Question Details

Mark Davis, Both Buyer and Seller in Gilbert, AZ

I am just about to go into foreclosure and not sure what to do.

Asked by Mark Davis, Gilbert, AZ Mon Jan 7, 2008

i currently own a home and decided to build a custom home but when my current house did not sell I got stuck with 2 mortgages that I can not afford. I tried finding a rentor but the rental pricies in my area are way lower than my mortgage payement. My new home is just about complete and the value of the poperty has decreased considerably so I would be taking a major loss. My credit score is 750 and my income is $180k-$200k annual (gross). What will happen to me if I foreclose on the new property and stay in the home I am in now? What would happen to my credit? How long will this hurt me? Whats the worst that could happen?

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14
well..do not use weloweryourrate.com
if they charge an upfront fee!
0 votes Thank Flag Link Mon Mar 30, 2009
First and foremost YOU are NOT ENTITLED!!!
http://www.msnbc.msn.com/id/27648884/

Your best option is to Buy 'n Bail! It's today's Fix and Flip!
http://online.wsj.com/public/article_print/SB121314811278463…

Remember, don't throw yourself under the bus!!!
0 votes Thank Flag Link Tue Jan 13, 2009
Mark, I'm sorry to hear about your situation, you could see what you can find out here....
http://www.995hope.org/

http://www.homeloanlearningcenter.com/YourFinances/Foreclosu…
Has good info...

Good luck, Dunes
0 votes Thank Flag Link Mon Jan 12, 2009
if you have attorney representation, you obviously stand a better chance to get the best of what's a available to you. Since your mortgage is probably your biggest expense you don't want to sell yourself short. Food for thought.
-Sofia
0 votes Thank Flag Link Mon Jan 12, 2009
Mark you first need to decide which house you want as your principal residence, on that house call your bank, ask for the home retention department and ask for a loan modfication, they will be able to work with you to keep you in your house. You do not have to pay anyone for this, you can do it yourself. Get together the last 2 paystubs, 2 months bank statements and teh last years tax returns, they will send you a finacial form to list your assets, income and liabilities , lastly you will write a letter explaing what you have told us here. Then on the other home ask for a short sale package, list with a realtor who is experienced in short sales who can negotiate it for you, they will allow you to sell the property less than you owe. make sure they are experienced in this. good luck with working things out.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Mon Jan 12, 2009
Hi Mark, We are an attorney based Loan Modification company, our website is http://www.WeLowerYourRate.com
I believe that we could help you with this situation, there are several options that could be discussed. When you have a chance, you can email me at
Sofia@WeLowerYourRate.com with a convenient time to contact you. Look forward to speaking with you soon.
0 votes Thank Flag Link Mon Jan 12, 2009
Another posibility would be to get a section 8 person (California) to live in your home. Or another similar program. With this program the county guarantees that you get paid - it is directly deposited in your bank account. The renter is evaluated frequently by the worker to make sure the home is kept up and they would loose their section 8 (which is difficult to get) if they don't follow guidelines. Some people don't want to consider this thinking unfavorable people would move into their home, but with this program, you can have more of a guarantee that you home will be kept than if you just picked Joe Shmoe off the street-because the county checks up on these people. I know someone who saved her home this way.

Also you said rent didn't cover the lease amount, well lets think, some rent vs no rent. Which is better?
0 votes Thank Flag Link Sun Jan 27, 2008
Unfortunately, your situation isn't uncommon around here. What neighborhood did you build in?

I can look up some neighborhood statistics for you to help paint a better picture of the situation in your new build, and your current place.
Have you thought about offering your current home as a lease-purchase? Maybe in this market, a good deal for you and for your tenant would be 18 mos or so? You could get a slightly higher monthly payment, and possibly the sale of your home at the end of the term of your lease purchase if you can still carry that mortgage. There are lots of benefits for both the 'buyer' and 'seller' with a well-written and executed lease purchase. In our area, there are plenty of former home owners out here that need a place to stay after they've lost their home to foreclosure when the ARMs went up... A lease-purchase is a good way for them to get back into home ownership.
Also, have you thought about doing a short sale on the new property, instead of just letting it go to foreclosure? If it just rolls into foreclosure, the 'word on the street' is that your credit will take around a 200 point hit. Everyone's credit and everyone's individual house situation is different. It would be worth an attempt, and is another option.
0 votes Thank Flag Link Tue Jan 8, 2008
Robert... I believe that Mark was asking the question here on Trulia to get direction understanding that Realtors deal with his situation all the time. Because we assist individuals with all their real estate needs which includes helping them out of sticky situations like this.

