What can we do if our investment homes are deep underwater?
Date: Friday December 12, 2008Posted in: Credit Loans, Economics, Real Estate, finance, legal stuff
I understand that many people live in a home that they purchased a few years ago and they were given a loan payment that was more than 50 percent of their montly income. So now they realize that it is too expensive to pay it and they are looking into doing a short sale or foreclosure. Well it looks like their is some government help available to help them modify their loans, forgive some of their principal, give them lower payments and keep their credit intact. Well that is good for those who are honest and deserve a second chance.
But I have a slightly different situation. My wife and I purchased a second “investment” home in Florida. This home was a complete failure. We paid over $320,000 and now it is worth only $150,000. The builder totally ripped us off. We have good credit, but the rent income from this home does not even pay half of the expenses to keep it, even at the lowest interest rates, and the taxes are very high too. So it is costing us $1000 per month to keep something that is so far underwater that you can compare it to paying for life support on someone who is totally brain dead. We have good credit now, but is it worth it to keep throwing away $1000 per month, or risk loosing some of our credit for a few years. We have no problem paying our primary home mortgage and other bills. but is our credit going to be ruined so bad, only based on one bad item out of 15 other items on our credit report that are in perfect standing, payed on time etc. Can I compare this to getting one or even 2 F’s on a test, when all my other grades are A’s?
I have found a realtor that will help me to short sell this home for a very small fee.
I also have a few credit card balances that I am willing to pay off prior to the short sale. We are also going to try not to miss any payments unless the bank requires us to show some sort of financial hardship. If that happens, I can use the same money to pay off my credit cards completely. Is that a good idea, to boost my credit score up as much as possible, before the short sale inpacts it?
Please post comments or email me with any info. Thanks
1 Comment
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Hi,
My family is in the same situation and I am having the same thoughts. We are trying to find the least painful way out from this madness.
However, I was told that if we don’t have any proof of hardship and our income did not change bank will not approve short sale and even more if we go into foreclosure, lender can pursue or assign deficiency liability. Bank even can sell it later to debts collectors, who really can make your life miserable.
The decision as to whether to pursue a Deficiency Judgement depends on whether the individual has any real assets worth pursuing and it looks like we do. In Florida, getting a deficiency judgment is not hard, and in some cases, is almost automatic (with the amount being the only real issue to be determined). However, most Lenders, Investors, and PMI companies don’t spend the $ to seek such judgments unless they have a reasonable expectation of recovery. Average Joe homeowner is not a high-percentage candidate, but real estate investors are another story. If someone has been through a completed foreclosure and owns other real estate, they should be very concerned. The statute of limitations for pursuit is generally 1 year (there are exceptions) and the judgment lien can stand for 7 years, but can be redeemed for more (in FL). The judgment lien can be adjudicated to the county where your real property is located as well (even in other states). FNMA (for example) has foreclosure law firms like MCW perform asset searches in making such determinations.
Please advice if you find anything worth to try.
Comment by Tatyana Polnyi on February 27th, 2009 @ 11:28 pmThank you in advance.