In the last down market we had, 1989 thru 1998 home owners found themselves in an 'upside down' position and so did I, on my own house. I advised all my clients to hold on to the properties and lease them out. In 1998 the market started to correct and property values went up again and that's when those homesellers sold their properties at a profit and kept their credit rating in good standing.
Burbank has always been and will continue to be a desirable city of choice for many people. See what you can do about finding quality tenants, even negotiate a 2 or more year lease for a desirable person/s b/c a year goes by very quickly.
Once the market recoups, and it will - I know b/c I've been selling real estate since 1977 and the market runs in cycles, you will be able to sell at a profit, refinance or move back in. This is an option that is tried & true that was utilized in every down market we've had in the past 30 years.
I hope this helps - wishing you all the best in making a wise decision.
Try and renegotiate the loan first. It's always your best bet if the programs work for you.
If you don't qualify for the HAFA or other programs currently available to Owner's who are "upside down" then if you can bring money to the table to sell the property for a loss that's your next best option. If you don't have the money to make up the difference you would be looking at a short sale.
If you are looking into "giving the key back" you may want to think about what you want to do in the next 7-10 years as your credit will take a drastic dive from the foreclosure. If you stop paying your mortgage the bank may not start the foreclosure process immediately so you may be adding more time to that 7-10 years.
Why not try to rent it to help pay the mortgage?
Short sales are difficult in any case, but especially so on investment properties.
And let me clarify something: You can't give the key back to the lender. The lender never owned the property. You'd be giving the key back to the seller, which obviously wouldn't make sense. The lender's only involvement was to lend money based on the value of the property. Yes, I understand what you mean, but it's a pet peeve of mine when there's a mention of "giving the house back." It wasn't the bank's to begin with.
Look! Compliance and acceptance audits are subject to verifable and substatniated findings under RESPA, TILA and FAIR HOUSING ADMIN initiatives. We are auditors, examiniers who see Violations almost everywhere we look ...in Way too many files which is scarey! Is heavy adherence by lenders to strict rules fair? Hell No. But thatâ€™s what the government says. Make a compliance error.....no mo loan. Federal judgeâ€™s rule...makes a mistake and lose the loan, courts decisions...Rescind. Lawyers need to see this is not a case by case argument with uncertain prejudice in certain cases. It is cut and dry! http://www.borrowerhotline.com
I believe in general your options are
1. Lease it out - great tax break, values will re-bound (hopefully)
2. Renegotiate the loan...did you buy it as owner occupied, now your in SFO..you'll have to explain that.,
3. Sell at a loss - maybe take a promissory note for the difference
4. Give the key back, you'd better be a better negotiator than that. Your credit will be trashed.
If you'd like a Burbank market report I'll be happy to send one.
1-888-284-2056 Burbank is turning around.