home for 130,000 we will still owe money. The house right next door is selling for 117,900 and it is only 150 sq feet smaller. What are our options? Can we foreclose? I know what some of the drawbacks are, but it really seems like the only option. Ugghhh.
Home Foreclosure
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contact your lender and see if they will do a short sale.( Which means they would take less for the house then what you owe). They might agree to it or might not. Worst thing they can say is no we wont take less then what you owe. In that case , if you let the house go back they are out mortgage payments, have to pay legal fees to foreclose on you and then have to pay to sell the house. It's a much better option for them if they just let you sell the house for 117000 or 110,000 with you getting no proceeds at all from the sale. Good Luck.
hitbyatrain
250+ Posts
How similar is the house next door? There's more to valuing a house than just the square footage. Maybe you can get more than you think.
Can you afford to pay the difference at closing? What's wrong with just paying what you owe. You won't be the first seller to ever show up at the closing table with a check. If you have other assets, the lender can sue you for their losses (not in California). This doesn't happen often because most lenders don't think they'll ever collect the judgement. If the lender thinks you have the cash though, they can come after you. You could end up paying more if they successfully sue you.
How about just getting a new job where you are now and staying in your home?
Can you rent the home to someone for an amount that will cover your mortgage payment?
Your credit will be ****** if you walk away. Of course, that's not the end of the world. If you ever want to borrow any more money someday when you buy a car, buy a new house, get a credit card, etc., the money you save now walking away from your house may cost you plenty more in the future.
If you really want to walk away, a short sale is the way to go. Interview some Realtors first and get their opinion of value in writing. Then call the lender and explain the situation. They will take you more seriously if you provide them with specific data. The conversation will go somethingl like this,
"Hey, Lenderperson. I lost my job and need to get out of my house. I'm moving to take a new position in Texas. I've interviewed three Realtors and they estimated my house will sell for $110,000 after closing costs. Unfortuantely, I owe you guys $125,000. I don't have the means to make up the difference out of my pocket. If I find bring a willing buyer to the table, will you accept $110,000 to release the lien."
Of course if were the lender, I'd respond as follows, "Sorry to hear about your sitation. Sure, we'll release the lien if you pay us $110,000, but you'll have to sign an unsecured note to us for the difference. You can pay the remaining $15,000 over the next 10 years at 12% interest."
Bernard
Can you afford to pay the difference at closing? What's wrong with just paying what you owe. You won't be the first seller to ever show up at the closing table with a check. If you have other assets, the lender can sue you for their losses (not in California). This doesn't happen often because most lenders don't think they'll ever collect the judgement. If the lender thinks you have the cash though, they can come after you. You could end up paying more if they successfully sue you.
How about just getting a new job where you are now and staying in your home?
Can you rent the home to someone for an amount that will cover your mortgage payment?
Your credit will be ****** if you walk away. Of course, that's not the end of the world. If you ever want to borrow any more money someday when you buy a car, buy a new house, get a credit card, etc., the money you save now walking away from your house may cost you plenty more in the future.
If you really want to walk away, a short sale is the way to go. Interview some Realtors first and get their opinion of value in writing. Then call the lender and explain the situation. They will take you more seriously if you provide them with specific data. The conversation will go somethingl like this,
"Hey, Lenderperson. I lost my job and need to get out of my house. I'm moving to take a new position in Texas. I've interviewed three Realtors and they estimated my house will sell for $110,000 after closing costs. Unfortuantely, I owe you guys $125,000. I don't have the means to make up the difference out of my pocket. If I find bring a willing buyer to the table, will you accept $110,000 to release the lien."
Of course if were the lender, I'd respond as follows, "Sorry to hear about your sitation. Sure, we'll release the lien if you pay us $110,000, but you'll have to sign an unsecured note to us for the difference. You can pay the remaining $15,000 over the next 10 years at 12% interest."
Bernard
I have never heard of a lender asking you to finance the remainder after a short sale.
They will issue you a 1099 for the difference.
In Bernard's example, that is 15K.
if you can find a renter, do it. Or sell it to someone who might want it as an investment property.
good luck
They will issue you a 1099 for the difference.
In Bernard's example, that is 15K.
if you can find a renter, do it. Or sell it to someone who might want it as an investment property.
good luck
This may sound trite, but do everything you can to save the house. You'll be glad you did. Eeven if it means going back to eating ramen and working two jobs.
If you just can't, a short sale is the next best thing.
If they forclose, and the sale comes up short, they can sue for the difference, forcing you into bankruptcy.
If you just can't, a short sale is the next best thing.
If they forclose, and the sale comes up short, they can sue for the difference, forcing you into bankruptcy.
