Foreclosure in Chicago>Question Details

Mrchgo, Both Buyer and Seller in Chicago, IL

Foreclosure and retirement, We have 3 homes a primary in Chicago $200,000 no equity and losing value, a short term rental in Kissimmee Florida

Asked by Mrchgo, Chicago, IL Wed Nov 17, 2010

(underwater by $40,000) and a vacation home in Florence Arizona (Underwater by $100,000). So far I have been able to keep making payments and have great credit.
We are looking for our Retirement home in Arizona, another words we plan to purchase another home to retire to at a cost of $100,000 - $130,000.
Now for the problem, I will not be able to keep paying for the other 3 homes I retire in less than 3 yrs my income will be half of that it is now. I plan to foreclose and file for bankruptcy if the homes values do not come up to value and we can’t sell them.
What will my repercussions be? Can anyone come after our retirement home our cars, retirement income etc.

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Answers

16
The short answer to your question is, yes, it is possible creditors can and will try to attach assets and income in a bankruptcy filing.
Your credit will be severely impacted. You will have a far from perfect retirement, especially in the first few years afterward. You will be hounded by creditors until the bankruptcy is finalized and you will need a very good attorney.
A loan for the final home may be challenging before you stop making payments on the other real estate and most likely impossible once you are in default.
The ownership of the real estate in several different states will also need to be considered.
On the face of what you have outlined here, it seems to me you have several options for resolving the financial pressure you are under, all which are better choices than the foreclosure/bankruptcy route you are considering.
A "strategic default" should be the last path you follow at this stage of your lives.

I am a Chicago based real estate broker with a strong networking relationship in both Arizona and Florida.

I would be glad to spend a few minutes on the phone with you or in person to talk more about the choices you have. This is not the kind of question we can easily answer completely here on the forum. It is the kind of question that needs a complete answer.

davehanna@realtyexecutives.com


Dave
1 vote Thank Flag Link Thu Nov 18, 2010
1st and best option is to talk to a bankruptcy attorney, why? A short sale is a great option for a homeowner who's primary residence is being short sale, because the deficiency and/or tax may be waived. With an investment property you will be responsible for paying the difference and/or taxes on the difference as the IRS considers it income. Keep in mind that when filing bankruptcy, IRS tax judgments are not waived therefore it's in your best interest to avoid foreclosure or short sale on Investment properties.

Disclosure: This is not legal or tax advise.

good luck!

Jose Hernandez
Keller Williams, Gold Coast
0 votes Thank Flag Link Tue Nov 23, 2010
HI,
YOU GOT SOME GOOD ADVICE FROM REALTORS. NOW, IS TIME TO ACT. DO IT NOW...SELL NOW...GET IT SOLD!
YOUR OPTIONS ARE CLEAR. CALL ATTORNEY, CALL A REALTOR...AND GET IT SOLD! I AM AVAILABLE AND SO ARE THESE OTHER REALTORS. NOW IS THE BEST TIME TO ACT. AS YOU PREPARED FOR RETIREMENT...SO IS THIS MOVE CONSIDERED PREPARING FOR RETIREMENT. IT WILL DIRECTLY AFFECT YOUR PLANS. SIGN THE CONTRACT AND LET'S GET IT SOLD!
0 votes Thank Flag Link Fri Nov 19, 2010
Talk to a Bankruptcy attorney as well... each will have different ideas of what will transpire.
0 votes Thank Flag Link Fri Nov 19, 2010
Just short sell them. It will be a lot easier for you in the long run. The only thing that might affect you is that you usually cant buy for a year or two once you do one.

Matt Laricy
Americorp Real Estate
Brokers Associate, e-PRO
mlaricy@americorpre.com
708-250-2696
0 votes Thank Flag Link Thu Nov 18, 2010
Hello Mr. Chgo,

Short sales seems to be the best option. The transaction can be negotiated with the bank to forgive the balance due thus barring them from coming after you in the future.

Additionally not only will a short impact your credit less than a foreclosure or bankruptcy, 50-100 points with a short sale VS up to 200+ with the latter, but you will also be able to purchase another home (your ideal retirement home?) within 18-24 months. Time is of the essence!

Good luck and if I can be of further help listing your Chicago homes for sale, please do not hesitate to contact me directly. I am a certified Short Sale/Foreclosure rep and an Accredited Distressed Property Realtor.
0 votes Thank Flag Link Thu Nov 18, 2010
You can Short Sale with great Credit and Income. A hardship letter is required in the process... you simply explain in writing to each individual lender that you will be retiring within 3 yrs and your income will be drastically reduced, and would render you incapable of meeting your financial commitments... to avoid foreclosure, you would like to request a Short Sale in advance... that you understand that the process can be lenghty per the current glut on the market... thus, your timing. You can do the same letter for each lender/servicer with their appropriate address etc. While you are going through the Short Sale process, once you continue to make timely payments towards your mortgage, your credit will not be affected nor will it hinder a new purchase... it's the 30 plus days late that negatively impact your credit during a Short Sale. Banks will finance a loan for a new purchase even 1 month after a Short Sale with no missed payment... once you were current on your mortgage.
0 votes Thank Flag Link Thu Nov 18, 2010
EVEN IF YOU HAVE GOOD INCOME AND GREAT CREDIT, YOU CAN STILL SHOW PROOF OF HARDSHIP. THE REALITY IS...YOU CAN'T PAY ALL THE HOMES...RIGHT!? YOUR CREDIT SHOWS WHAT YOU OWE AND PRESENT WHAT YOUR INCOME IS AND THEY WILL CALCULATE THE DEFICIT. WHAT YOU WROTE ABOVE IS WHAT YOU NEED TO PROVE TO THE LENDERS. "I will not be able to keep paying for the other 3 homes I retire in less than 3 yrs my income will be half of that it is now." THIS IS A HARDSHIP. YOU HAVE TO GIVE IT A TRY AND THE BANK HAS TO SEE THAT YOU TRIED OTHERWISE THEY MAY SEE YOU JUST LET THEM GO AND BOUGHT SOMETHING ELSE. THE BANKS DO NOT LOOK WELL ON THIS TYPE OF ACTION. GET RID OF THEM AND ...SELL NOW.

