4children, Both Buyer and Seller in Colorado Springs, CO

My home value dropped $30,000. I am wanting to purchase another home with a friend. I owe more than what it's worth. What do I do?

Asked by 4children, Colorado Springs, CO Sun May 1, 2011

I have already been pre-approved (but not closed) for the new home with my current home as a debt. Nothing is being sold where I live because of the value drop. Everyone has either filed bankruptcy or just walked away. Can't afford both. Have been told to just let it go into foreclosure a few months prior to the new house closing. Does that effect my loan or getting the new home?

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Yikes People...If you're in Colorado I see unlicensed practice of law and tax advice all over these answers...not to mention potential lawsuits...and I'm sure there are similar laws and regulations in other states designed to protect the public from incorrect, misleading or improper advice.

Unless you are an attorney or tax advisor, Realtors and real estate licensees cannot provide information above our level of licensure. For your own protection, be careful to at least qualify your answers, use anecdotes from personal experience and advise them to seek legal and tax advice from professionals in those fields.

I'm just sayin
1 vote Thank Flag Link Mon May 2, 2011
In order to best protect yourself and any other assets you have, do consult with an attorney before making any decisions...if hardship can be proven to the lender, a short sale may be an option over foreclosure, however if worried about your credit, it will be affected....again, consult with an attorney.
1 vote Thank Flag Link Sun May 1, 2011
Or not showing the new lender?
0 votes Thank Flag Link Sun May 1, 2011
No one can tell you that a foreclosure is or is not a good option, unless they are a CPA or Attorney aware of your individual situation.

Colorado is a deficiency state, and if your bank takes a look and sees you went and got another home do you think they are going to be more or less likely to go for that deficiency judgement?

One last thing... if you know you cannot afford both homes, what are you showing the new lender that makes them think you can afford both (since your current mortgage is taken into consideration)?
0 votes Thank Flag Link Sun May 1, 2011
Foreclosure is a bad idea cause it will affect your credit very badly for about 7 to 10 years.

Keep in mind US inflation is very likely to rise in the next couple years due to the deficit issues and extreme dollar weakness. This alone will likely bring your home back above water relatively soon.

I'd recommend being patient. Make good on your mortgage. Rather suggest taking a smaller share of the home with your friend (your friend would carry more) and that way maybe you can at least have a stake. Then make a deal to even up with your friend once you sell your home and recover costs. This is likely to be possible in two to three years, if you can afford the mean time and if you keep your nerve.
0 votes Thank Flag Link Sun May 1, 2011
If you have foreclosure on your credit prior to closing on your new house, it will very likely be an issue. You can do a short sale and get out of the first house. You should close first, though, then move, then short sale. We are a professional short sale service and would be happy to explain the process to you. Please call us directly to discuss your specific situation. Our services are FREE to homeowners. We look forward to hearing from you.

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.
0 votes Thank Flag Link Sun May 1, 2011
Lots of good advice so far, and I think you have a potential train wreck on your hands. I would definitely suggest talking with an attorney ASAP, as owning a home with a friend presents legal scenarios most people don't think about especially if you file for bankruptcy. Your current lender may not be favorable to a short sale because you are going deeper into debt instead of honoring your current deed of trust. Being a landlord can be a great way to build wealth but it has to be approached as a business and it does have tax consequences. Enough said, proceed VERY CAREFULLY and with sound expert advice.
0 votes Thank Flag Link Sun May 1, 2011
Most lenders these days may require you to have a lease in place for them to consider the income if that is needed to keep your debt to income ratios where they need to be, last I heard most lender want a renting history, so someone doesn't just say they have it rented. But don't walk, rent it as mentioned by other realtors. Only if you can go forward with your new purchase....Mike
0 votes Thank Flag Link Sun May 1, 2011
Pre-approved is a very losely given word. Before you decide to walk from your current home, be sure your lender has had your file if possible looked at by a underwriter. The pre-approval is usually an automated answer based on certain answer and questions. There is no for sure approval these days unless you have cash to buy or alot of assets that can be turned into cash. Lender requirements for under writers are much tighter than years past. There are lots of things that have to be looked at before someone could give you sound advise. What I can tell you is get a good realtor and a good lender. Your home that you want to buy will be considered a 2nd home if in the same city. Not favorable rates on such a loan. If you do a short sale, get behind on payments, or walk on your current home, these are things I beleive could be viewed as fraud if not disclosed to your new lender prior to closing. Call or email me to discuss your situation...Mike

Michael Gumucio
RE/MAX Properties
0 votes Thank Flag Link Sun May 1, 2011
Hello there - not sure who gave you that awful advise about letting your current home go into foreclosure PRIOR to closing on the new house, but they sure need to go back to studying :) Are you currently under contract in this new home? If so I am assuming you are working with a Realtor in which case your current Realtor should be able to give you the advise you seek. Trying to rent it out is excellent advise - we have a few more years to go before we see a meaningful turn around, is my belief, so if you can rent it out what a perfect situation in salvaging your credit and dilema at the same time, if not then you absolutely should keep paying on your current home and make an educated decision after you have closed on the new home. I hope this helps.
0 votes Thank Flag Link Sun May 1, 2011
You may wish to find out what the rental market may be for your home. If you can get enough from a lease it may be opportune for you to go that route. The rental market is pretty good at this time. If you would like me to run some stats for what your home could possibly lease for just let me know.

Foreclosure is not a good option.
0 votes Thank Flag Link Sun May 1, 2011
You might consider reaching out to some investors and/or doing something creative.

Please let me know if you're open to either, because I might be interested in it.
0 votes Thank Flag Link Sun May 1, 2011
You absolutely do not want to let your current home go into foreclosure before you close on another home. That will affect your credit and impede your ability to actually close on the new loan, particularly in the 11th hour. It's best to consider a short sale after you buy the new home. However, that process will take a considerable amount of time. A short sale after you buy the new home first will likely avoid a foreclosure on your credit report. If you would like to learn more visit my website and listen to the podcasts discussing Forecloures and Short Sales. Of course you are welcome to contact me personally to discuss your particular situation.
0 votes Thank Flag Link Sun May 1, 2011
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