I didn't mean to make it sound like "foreclosure" was like filing for bankruptcy. i know that if we don't pay for like 90 days then the foreclosure process starts. at least i think i know that.
the thing about having a check ready to go at closing is that we have NO extra money right now. almost none in savings. medical bills, wife going to see her family in brazil, etc have lead to that. we are talking about $7,000 give or take that we will need if we sel lthe home. of course thats if we sell it for $130,000. we bought it at $128,900. my parents (hate this) have said they can get a small loan to cover whatever we might owe and we can pay them back. always an option.
the thing about having a check ready to go at closing is that we have NO extra money right now. almost none in savings. medical bills, wife going to see her family in brazil, etc have lead to that. we are talking about $7,000 give or take that we will need if we sel lthe home. of course thats if we sell it for $130,000. we bought it at $128,900. my parents (hate this) have said they can get a small loan to cover whatever we might owe and we can pay them back. always an option.
suck it up and take the parents option. Seriously, do ANYTHING you can to avoid foreclosure.
By the way, we borrowed some dough from my inlaws once many years ago. Paid back every penney with interest. MIL said it was her best performing investment during that period. She still asks if we want to borrow any more money from her. Point is, it was a win win for both of us. No shame in that.
By the way, we borrowed some dough from my inlaws once many years ago. Paid back every penney with interest. MIL said it was her best performing investment during that period. She still asks if we want to borrow any more money from her. Point is, it was a win win for both of us. No shame in that.
tbone..yeah thats what we will probably do. that option wasnt "available" when i first posted this. it will be the best i think. ours will have built in interest too, they will just get a loan from the bank. their credit is stellar. its sickening. anyway, appreciate all the info guys.
Touchdown_Texas
500+ Posts
If you didn't put significant cash into the house, I would try and do a short sale.
Call the lender and ask to speak with the work-out department. Inquire about your options, they will likely suggest short sale. Most lenders in this market will more than gladly go this route with you, rather than go thru the cost of foreclosure. Then find a realtor who specializes in short sales and list the house. Once your house is listed, and the lender knows your intentions (to short sale), you'll be surprised how little they'll bother you from that point. Then just move on with your life while the realtor tries to sell your house.
Some things to keep in mind. Make sure the lender will forgive the entire mortgage in writing so they don't come back and ask for the difference later. Most lenders will oblige. Good thing is you won't have to worry about getting 1099'd because of the recent law. Huge break. Bad thing is I heard you may not be able to buy another house for 3 or so years (you'll have to look into this since I'm not sure about the length of time). Good luck.
Call the lender and ask to speak with the work-out department. Inquire about your options, they will likely suggest short sale. Most lenders in this market will more than gladly go this route with you, rather than go thru the cost of foreclosure. Then find a realtor who specializes in short sales and list the house. Once your house is listed, and the lender knows your intentions (to short sale), you'll be surprised how little they'll bother you from that point. Then just move on with your life while the realtor tries to sell your house.
Some things to keep in mind. Make sure the lender will forgive the entire mortgage in writing so they don't come back and ask for the difference later. Most lenders will oblige. Good thing is you won't have to worry about getting 1099'd because of the recent law. Huge break. Bad thing is I heard you may not be able to buy another house for 3 or so years (you'll have to look into this since I'm not sure about the length of time). Good luck.
Don't rule out the loan thing, but I like the extra work idea. I don't know what shape you are in physicallly, or where your relationship with the wife is, but I'd look at getting a night job if possible. I work 7-4, I could easily do a 5-11 at a gas station or HEB if I had to. And there are people that probably do that and more.
HoustonHorn
250+ Posts
I'd say if you are willing to set up a payment plan with the in-laws, and you have a good relationship with them, and they are willing to wait for a period of time until you can get another job before making payments, then that is the best option.
I would not have a problem getting a loan from my parents or my wife's parents because I know for a fact that there is no chance that I won't repay them, with interest. The problems arise when family members take advantage of the situation and don't feel an obligation to pay back the money they borrowed.
In this case, if they've offered, they feel comfortable that y'all will pay them back. Set up a plan to pay them back.
Until then, you don't have a job. Spend time looking for a job (in Texas if you are planning on moving), but also seeing what you can do around the house to clean it up and make minor improvements without spending money. That work may make several thousands of dollars difference when you sell the house.
This advice is clearly based on the fact that you feel comfortable with getting a loan from your in-laws and that everyone involved is willing to enter into an arrangement for paying the money back when y'all are able to move and get new jobs in Texas.
Don't foreclose, and investigate the short-selling option closely to see how it will affect you in the next few years. You don't want to mortgage your future for a few thousand dollars now.
I would not have a problem getting a loan from my parents or my wife's parents because I know for a fact that there is no chance that I won't repay them, with interest. The problems arise when family members take advantage of the situation and don't feel an obligation to pay back the money they borrowed.
