Not sure whether Foreclosure is the best option?

Guest 0.10 Dollars($)

Hi,
I purchased a home in South Florida about 2 years ago and with the housing market getting worse, the value went down at least 35,000. I do not have any vested interest in keeping the property but nor do I want want ruin my credit. I have good credit right now but unfortunately, I'm dipping into my savings to pay my mortgage payments each month. I have no deliquent payments right now but will not be able to pay this in the upcoming months b/c i've used all my savings. I'm desperate to find an alternative, however I'm thinking of forclosuring the property. Can you tell me what my best option is? If I foreclosure the property, what kind of tax liabilities will I incur?
Appreciate any insight you have and help with this difficult situation,
Cheri

smithsussane · Posted: Tue Sep 30, 2008 9:36 pm Post subject:

Hi Cheri!

Welcome to Forums!

I do not think foreclosure is a good option for you. It will ruin your credit history for a long period of time. There are two other options left with you - deed in lieu and short sale. Both the processes are more or less the same. You will have to give away the property to the lender and he will give you a note stating that the debts are paid. Then he will sell the property in the market to recover the debts. However in most of the cases, the lenders are not always able to recover the full debt and there remains a deficient amount. In case of deed-in-lieu, the lenders forgive the deficient amount whereas in short sale, you will have to pay this deficient amount. If the deficient amount is forgiven, then you will have to pay taxes on it.

Feel free to ask if you have further queries.

Sussane

jerry · Posted: Wed Oct 01, 2008 2:48 am Post subject:

Hi Cheri!

You have the options of short sale and deed-in-lieu open. A foreclosure will ruin your credit badly and it will remain on your credit report for at least 7 years. So I will recommend you to either choose short sale or deed-in-lieu foreclosure where the negative impact on your credit report will be much less.

Thanks,

Jerry

gmakerley · Posted: Wed Oct 01, 2008 7:28 am Post subject:

in this marketplace, lenders are much more likely to accept a short sale.

however, there is a caveat to that: given that your property is in south florida, where home values have dropped precipitously in the last couple of years, you may find it difficult to sell; as you'll be in competition with all the other folk who have suffered a similar fate.

your best bet is to speak with a real estate agent to get a feel for the current resale market and an idea of current market value; then you can come up with a plan to present to your mortgage lender - either the short sale or the deed-in-lieu.

i agree with the above, that foreclosure is not preferable.

Guest 0.10 Dollars($)

if you were trying to stay in your house there is help out there that can present some healthy alternatives. Unfortunalty realtors are not aware of the ever changing market place and they can list your house for a short sell but that doesnt mean you will sell it in a promply manner. The bank has to make the final say whether or not to accept the offer and most short sells can take 6 months. With a died in lieu though there is no set in stone guidelines on if a bank will agree upon. You usually have to have three price drops and then the bank will think about a died in lieu. Instead of talking to a realtor (who most by the way are dumb as nails and can do one thing well and thats show houses to clients), talk to a proffesional such a real estate attoney or a loss mid firm who deals with these issues on a daily basis. They will give you some insight on the best way to go about your situation.

gmakerley · Posted: Wed Oct 01, 2008 12:31 pm Post subject:

wow, charlie!

i think your commentary is way too strong, frankly. yes, there are realtors who don't know much about the short sale market. yes, there are lenders who are clueless, too. yes, there are posters who don't know it all either. i wonder if the latter fits? from your commentary, it would seem that you would like to think you aren't in that category....everyone is.

one of the problems we've found is that nobody was prepared for this market. property values have fallen all across the country, and in some locations, the falls have been enormous. no doubt, there are many realtors who got caught up in something they had no experience with. lenders got caught with their pants down too (have you noticed the number of banks/lenders, etc. closing lately?).

i don't disagree with your recommendation about a real estate attorney or a loss mitigation firm, but i don't know too many attorneys who have their pulse on the real estate market such that they can assess current values. maybe in your part of the world they exist more regularly.

at any rate, our poster has a lot of things to consider and, now, a lot of places to go to get information. but be careful how you choose your words - everything we say does come back around, after all.

thanks for the insights and come back and join us as a member of the community.

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