I agree with your advise Robert that Mark should consult an attorney as I suggested and as the others suggested. Perhaps we helped Mark with specifics to speak with the attorney about. Mark has to be the judge of that since this was his questions.

I disagree Robert that Mark should consult a BK attorney... he needs to consult with a real estate attorney and his CPA. A BK attorney would probably recommend a BK as the option... and that might not be the best option.

Mark... I recommend that you speak with your CPA and a Real Estate Attorney to fully assess your situation. You do not have to file a BK to correct your housing issue.
0 votes Thank Flag Link Tue Jan 8, 2008
Rent the place out for as much as you can get for it. At least that way you have some part of the mortgage paid. A late pay is much better than a foreclosure. You can kiss that great credit good bye... Then try to see what the high income brings... nothing. Protect your credit like it is a child in a pit of broken glass.
0 votes Thank Flag Link Mon Jan 7, 2008
Why would you ask real estate people this kind of question?
They have no clue. Seek advice from a bankruptcy attorney. It'll cost you 300 bucks understand your alternatives.
0 votes Thank Flag Link Mon Jan 7, 2008
Hi Mark,

As the other two posters have stated, I am not an attorney. This is not legal advice, and you should consult w/ legal counsel before making decisoins on this matter.

I agree with both Greg and Lori. I wanted to throw out one other possible alternative.

Lori mentioned that a deed in lieu may avoid the deficiency judgement.....

Depending on how you run the numbers, you might be able to short sell the property and absorb a deficiency judgement, since you have a strong income. That, while costly in the payments on the deficiency judgement, may be less expensive than the costs associated with credit damange.

This is a thought for exploration. Run the numbers in various scenarios and consult an attorney before choosing a path.
0 votes Thank Flag Link Mon Jan 7, 2008
Deborah Madey, Real Estate Pro in Red Bank, NJ
MVP'08
Contact
Mark...what is "way lower than my mortgage" mean? Are you current on the mortgages right now? If so, could you afford to rent your current home for less than what your mortgage is and still manage; therefore, saving your credit? Please consult with your CPA but the difference between your monthly mortgage payment the market rent paid could be a tax right off. Again, check with your CPA.

After all exhaustion if there is no option for you to rent out either home and you know you are going to lose a home then I would go with Greg's recommendation then talk with the bank about a Deed in Lieu of Foreclosure. Although this damages your credit just as a foreclosure does it makes it cleaner and can protect you from a deficiency judgement. Always check with an attorney as I am not an attorney and cannot provide legal advise.

A foreclosure and a deed in lieu of foreclosure can lower your credit score by 200 plus points and will remain on your credit for 7 years. You can rebuild if you keep everything else clean and you could purchase a new home within 3 to 4 years.

I understand that the new property has decreased in value... is this a property that would increase in value once the market improves? Look at each home and determine what will be the better investment when the market turns. Exhaust all options to save credit first... perhaps a short sale on the new homes or perhaps a refi to reduce payments so you can rent that home.

Talk with your CPA and talk with a Real Estate Attorney to discuss all your options and the best option!

Best of Luck!
0 votes Thank Flag Link Mon Jan 7, 2008
This information should not be used without legal counse but, you can offer the lender a deed in lieu of foreclosures which is effectively handing them the keys to the house. This will still have a negative impact on your score however it may not drop as much. Qualifying for new credit is going to be difficult after doing this for perhas several years so you should have permanent financing in place on the home you will be keeping so that you will not need to seek a new mortgage during this time. Here is a blog that may be helpful.

http://localism.com/article/190990/Avoiding-Foreclosure

http://localism.com/article/183186/Home-Equity-Home-Foreclosure

Greg Zaccagni
0 votes Thank Flag Link Mon Jan 7, 2008
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