CONNIE BERNAL
KELLER WILLIAMS REALTY PROFESSIONALS
773-517-8373
0 votes Thank Flag Link Thu Nov 18, 2010
All great answers but from what I understand since I have great credit and income I cannot do any of the things suggested. Right?
0 votes Thank Flag Link Thu Nov 18, 2010
JUST DO IT!! SHORT SALE OR DEED IN LIEU OF FORECLOSURE. THESE ARE YOUR OPTIONS. YOU NEED A STRONG AGENT TO DO THE SALE FOR YOU. DO NOT END UP WITH A WEAK AGENT OR YOU WILL END UP FORECLOSING. YOUR DEED IN LIEU... YOU MUST HIRE AN ATTORNEY. THERE ARE SOME AWESOME ATTORNEYS THAT I KNOW DO THAT.
IF YOU NEED MORE INFORMATION DON'T HESITATE TO CALL ME. DO NOT LET THEM GO INTO FORECLOSURE.

MY REGARDS,

CONNIE BERNAL
KELLER WILLIAMS REALTY PROFESSIONALS
CHICAGO/OAK PARK
773-517-8373
0 votes Thank Flag Link Thu Nov 18, 2010
A couple more points you need to be aware of-
1- Be aware that short sales will also impact you credit adversely.
2- Creditors will not hound you if you file for bankruptcy. As soon as you file, you
are protected and any creditors must
stop calling you. You will not hear from
them again far before your bankruptcy is
discharged.
3- Be advised also that real estate
brokers (and agents) are restricted in
dispensing this sort of legal advice.
Unless an agent has a law degree,
he/she is prohibitted by law from
practicing law. You really need to talk to
an attorney and one who is a specialist
in bankrutcy to know if this is a good
option for you.
I know a couple of great attorneys in
Chicago who would be happy to talk to you. Feel free to contact me and I will
pass on their contact info.
0 votes Thank Flag Link Thu Nov 18, 2010
From your scenario, your best option is a Short Sale of the properties asap... using a realtor who has extensive Short Sale experience and can provide proof of recent cases that closed within 6 mths from inception. One recommendation is Carby King Realty in Evanston.... you would have to google for phone info...

Also, I am a real estate investor and may be interested in purchasing the properties in Chicago... depending on location... Please forward your contact info so that I can follow up; Carolinefelix7@gmail.com
0 votes Thank Flag Link Thu Nov 18, 2010
Why have you not considered a short sale for both your primary residence and the investment home in Az.

You would be better off trying this as opposed to letting them both go to foreclosure. You say your current on both homes so you have time to negotiate a short sale on both homes.

You need to find a SFR certified realtor in both state to assist you on listing these homes for a short sale.

Short sales can be done for both primary and investment properties . If a Short sale does not work then you should also consider a DEED-IN-LIEU of Foreclosure on both properties.

The worst case scenario would be a foreclosure and bancruptcy on your record. You do need to consult with a bancruptcy attorney to see what assets would be protected. Most people are forced into bancruptcy when the lender issues a deficiency judgement on difference owed and received after the foreclosure.

The lender starts to garnish wages and this forces people into bancruptcy. Now if you purchase something else with cash prior to the bancruptcy or after is what you need to discuss with an attorney?
0 votes Thank Flag Link Thu Nov 18, 2010
Hi Mrchgo, In my opinion walking away is always the worst strategy in any situation.You give up all your leverage and hand over your finances to someone else to do with as they wish, they may decide to go after your remaining assets or maybe forgive the debt yon never know. A Short sale or bankruptcy will hurt your chances of purchasing a new home for several years at least. The latest option in Real Estate Financing is a Principle Balance Reduction. In which your balance is negotiated down too or below current market value, your monthly payment will also reflect this decrease. You keep your home and your credit, and then you can sell or keep it as a income producing rental. From the info above you can receive at least a 140k reduction in what you currently owe.
0 votes Thank Flag Link Thu Nov 18, 2010
I agree 100 percent. Talk to a bankruptcy attorney asap and make sure to get a second opinion.
0 votes Thank Flag Link Wed Nov 17, 2010
Given your pending retirement, your logic of walking away from these underwater properties could be sound, but all of your assets except for your retirement fund (IRA) are at risk. Once the foreclosed home sells, the bank can come back and sue you for the difference in price. I recommend you talk to at least 2 attorneys: 1 that specilizes in foreclosure and 1 who does bankruptcy cases.
0 votes Thank Flag Link Wed Nov 17, 2010
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