If the bank is asking you the deficiency judgment then you should go for short sale as it will hurt your credit less than the deed in lieu of foreclosure.
What's your situation? I feel there is some confusion here. In a deed-in-lieu, you hand over the property to the lender which is then sold off to recover the mortgage debt.
In case the sale price falls short of the balance, there arises the question of paying the deficiency. But lenders are not allowed to demand it if there is a deed-in-lieu.
You cannot be responsible for the entire loan balance. Just clarify once again with the lender. It shouldn't be the scenario. _________________ Procrastination is the enemy of your financial sucess
MM Guest
Posted: Wed Feb 13, 2008 9:13 am Post subject: Is DIL the best option?
Hello,
I have an "upside down" mortgage right now, well two mortgages, equaling 100% of the property. To make a long story short, we had a baby a year after buying the property and have been struggling ever since. We've never been late on a payment, but as our baby grows, its becoming more difficult to stay in the property.
Some other facts:
- Both loans are interest only
- Second loan is a HELOC with variable interest
- First loan is a 5 year ARM that will adjust in 2010
- We do now want to stay in the place, the space is too small for three people, so I would rather get rid of it than refinance it
- In our same complex, places with upgrades have been on the market for 6+ months, and our place will be much more difficult to sell
I've been looking at various options for months, and Deed in Lieu seems the best option for us since we just want out. We do not want to go through trying to sell it because even when the market was at it's peak, the previous owners had a horrible time selling it (we found this out after we bought it).
So my questions are:
Is the DIL infact our best option? I don't want to owe any taxes or have the risk of the lender coming after me for any part of the mortgage
Would the first step be contacting a real estate lawyer, or the lender?
Apologies for the lengthy post, and thank you in advance.
MM Guest
Posted: Wed Feb 13, 2008 9:16 am Post subject: Correction
Correction on the post above:
We do not want to stay in the place, the space is too small for three people, so I would rather get rid of it than refinance it
Posted: Thu Feb 14, 2008 2:05 am Post subject: RE: Is deed-in-lieu the best option?
Not a problem MM. Let it be length but at least you should feel comfortable putting down your situation. The very first step that you should take is to contact the lender and state your problems in paying off the loan. Possibly he will suggest some option by which you can at least get out of the mess.
Now, as for short sale, as you say, the market isn't doing good, so chances of recovering the loan balance are very less. But it's not mandatory for you to pay the deficiency. I mean even if you don't pay it your debt may be canceled depending upon certain criteria. It's better that you ask the lender whether he'll collect the deficiency.
Regarding taxes, well, under the Mortgage Debt Forgiveness Tax Relief Act , you can avoid paying tax on canceled debt except if you are in California. But the advantage that I see in a deed-in-lieu is, the lender will probably not ask you for the deficiency. That's how it works for a deed-in-lieu. So, you can go for the second option. But whether you do a short sale or deed-in-lieu, you will be required to predsent a hardship letter to the lender explaining clearly the reason of not being able to pay. _________________ Mortgage Shopping made easy with booklet
Hawkpilot81 Guest
Posted: Wed May 21, 2008 1:08 pm Post subject:
I was told that a short sale would not affect my credit b/c I have not been late on a payment yet. Is this true? I am military and have to move.
Short sale affects your credit less than foreclosure or deed in lieu of foreclosure. So you can sale out your property and pay off the mortgage company. Have you consulted with your mortgage company yet? How much do you owe? Can you cover total amount by selling out the property? _________________ Good is the Enemy of Great.
Kemet Guest
Posted: Wed Jun 11, 2008 6:46 am Post subject:
I have seen a couple of posts where sellers have taken back mortgages that are now in default because the buyers were not able to make the payments any longer. The sellers now face the prospect of bringing a foreclosure action against the buyers. This is going to be a long, costly procedure. It is not at all unheard of for homeowners to neglect or even intentionally vandalize the property they are losing, adding measurably to the sellers loss.
The seller financed sale is going to increase in popularity out of necessity, as bank financing dries up and seller financing becomes an attractive alternative to motivate a sale, often at a higher purchase price than a regular sale could have produced.
The way to avoid the predicament mentioned above, the need to go through a long and costly foreclosure is to first put the property into a Land Trust, then sell the Beneficial Interest (the "shares" in the trust) to the buyer with the seller holding the bulk of the financing as in a regular seller financed deal.
Just like with an auto financed by a bank, the new owner gets all the benefits of ownership of the vehicle. With the Land Trust, the buyer gets all the benefits and advantages of owning the house outright; property tax write off, mortgage interest deduction, etc.
As with the financed auto, the only thing the buyer does not have is the title to the property. In the case of the auto, it is held by the bank. In the case of the Land Trust, the title is held by the trustee.
The trust agreement provides that if the owner does not keep up the property's payments, his status reverts to that of a rental tenant after a specified period to cure the default has passed.
The seller can then evict the former owner/tenant with an order from the landlord tenant court instead of a going through the foreclosure process.
Any and all money paid by the evicted owner is forfeited and the real owner is free to resell the property.
If you would like to learn more about how a Land Trust can help you quickly and safely sell a property that you can't sell, email me and I will send you a copy of an article I did on the subject. Did I mention that when you use a land trust to sell your property, there is no income tax or capital gain tax on the sale, no depreciation recapture on the sale?
Kemet _________________ Need help choosing the right loan? Get free consultation from community lenders/consultant
mac_7 Guest
Posted: Fri Jun 13, 2008 5:42 am Post subject:
That's some real good stuff about seller financing kemet. but what's all about depreciation recapture? any thoughts..
Posted: Mon Jul 28, 2008 4:44 am Post subject: RE: deed-in-lieu on home?
Hi Donwong,
Welcome to our community forums.
If you don't have enough money to pay for the mortgage, you may request the lender to reduce your payments or may be suspend them for a while, so that you gather enough funds to start paying the loan. By the way, are you in financial crisis or have you been through a job loss? would you mind putting down the reason for being unable to pay down the mortgage?
A deed-in-lieu can be used but why aren't you trying out a usual sale if at all your lender doesn't suggest any other option to help you get out of the mortgage? _________________ http://jessica.mortgagefit.com/
NICOLE Guest
Posted: Wed Aug 13, 2008 4:44 pm Post subject: DIL OR BANKRKUPTCY ON RENTAL PROPERTY
I HAVE MULTIPLE RENTAL PROPERTIES, BARELY GETTING BY WITH MAKING THE MORTGAGES. SOME UNITS CAN'T KEEP A GOOD TENANT IN I AM SERIOUSLY CONSIDERING BANKRUPTCY. HOWEVER, I'D LIKE TO BE ABLE TO HOLD ON TO A FEW OF THE PROPERTIES IF POSSIBLE. WHAT WOULD YOU SUGGEST? DON'T WANT TO LOSE PRIMARY PLACE OF RESIDENCE
Posted: Thu Aug 14, 2008 3:32 am Post subject: RE: file chapter 13 to retain rental properties
Hi Nicole,
What I feel is, if you're comfortable making payments, you may file Chapter 13 which will help you make payments on your loan using a repayment plan approved by a trustee appointed by the court. But you need to check if you'll be able to file chapter 13.
Posted: Thu Aug 21, 2008 10:32 pm Post subject: options
We have a house that has been on the mkt for over two years with no offiers. We've dropped the price 3 times, but with all the foreclosures and short sales in the area, we just can't compete. To complicate matters even more, my husband got a job transfer to another state. We've been doing the back and forth thing for a year and a half now and it's become very taxing on all of us. (we have a 3yr old) We are not behind on any payments, but cannot continue to do this. Any suggestions?
larry
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