Need to sell home......gonna lose lotsa money.....help

mrcj001 · Joined: 16 Jan 2008 Posts: 7 5.66 Dollars($)

My Son is in the armed forces and purchased a home 2 years ago. (I tried to talk him out of it but he was convinced he was gonna make a profit on it). Well.....now he is being relocated and needs to sell the home and of course,the market is in shambles in his location. He tells me that he stands to lose 20K-30K on the home (407K loan).
The payment is about 2700.00 per month. Homes in his area rent on average 16-1800.00 per month.
His finacial advisor reccomends to sell the home at all cost. He will have to liquidate ALL his savings and investments and that still may not be enough.
He has to move in May and he his not sure what to do......

So WHAT would be the right move?????

jameshogg · Posted: Wed Jan 16, 2008 9:37 pm Post subject: RE: short sale and loan pay off

Hi Mrc,

Welcome to forums.

I think he should go for the sale because you never know how bad the market can be in the next few months. Perhaps the financial advisor can make a guess as to what the market will likely be in the near future and that's the reason he is asking your son to sell the home right now.

However, if the home does not sell for it's appraised value, then that will be considered as short sale and hence the lender may file a judgment to collect the deficiency (appraised value - sale price). So, in that case, your son will have to pay it and in case he cannot afford to pay it all, he can have a talk with the lender. If he can explain in details, the lender might give him some more time within which he can gather the required funds.

Thanks

jenkin7 · Joined: 04 Jun 2007 Posts: 939 140.77 Dollars($)

Hello Mrcj,

Is the house already listed with some real estate agency? I think your son might take the help of a real estate agent to sell the property as the time is short.

The lender might file a deficiency judgment to recover the unpaid mortgage balance but if your son lives in an anti-deficiency state then the lender will not be allowed to do so.

Could you tell me the place where your son lives then I might help you to find if he is protected by the anti-deficiency laws of the state or not?

If the lender is willing to charge-off the debt then it won't be a problem. For that your son has to talk to the lender directly. If he forgives the debt, then according to the new laws, your son is not even required to pay federal tax on this forgiven amount.

mrcj001 · Joined: 16 Jan 2008 Posts: 7 5.66 Dollars($)

The home is located in Maryland near the D.C area......He purchased the home for 407K and he is telling me that homes like his (townehouse) is selling in the 370-385K range.
He said that even if the home sold for 400K, by the time he helps pay the closing cost and other fees, he could lose 20-30K on this house.
He has excellent credit (755 score) and is not behind on payments......even if he keeps the house and rents it out, he will still be bleeding out about 1200 bucks a month.....plus he will have to rent a place at the new location,plus he is married and expecting a child in May.

Man, he is in a pickle.

larry · Joined: 27 Jun 2007 Posts: 3311 471.00 Dollars($)

Hi Mrc,

Welcome back.

I think you should not sell the house. If you sell the house, you will loose money. Credit report will be affected. Even after selling the house your son will have to pay (as you have said) $ 20-30K.

As your son is moving out he can rent it out. If he rent out the house, he will have to pay $ 1200 when he is actually gaining equity of $2700. See the housing market is down and it is at its bottom. I don't think it will go worse than what it is now. It may be 3 months or 6 months. Then the market will surely improve.

So if your son sells the house now, he will on loose all the money, time, and effort that he has invested for that property.

So as long as he can pay the mortgage payments, I think he should not sell the house. (My personal thoughts Smile

. Anyone may differ. But if you stick to it, you will surely gain in the longer run)

Now you and your son have to take the decision.

Feel free to ask if you have any further questions.

Best of luck,
Larry

0.10 Dollars($)

Larry, That was my first thought...dont sell the house.....do not take that big of hit on it....dont panic.....look at those payments as a investment.....

The problem is...sometimes he doesnt listen to me and thats why he is in this pickle in the first place........(do they have a forum for that??)

His finacial advisor says to sell....I say dont, "you bought it,now pay for it".
He can get by "OK" if he has a renter.....but if not, he could start missing payments and that what concers him.

jenkin7 · Joined: 04 Jun 2007 Posts: 939 140.77 Dollars($)

Hello Mrcj,

Maryland is not an anti-deficiency state. So the lender might seek a deficiency judgment to recover the unpaid mortgage balance and then your son shall remain liable to pay that.

I don't think it will be wise to put up rent on the house as he is being relocated and it is really difficult to manage. If there is any default in making the monthly mortgage payments somehow or the other, that will damage his credit.

In that case, I think, selling it off should be the best option. He should talk to the lender and come to a settlement for paying the remaining balance. If your son is able to convince the lender properly, then he might agree to help him in some way or the other.

lisascherzer · Joined: 04 Jan 2008 Posts: 599 69.58 Dollars($)

I would sell the home on a short sale. This is where the lender takes less than what is owed on the balance based on the market. If the home is not worth more than the sale price, you shouldn't have much trouble getting this approved from the lender. I wouldn't exaust savings on the difference when the lender may not require you to do so. But remember, that you have to get a short sale approved with your lender. Call your lender and get the requirements. When you recieve an offer to purchase the home, you will send the purchase agreement along with other information your lender may require to approve this. Short sales are becoming more common and lenders are being proactive so I think you should really look into this option.

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