If you do let your investment property go back to the lender you're looking at four years of credit repair. I understand that the lender cannot come after you after a short sale - in California. That's not true in my state. But ... Get advice from a financial counselor or an accountant.
If you own other property in California, you might want to think a little longer about just walking away or asking for a short sale. Take a look at the chart on this page:
The reason real estate can't gain traction is because of the foreclosures. A recovery hinges on these foreclosures clearing out. If these people who walked away think their actions won't affect them, they're wrong. Fewer jobs. Sluggish economy. Beaten up real estate market. That's the likely result. If you own other real estate in California, the effect of all of these homes going back to bank is going to effect other real estate, whether you keep your job or business and how long it will take for prosperity to return.
I hope you will do what is prudent for yourself and your community.
PML of Longmont
Doing a short sale would seem like a good option for you to consider. As this is an "investment" the rules of the lose change a little bit so you want to make sure you protect yourself from the future of having to claim BK or anything like that after successful short sale.
Also advice as to suck it up, come on, this is not a moral obligation...this is business, didn't GM claim BK last year, are we upset they didn't SUCK it up? UGH, I could go off on that one! I digress, sorry...anyway, here is a quick blog about short sales vs foreclosure
Also with a short sale we can minimize what you're going to owe the IRS for "income tax" on the negative balance.
Example: You short sell the rental property for $300K, you owe $400K, your tax liability is $100K. OR You just "let it go to foreclosure", the property Could end up selling at auction for $175K, now you're liable for $225K in "income tax" on the negative debt owed.
Please email or call me directly so I can see how underwater your property is. I can also talk to you about the TYPE of loans you have on the rental. If any of your loans are Equity loans or a Cash out Refi, I can let you know what the bank will want to completely SETTLE that debt.
I've had many clients short sell their investment property, all the while having a good amount of money in the bank, other assets & other properties. The bank is not going to go after your other properties or equity.
Realtor Since 1996
Short Sale Expert
Foreclosure will hurt your FICO score more than a short sale. Go with a short sale versus a foreclosure if you can.
I am a certified distressed property expert and can offer you the best advice in your situation, please visit my website below and get all your answers, it's free and you will find it informative. Im more than happy to answer any questions you may have. Call me 626.893.6070
It will go on your credit history, as any foreclosure would, and it would affect you for many years to come. On the other hand, if you do a short sale, the bank will release you from the mortgage and allow you to sell for market value regardless of what you owe and without paying the difference between the loan amount and sales price.
You can completely avoid foreclosure with a short sale and it would help you preserve your credit. It will still show up as a settled account on your credit report, but it is far less damaging than a foreclosure - the two don't even compare. To learn more about short sales, check out : http://www.shortsalespeople.com they offer free help and information to homeowners.
My advice would be like many of the other agents who answered your question. Namely, consult a real estate attorney before you decide on what to do. If you have a foreclosure, it will definitely affect your credit rating and you may be liable for a deficiency judgement if you do a short sale.
I don't know if it's much comfort, but there are many people in your situation and some have or are losing their principal residence.
Before you stop making your payments you may want to see what you qualify as far as:
Depending on who the investor is you may want to consider checking out your options first.
Because this is a rental property you may open your self up to greater liability possibly a deficiency judgment.
Best of Luck,
Please do not do this. How far behind are you on your mortgage payments? There are many options for you. I just finished a seminar on this topic. Investors who do a short sale on their investment property are more common then then ever. Some banks are approving their plea on hardship basis. Contact a local short sale expert to help guide you through this process.
Don't give up. Push through.
The foreclosure will not affect your primary residence but it will adversely affect your credit rating. Also there may be tax liabilities and a foreclosure does not automatically release you from all financial obligations. You need to consult with your accountant and a real estate lawyer to determine your best option and how it will affect you financially.
