Home Buying in Rockford>Question Details

Hunt365, Home Buyer in Rockford, IL

What to do with current underwater property?

Asked by Hunt365, Rockford, IL Sat Apr 7, 2012

I want to buy up to a new home. My current home is 30k underwater plus 30k in improvements current market value is 65k, do i try and qualify for a second loan for the house i want then walk away from current property. i have 810 credit score and 100k in liquid assets. Renting current property isn't an option i want to consider unless a last resort. Current location is SE side Rockford, IL

Help the community by answering this question:


Ryan Petry’s answer
With $30k on the line, and perhaps not even including your selling expenses (you can add another $6,000 to $8,000) on top of that, maybe the thought of selling shouldn't even come to mind. If you value your credit, as others have said, you will certainly want to avoid selling short or even worse, abandoning or foreclosing the property. However, people do what they need to do, and it doesn't sound like that is something YOU need to do. I think it would be much different if you had lost your job and had no financial ability to recover missed payments; that's just not the case here.

The solution to your problem revolves around time. How long will it take for our local Rockford market to turn around? I'm hesitant to believe that market rebound and recovery is going to be experienced within the next year or two locally; and I'm even more skeptical that the property values are going to snap back to where they need to be for you to break even - that could take the better part of the next decade. Values in Rockford have already reverted to where they were in the mid-1990s. We just lost nearly 20 years of appreciation. We aren't going to miraculously gain that back.

So here's the deal... If I were you, I would give more consideration to the possibility of being a landlord. Given the fact your mortgage is where it is and the taxes are where they probably are, you will probably need to get $900 to $1100/month for rent. If you can get that... great! If not, you might lose a couple hundred bucks a month. But do the math... sell now and lose $30,000 to $40,000 or rent the house out for the next decade with a $200 monthly loss and still be $6,000 to $16,000 AHEAD of where you would be if you dumped it today.

Bottom Line: Don't sell in today's market unless you absolutely have to. It's very difficult, in fact nearly imposssible, to compete with some of the prices on these short sales and foreclosures. Unless, of course, you're willing to get bent over a barrel.

0 votes Thank Flag Link Sun Apr 15, 2012
That is quite a tough question! Even though your credit score is outstanding (we rarely see 800+ scores), you will not be able to buy a new home without selling your current one if you owe more than it's current market value. As difficult as it sounds, your two options are:
A. Pay down your current mortgage so you have at least 25% equity in your present home, then rent it out for enough to cover the current mortgage (then you should qualify to buy a new home), or
B. Sell your present home for as much as you can and pay the shortfall at closing from your other assets. Then you will be free to buy another home.
There is no easy answer when you are in an underwater situation and you do not want to ruin your credit by a short sale or a foreclosure. I have had 6 closings in the past six months where sellers have brought between $20,000 and $60,000 to the closing.
If I can help you, please contact me at 815-231-4166 or my cell 815-494-1444.
0 votes Thank Flag Link Mon Apr 9, 2012
As mentioned in previous posts walking away from the property will be the worst thing to do and would effect not only your credit, but your ability to purchase a new home. You need to consult with both a experienced lender and realtor to look at your options.

If you are looking to get a preapproval for the purchase of a new home, please contact me.

Good Luck,

Nick Nelson (NMLS #384413)
Mortgage Loan Officer
1st Step Mortgage Group
6876 Spring Creek Road, Suite 124
Rockford, IL. 61114
0 votes Thank Flag Link Mon Apr 9, 2012
Now is a great time to buy if you have good credit. Try a loan modification with your lender, walk away is not a good idea, Foreclosure is the worst option.Good luck.
0 votes Thank Flag Link Sun Apr 8, 2012

Trading up would absolutely be the best option. While you may not realize a profit on your current home, the low interest rates combined with the current market home prices would allow you to invest in a larger home that would offset your looses in the long run. Walking away from your current home would result in devastation to your credit for many years to come. With an 810 credit score, and 100k in liquid assets, barring no other credit issues, you should easily qualify.
Please give me a call and we can work together to keep your great credit standing, as well as find the perfect home for you.

Leslie Varisco
Keller Williams Realty Signature
0 votes Thank Flag Link Sat Apr 7, 2012
If you've got $100k in liquid assets then you should sell the house for whatever you can and move on with life... Anything else could be considered mortgage fraud, and if you walk away and let it foreclose you'll end up with a deficiency judgment and owe the bank that money anyway.
0 votes Thank Flag Link Sat Apr 7, 2012
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer