Good stuff - Posted by DJ-nyc
Posted by DJ-nyc on August 04, 2009 at 11:00:24:
That’s right! Get Creative! Keep the faith!
DJ-nyc
Re: Probably short sale… - Posted by Lubasha
Posted by Lubasha on August 07, 2009 at 17:33:57:
Nancy,
In which area you live? I see you feel very frustrated and advices you have here may confuse you more than help. I would say look for short sale specialist in your area and get this load of your shoulders now!
Don?t worry if someone will make money where you lost, your problem is to get out of situation with less damage to your future and your health!
If properties are not occupied, stop payments (you are throwing away your money no matter what you do at this point) but that will help bank to understand that your problem becomes theirs and they should do something about that.
Meantime your short sale specialist will help you to write hardship letter to bank, where he/she will take to consideration all the evidence you have about your insolvency, and that pro will convince the bank (if that is a good pro) to be on your side rather than to build a plot against you.
This is very general description of short sale in principal; actually it is much more to do in this matter. But remember life is not over in estates trouble, find a good pro (local RE club or maybe this board can help) and get you life back.
Re: Probably short sale… - Posted by Vic
Posted by Vic on August 07, 2009 at 01:59:11:
Nancy,
Approach the bank first before you stop paying & see if they’ll cooperate. Explain to them that you cannot make any more pmts. & that if they don’t play ball with you, they will end up getting this house back as a foreclosure.
If you could rent it out, could you rent it for enough to cover the note? If so, that is your best option. If not, then tell the bank that not only can you not make any more pmts., but you can’t even rent it out, so it’s in their best interest to work with you now, before the pmts become late. This may not fly, but it’s worth a try.
By the way, I’m pretty sure in FL, you can get what’s called a builder’s risk policy, while the house is vacant. Talk to your ins. agent. If you can’t get builder’s risk, then there;s probably another type of policy you can get.
Also, you don’t want to rent it & then stop the payment. If you keep the rents & don’t make the pmts, that could be illegal. You most probably signed an assignment of leases form when you bought the house anyway, which would eventually transfer the rents to the noteholder.
So again, you should try things in this order.
1st - rent it & keep paying the note
2nd - do a shortsale (if the bank won’t play ball with you then they will get the house back in foreclosure). If need be offer to sign a note for the difference between what’s owed & what the property eventually sells for. Before you make the offer though, see if they’ll waive the difference (they probably won’t but worth asking). In a shortsale you still have control of the property & it is you that sells it. In a foreclosure the bank sells it. So in a shortsale you still have control of everything. Once the bank gets it in foreclosure you lose all control. They will sell it for whatever they can get, which may be less than you could have sold it for.
3rd they foreclose & sue you for the difference between what you owe, plus attorney fees & what they sell the property for. Maybe if you get lucky they won’t sue you , but instead will just send you a 1099 for the taxes on the amt of the loss.
Re: short sale vs foreclosure - Posted by G.O.
Posted by G.O. on August 05, 2009 at 12:01:01:
Certainly, any time.
Re: short sale vs foreclosure - Posted by G.O.
Posted by G.O. on August 05, 2009 at 12:00:19:
Agreeing to a short payoff does not preclude a bank from attempting to collect deficiency. They may only release mortgage and leave the mortgagor personally liable thus paving a way to pursue the deficiency, even via a court order. Usually, you’re right, if they don’t allow a full release of liability, they will offer to sign a promissory note, usually as an unsecured debt.
Re: Probably short sale is the better choice - Posted by Vic
Posted by Vic on August 05, 2009 at 17:30:16:
Nancy,
DO NOT PAY THAT LAWYER! That’s outrageous just to negotiate a short sale. You can do that yourself.
All you have to do is call the bank & explain to them your situation. The bank may be hesitant to do a short sale with some one that is current on mtg., so you’re going to have to explain to them that you can no longer afford the pmts & that if they don’t work with you, they will definitely be getting the houses back. I would call the bank now if your intention is to do a short sale & get things started.
The bank may order a BPO (broker price opinion), which is when they send a real estate agent out to give them an idea of what the house is worth. They’ll just do an exterior BPO, which means they just send someone out to take pics & provide comparables. They don’t contact you, they just do it.
Do you have the house listed for sale with an agent right now? If not you may want to put it up for sale now. Make sure the agent notates in the comments section of the MLS that the sale is subject to a short sale. The bank may also require you to list the house with an agent.
The bank may also ask you for several things such as a hardship letter explaining your situation, bank stmts., tax returns, etc. just to make sure that you can’t pay the notes.
If you decide to keep the house & rent it, but fall behind on pmts & need to buy some time you can always try to get them to do a forbearance agmt., whereby they take 2 or 3 pmts & put them on the back end of the loan, which gives you no pmts for those 2 or 3 mos.
If you do Sec. 8, make sure you SCREEN! SCREEN! SCREEN! You can end up with some real trash on Sec. 8. Bad tenants can totally trash the house in no time flat. Also Sec. 8 will do an inspection of the house to make sure it meets their standards. Contact Sec. 8 in your area for the Housing Quality Standards in your area. Inspection is done once a yr. Talk to some other Sec. 8 investors in your area for more info. Personally, I no longer do Sec. 8. I just don’t want to deal with all the crap. Some people like Sec. 8 though so you’ll get mixed opinions on this.
You’re on a forum here, not a chat room. A forum is like a bulletin board. A chat room is live. But yes people can read what is posted here. But that’s a good thing cuz you get lots of opinions.
G.O. mentioned that a bankruptcy stays on your credit for 10 yrs & he’s right, it is 10 yrs. That was my mistake. However it probably won’t be that big of a factor on your credit after a few years. And he’s right they also ask on loan app, have you ever filed bankruptcy, but after a few years, again it won’t be that big of a factor. Look at Donald Trump.
I’m not saying to automatically use bankruptcy as your exit strategy here, because like G.O. says you should not take it lightly. You have to consider all aspects of it before you do it. Your best bet if you can’t rent it is short sale. See if the bank will work with you. If they won’t then you may have no choice. If you get stuck with 170k in debt plus attorney fees of say another 10-15K or so, & you have no way to pay it off, then bankruptcy may be the thing for you. It’s really a personal decision that only you can decide if it’s right for you or not.
To email me or anyone, just click on the top of the message where it says Posted by. Next to it in blue is the person that posted. Just click that blue link & you can send email to that person.
If you’ve been stressing out for 2 years over this, that’s way too long. Don’t do it anymore. None of this will change your life. It’s not criminal(unless you did something illegal), so don’t make yourself sick over it. Like I said the worse that can happen is bankruptcy & that’s a civil thing, not a criminal thing. So relax a little. It’s one of those things that seems daunting, but after you go through it you look back & say it wasn’t that bad that you let it cause you to not sleep for 2 years. Make sure you learn whatever lessons you can out of all this, so you can apply those lessons to next time. You’re not alone in this. Millions of people are going through the same thing right now. Turn on the news & that’s all you see is foreclosures. The number of people in your situation is greater than the foreclosures, so that should give you some idea as to how much company you have.
Re: Probably short sale is the better choice - Posted by G.O.
Posted by G.O. on August 05, 2009 at 11:47:02:
Wow, $6500 and only 50/50 outcome! Unbelievable! I don’t think there is any reason for you to spend this much money with no guarantee.
And bankruptcy. Do not think of it so lightly, it has to be considered only as a last resort. Bankruptcy stays on your record for 10 years (not 7) and even after it’s gone you will still be asked on every financial application “have you ever declared bankruptcy?”
However, it does not mean this will happen, or happen exactly like this. Even if they don’t fully release you from liability, you and the bank might agree to a repayment of this deficiency on the terms acceptable to you (as an unsecured debt). This still beats paying an entire mortgage payment on the property you can’t rent.
As I said before, attempting a short sale provides you with the control of the situation, whereas after foreclosure you’re at the bank’s mercy (unless a mistake has been made by the bank).
Re: Probably short sale is the better choice - Posted by Natalie-VA
Posted by Natalie-VA on August 05, 2009 at 08:24:53:
Please talk to a CPA about the impact of debt foregiveness on your taxes. I have never heard anything about the IRS waiving taxes owed on debt forgiveness related to investment property. The impact of this alone might make you consider putting tenants in these properties and sticking it out.
–Natalie
Re: Good stuff - Posted by LightWalker
Posted by LightWalker on August 04, 2009 at 11:14:41:
Thanks DJ-nyc… I just happen to be a Jersey Boy… =^)…
Hey Nancy… You’re FRKN’ UNSTOPPABLE!!! =^) We’re all behind you… You’ve got some family here… :o)
Re: Probably short sale… - Posted by nancyp
Posted by nancyp on August 07, 2009 at 05:49:45:
Vic: Thanks again for writing. These options are not helping me to get out of a desperate situation. If rented, both houses barely even cover the notes–which are interest only. I’ll be paying out of pocket forever for taxes, repairs (which they destroy every time they move out), paying down note, etc.
The comps are about $42,000 each for which I owe $170,000. I just put out $1,200 last month and over $1,000 this month, to repair one and re-do duct work for a/c plus I need to pay for insurance out of pocket. The insurance agent told me I’ll pay 3x as much if not rented (almost $3,000 for one–again, out of pocket)!!!
They were both built in 1930. I can’t imagine the value coming up very much, very fast. Therefore, I have headaches and am losing tons of money every month. Even a Short Sale won’t bring in $40,000 tops. I’m afraid of being sued for the difference or full amount, but I thought if I had to go to Bankruptcy it would be a better option than where I stand now.
I truly want/need to get out o this situation; I can’t take it anymore–it’s way too much stress. Do I need to pay out thousands every year never to see any of it again? Any other options? I’m over 50 now and definitely going in the wrong direction. I want to make it stop, take a breather, and go the other way Thanks again!
Re: Probably short sale… - Posted by nancyp
Posted by nancyp on August 07, 2009 at 05:48:05:
Vic: Thanks again for writing. These options are not helping me to get out of a desperate situation. If rented, both houses barely even cover the notes–which are interest only. I’ll be paying out of pocket forever for taxes, repairs (which they destroy every time they move out), paying down note, etc.
The comps are about $42,000 each for which I owe $170,000. I just put out $1,200 last month and over $1,000 this month, to repair one and re-do duct work for a/c plus I need to pay for insurance out of pocket. The insurance agent told me I’ll pay 3x as much if not rented (almost $3,000 for one)!!!
They were both built in 1930. I can’t imagine the value coming up very much, very fast. Therefore, I have headaches and am losing tons of money every month. Even a Short Sale won’t bring in $40,000 tops. I’m afraid of being sued for the difference or full amount, but I thought if I had to go to Bankruptcy it would be a better option than where I stand now.
I truly want/need to get out o this situation; I can’t take it anymore–it’s way too much stress. Any other options? I’m over 50 now and definitely going in the wrong direction. I want to make it stop, take a breather, and go the other way Thanks again!
Re: Probably short sale is better -THANK YOU! - Posted by nancyp
Posted by nancyp on August 05, 2009 at 19:14:04:
Vic: Thanks for the wealth of information. I’ve made a decision on what to do & you’ve helped a lot. I have a few things to do before moving forward. It takes a lot of stress off to have info and a plan and knowing it’s not the end of the world. I sincerely thank you & everyone that wrote in to give me knowledge/support I will proceed slowly & carefully in the future. Thanks again!
You’re from Jersey? I’m from Jersey! - Posted by Natalie-VA
Posted by Natalie-VA on August 04, 2009 at 11:39:48:
Remember that one?
So, LW, you moved from NJ to VA. Me too. I’m in Virginia Beach, what about you?
–Natalie
Re: Probably short sale… - Posted by G.O.
Posted by G.O. on August 07, 2009 at 11:23:25:
Regarding a short sale: at this point (of the market situation) it’s not really necessary to ask the bank beforehand whether they will entertain a short sale. I’ve never had or heard a bank say ‘no’ without considering an offer first. However, they won’t do anything with regards to a short sale UNTIL they have an offer presented to them. So whether you stop making payments or continue - you still need an offer.
And as Vic said, there is no need to file a bankruptcy now. In fact, if you have to file it it will be more useful if done AFTER you get rid of the properties, either via short sale or foreclosure. Then you will now your exact financial position and, maybe, there won’t be a need for a bankruptcy at all. As I understand, mortgage payments is your biggest expense. If so, perhaps when they’re dealt with your financial situation will have improved.
G.O.