Why are you thinking about letting your rental property go into foreclosure? Are you struggling to make the payments? Have you experienced some hardship that has resulted in a loss of income? Or are you just underwater on the property? The answers will affect how you can and should proceed. If it is a 1 to 4 unit building, depending on the type of loan you have, see if you qualify for modification. If not, see if you can do a short sale, if you meet the requirements and guidelines.
And please let your tenants know once you decide on a course of action as they will be affected by your decision as well.
Best of Luck.
ANTHONY ALTIERI Real Estate Agent
Certified HAFA Short Sale Specialist, Keller Williams, Los Feliz 323 252 9055
Website and Real Estate Blog: http://WWW.EASTBOUNDLA.COM
My Personal Blog: http://WWW.EASTBOUNDLA.BLOGSPOT.COM
You should call an attorney and they will explain your options as well as the consequences. When you are informed you will be able to make a decision that is right for you!
Just knowâ€¦you're not the only one going through difficult times.
Best of luck!
Eli Givoni, Director
Short Sale Department, LLC
Serving all 50 states
MARS Disclosure for General Commercial Communications
Short Sale Department, LLC is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit.
Realtor w/Milbank Real Estate Services
Sara Mehrpouyan, CDPE
Dre Lic #01712757
Lots of information below...from short sale it to suck it up! You might want to also speak to your accountant to see how any of your options will effect you financially and with taxes...like capital gains.
You have several options. They are as follows:
1. Loan modification- there are many government programs available that are designed to help property owners keep their property. These are mostly due to the Obama Making Home Affordable Plan.
2. Deed in lieu of foreclosure - where you give the property back to the bank.
3. Short Sale your property.
All of these may affect your credit. If you are behind on your mortgage, that may have already affected your credit...it's just a matter of what you will want to do next? Purchase another property, refinance your primary residence? For those options, you may have to wait 2 to 3 years before you are able to do either.
The biggest question that I would ask is what is your situation? Why do you want to get out of the property?
And...have you attempted to work with the bank to resolve any issues?
Feel free to contact me if you want to discuss this further.
All the best,
Prudential California Realty
Certified Distressed Property Expert
Head of Short Sales Division Keller Williams Realty (northridge)
I don't know your entire situation , so i am going to give you a general advice.You should try and do a short sale. By letting your rental home go, you will be open to deficiency. Bythat i mean is , that your lien holders on the rental property can come after you for the difference of the remaining balance after it is sold at the auction.
Regardless of a Short Sale or a Foreclosure the impact on your credit will be the same until one of those is consumated. It is the recovery factor that plays out in a Short Sale. In a foreclosure your credit is said to be affected until 7 years, but their are a lot of other factors that contribute to that.
Short Sale will allow you to not only have the chance to negotiate with your lien holders and get out of deficiency but also the chance of reviving your credit within 2 years of consumating the Short Sale.
I highly recommend you to talk to a Realtor who has done Short Sales and can guide you the right way.Short Sale is the best option for you. I have helped so many clients with this scenario and they have been extremely grateful. It can be done. Talk to a good attorney and a CPA too.
Foreclosure should be your absolute last option.
My first questions is, have you looked into doing a short sale. It will be less detrimental to your credit.
With regards to your questions. Even if the rest of your credit is solid a foreclosure will still really hurt your credit and there could be other negative ramifications.
If your are unsure what a short sale is or how to proceed with one go to the web reference below. I have written a comprehensive blog series that will answer most or all of your questions.
Get informed before you make any decision of this magnitude.
Find a local short sale expert, with experience. VERIFY the experience! Ask them to show you their recent closings in the MLS, ask for prior customer reviews and numbers, find out what type of support and staff they have... then see if you are a match in personality... only then hire them... You have choices when it comes to selecting an agent, do yur homework to make sure you are doing what is best for you... and don't believe anything so-called experts tell you.. ASK FOR PROOF!
This will affect your credit for years to come if it goes into foreclosure.
Try to list the property and have it go through a short sale first. This way would be the less of two evils.