Posted: Sat Sep 27, 2008 12:05 pm Post subject: Foreclosure of Rental Property in Nevada
I have a first and second mortgage for a rental property in Nevada. The loan amounts are roughly $230k and $30k for the 1st mortgage and 2nd mortgage, respectively. The market value of the home is probably around $160k. I have a 5 yr ARM on my first loan that will have its rate re-adjusted in 2010. My current monthly mortgage payment is around $1400, and will probably end up being $2000 when the rate readjusts in 2010. My monthly rental income is $1000. I have never been late in my payments since I purchased the property in 2005.
I plan to purchase a home in California within the next six months. At some point after this purchase and before my loan for rental property in Nevada readjusts, I was considering going through a foreclosure for the rental property in Nevada. I have considered a short sale, but I have assets saved up that would probably disqualify me from a short sale. And I don't think a deed in lieu would work because the value of the loan far exceeds the market value of the home.
1) If I decide to intentionally foreclose, what are the chances that the banks for the 1st and/or 2nd loan will go after my personal assets to satisfy the outstanding balance of the loans? Will they have a garnishment of my wages?
2) What kinds of other fees would I be liable for? Penalties in property taxes, sewer, garbage, legal fees, interest?
3) Would the amount of the debt I still owe (net of sale price of home) on both the first and second mortgage be considered taxable income and reported to the IRS? Would the debt relief act of 2007 apply to me?
4) Will the bank go after the primary residence I intend to buy in Cali?
I don't think the lender will allow you to intentionally foreclose the property. However, if you are not paying your dues on time, they will foreclose the property. You will have to clear the first loan before trying to clear the second one. If you are planning for bankruptcy, then you should opt for chapter 13 which will help you to reorganize your debts. There won't be be any other fees as far as I know.
If the lender forgives you the debt, then that will be considered as an income and the tax department will charge taxes on that. However, if it is not forgiven, you will be not liable to pay taxes. As you live in Nevada, I believe that the debt relief act will apply to you. If you declare a foreclosure before purchasing the property on California, I don't think they will go after your primary residence.
If the options of short sale or deed-in-lieu are unable to you, then you should opt for Chapter 13 of Bankruptcy. This is also known as reorganizing bankruptcy. You will sit with the lender and sort out a plan which will help yu clear off the loan within 3-5 years.
Thanks,
Jerry
Hilly Guest
Posted: Thu Nov 13, 2008 12:19 am Post subject: Foreclosure
Be sure to tell your tenant that you are considering foreclosure and let them have time to move. you can really screw over a tenant in Nevada and basically leave them with no place to live if you let the property go into foreclosure. Plus they can sue you! Please consider your tenant in your decision.
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