Re: Probably short sale… - Posted by Vic
Posted by Vic on August 07, 2009 at 06:25:59:
Nancy,
I hear your frustration. But filing bankruptcy now is not going to make this go away. You have to either do a short sale first or let them foreclose first. Once either of those 2 things is done, then they can get a judgement against you for the difference. Then once they get that judgement then you file the bankruptcy to wipe that judgement out. If you file now, about the only thing you can do to alleviate these mtgs. is do a Chapt. 13, which is not going to solve your problem. Under a Chapt. 13 you would just be reorganizing the debt, but the mortgages will still be there.
By the way, if you do a short sale or if they foreclose, they will not sue you for the whole 170K - they’ll only sue you for the difference plus attorney fees - maybe another 15K or so total. They may not sue you at all. They may just send you a 1099 for the taxes that would have been due on the amt. of the loss. Talk to your CPA about the best way to handle this if it happens. It could be that you don’t have to file bankruptcy at all because maybe they won’t seek deficiency judgement at all.
So the options I gave you above in the last post, are still the best ones.
If you don’t want these properties anymore & you can’t get them to do a shortsale, then let them foreclose & sue you for the deficiency (if that’s what they;re going to do) & then you file the bankruptcy after both deficiency judgements have been granted. That way you will wipe them both out. Your credit will be ruined for a few years, but you’ll bounce back.
Also, if you’re going this route, don’t spend any more money on repairs. You need to call your bank TODAY & talk to them. Then proceed as I’ve outlined above.
You know if you rent these houses out & can cover the note, that would not be as bad as having to pay the whole mtg. every month. I sense you don’t want to do this, though so shortsale is where you should go next.
You may want to take a look below at the discussion me & Gene are having about inflation & how that could affect the real estate values & fixed rate loans on properties. Scroll down a few links & you’ll see it.
Re: Probably short sale… - Posted by Brian_Wa
Posted by Brian_Wa on August 07, 2009 at 11:58:11:
When you have houses that are so up side down, whatever money you put into them, it’s exactly like throwing money away. Don’t be stressed. It’s not gonna help you one bit. Things like this happen all the time in life. You’re in the same boat as millions of others out there. Just conserve your money and concentrate on doing things that make you more money so you can start over. Be willing accept that your credit will be shot for the next few years. But that’s not the end of the world. You’re still physically fine. You didn’t borrow money from the Mafia so nobody is going to harm you or your family. The worse case is doing a short sale and if the lenders go after you for deficiencies afterwards, just file for bankruptcy.
Re: Probably short sale is better -THANK YOU! - Posted by Vic
Posted by Vic on August 06, 2009 at 04:10:10:
You’re welcome.
If you get stuck, just come on back & we’ll try to help.
Good Luck.
Re: You’re from Jersey? I’m from Jersey! - Posted by LightWalker
Posted by LightWalker on August 04, 2009 at 11:54:58:
WHAAAAAAAAAAAAT ??? (LOL) This IS Funny… Does Landstown High sound familiar? (LOL) I could probably throw a rock and hit it from my backyard… (LOL) I see lunch in our future… (LOL) … Jersey to VA via USMC …
Re: Probably short sale… - Posted by Vic
Posted by Vic on August 07, 2009 at 16:54:05:
Hey G.O.,
You’ve provided some good clarity to this discussion & provided some very good advice.
I have to take issue with you though on one point - sort of, & that is with waiting to contact the bank, even if she is doing a shortsale.
Here’s why. The bank may require bank stmts., tax returns, hardship letter, etc. in order to approve the short sale. I know you know this, but Nancy may not. Banks work at their own pace. Better to get all the documentation out the way first, than to wait until you have a potential sale. Because once you get an offer, you don’t want to lose the sale because the bank took forever to approve the short sale. Better to get all this out the way, so that when you get the offer, you can then just proceed without too much delay.
Also, I think if you contact the bank up front, it may give you a feel for how the bank is going to handle this.
But overall, I agree with you that having an offer to present to them will get a more direct answer.
Re: Probably short sale… - Posted by nancyp
Posted by nancyp on August 07, 2009 at 08:50:55:
Thanks Vic! I’ll consider everything and pray to make a good decision. I’ll move slowly. You are very kind to share your time and knowledge. Have a wonderful day!