In this case, if they've offered, they feel comfortable that y'all will pay them back. Set up a plan to pay them back.
Until then, you don't have a job. Spend time looking for a job (in Texas if you are planning on moving), but also seeing what you can do around the house to clean it up and make minor improvements without spending money. That work may make several thousands of dollars difference when you sell the house.
This advice is clearly based on the fact that you feel comfortable with getting a loan from your in-laws and that everyone involved is willing to enter into an arrangement for paying the money back when y'all are able to move and get new jobs in Texas.
Don't foreclose, and investigate the short-selling option closely to see how it will affect you in the next few years. You don't want to mortgage your future for a few thousand dollars now.
RockyBalboa
500+ Posts
I agree w/the DR recommendation. From what he says on the radio, if all else fails, I'd gather you should do a short sale "with no recourse" clause added. Meaning the lender can't go after you in the future for the balance owed. Have a realtor do a market analysis including recent sales, what's not selling in your neighborhood, days on market, etc. & send that to the lender with any reasonable offer that you get. Good luck.
Drew Shirley
100+ Posts
What state are you in now?
Other options not yet mentioned are to sell your house on a wraparound mortgage, or simply selling your house "subject to" the existing loan. In either scenario, your loan will stay in place, but someone else will cover the payments. This will probably violate your loan's "due on sale" clause, but your lender won't care as long as it still gets paid. PM me and I can explain how this works.
I don't know what state you are in, but short sales are very hard to come by in Texas because it's so easy for lenders to foreclose. If your state has easy foreclosure laws, the lender might not be very receptive to your application, and you'll waste a lot of time and energy on the application, only for it to be denied.
Other options not yet mentioned are to sell your house on a wraparound mortgage, or simply selling your house "subject to" the existing loan. In either scenario, your loan will stay in place, but someone else will cover the payments. This will probably violate your loan's "due on sale" clause, but your lender won't care as long as it still gets paid. PM me and I can explain how this works.
I don't know what state you are in, but short sales are very hard to come by in Texas because it's so easy for lenders to foreclose. If your state has easy foreclosure laws, the lender might not be very receptive to your application, and you'll waste a lot of time and energy on the application, only for it to be denied.
You need to do everything you can to avoid foreclosure, deed-in-lieu of foreclosure, or anything that is going to result in the bank having to charge off any of your debt. If they do, rest assured, that it will find it's way on your credit report.
Rely on the kindness of your relatives. Just make sure you pay them back. Particularly if they are your inlaws. I cannot stress that enough.
Rely on the kindness of your relatives. Just make sure you pay them back. Particularly if they are your inlaws. I cannot stress that enough.
pasotex
2,500+ Posts
I think you need to step back and look at your overall financial situation. The house is just one piece of the puzzle and while it is an important piece, it is not the only piece. I am not certain from your description whether keeping the house is in your best interest or whether it will just dig you a deeper hole. From your description, it sounds like you are already lowering your credit rating and investing good money after bad doesn't help this long term. There are times where a foreclosure can be a better option than keeping the house even though it will significantly impact your credit for years to come. I would suggest going to the free credit counseling at the local YMCA to get an idea from someone as to where you stand overall because I would hate for you to wind up right back in the same place in six months especially with a house that is worth less than you paid for it. For some good reasons and some bad reasons, a house is the last thing that most people want to give up even though there are times where it is better to walk away and start over.
From my understanding of the situation, he is at most 12 grand under water. It seems ridiculous to **** your credit for years to come over that small an amount. I agree that you need to look at your overall financial picture; where can you save money now? Do you have cable tv, high speed internet, cell phones? Get rid of them. Go out to eat? Start eating at home. You don't have the money for frivolities now.
Drew Shirley
100+ Posts
Foreclosure should always be the very last resort. It will ruin your credit for seven years.
pasotex
2,500+ Posts
and for some people ruining their credit is a good thing because good credit is what got them into trouble in the first place
if you lose a good paying job and have a fair number of debts, you are very likely to harm your credit in a very short period of time
a short sale will harm your credit, but it is already going to take a hit from all the other debts
while I agree that foreclosure should almost always be the last resort, I have seen instances where people make a bad situation much worse by trying to hold on to a house despite its negative value
I think a credit counselor or a consumer bankruptcy attorney are two people who you might want to consult because they can look at your overall situation and the long term impact of your decisions
if you lose a good paying job and have a fair number of debts, you are very likely to harm your credit in a very short period of time
a short sale will harm your credit, but it is already going to take a hit from all the other debts
while I agree that foreclosure should almost always be the last resort, I have seen instances where people make a bad situation much worse by trying to hold on to a house despite its negative value
I think a credit counselor or a consumer bankruptcy attorney are two people who you might want to consult because they can look at your overall situation and the long term impact of your decisions
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