Home Selling in Pittsburgh>Question Details

Kristin, Home Seller in Arlington Heights, IL

Does it ever make sense to foreclose on a house? My husband has been trying to sell his house in Pittsburgh

Asked by Kristin, Arlington Heights, IL Tue Jun 24, 2008

since Nov with no offers. We just evicted the tenants and lowered the asking price to less than the mortgage payoff. We'll probably have to use credit cards to pay the realtor, closing costs, etc. but my husband is willing to go into debt to avoid having a foreclosure on his record. I think there has to be a better option.

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Foreclosure isn’t an option to get out from under a home, it’s the result of poor financial planning. I don’t say that to be vicious or cruel however, to get you to understand Foreclosure wrecks your credit, almost the same way a bankruptcy does.

Short selling your home is an alternative to foreclosure but, make no mistake, it is looked at and treated almost the same way as a foreclosure.

In other words, avoid all 2 options, Foreclosure and Short Sale at all cost.

Ask to refinance or restructure your mortgage, contact a credit counseling service, speak with a real estate Attorney and or have an honest conversation with a trusted CPA and ask what you can do to avoid Foreclosure or the Short Sale, it really isn’t worth it.

Once again, understand that a Foreclosure or Short Sale isn’t an option, it’s a result and, not a good one at that.
2 votes Thank Flag Link Wed Jul 2, 2008
Be careful with a short sale if you are concerned about protecting your credit rating. It may be hard for you to get financed for another mortgage any time in the near future. Plus your FICO score could dip a couple of hundred points.
1 vote Thank Flag Link Wed Jul 2, 2008
The Hagley G…, Real Estate Pro in Pleasanton, CA
MVP'08
Contact
Kristin,
If at all possible, avoid foreclosure at all costs. Credit ratings are becoming more and more important on several levels. Even renting a home is harder with a poorer credit score. Some insurance companies also charge more to low credit people. What I am saying is that even selling for a loss is better than foreclosure. Make sure your realtor is doing everything he or she can, if not, boot them to the curb and get an agent that wll work hard for you.
The best of luck to you!
Michael

Michael D Delp
Mortgage Pro
4802 Old Bethlehem Pike,
Telford Pa. 18969
Ph- 215-453-1025
Fax- 215-453-1012
Cell- 610-762-0318
michaelddelp@aol.com
michaelddelp@verizon.net
http://www.mortgagepro.instantlender.com
1 vote Thank Flag Link Wed Jun 25, 2008
Are you moving out of the area? I'm assuming there's some reason you don't just continue to rent it out or get new tenants. As a Pittsburgh Realtor, I know things are tough for investors who were unlucky in the timing of their purchases or whose circumstances have changed -- though not as bad as in other parts of the country. And the rental market is quite strong here now.

I have a client from Florida who reports street after street of nearly empty condo buildings, and many thousands of people who are pursuing the strategy described below by "Under the Bus." In my opinion that's mortgage fraud: I don't see how they can do it without fudging debt-to-income ratios somehow. (If they have enough income to meet D/I ratios with two mortgages, they can afford to pay the mortgage on the first house and shouldn't be in foreclosure. If they can't, they're misrepresenting their D/I ratio and the bank shouldn't approve the second loan. If the Realtor knows they're doing it, he's failing to disclose facts material to the transaction.)

Anyway, a foreclosure is like breaking a mirror -- your credit is toast for seven years. I've seen people who've had to move in with friends after a foreclosure dropped their credit score so much they couldn't even get approved to rent!

I would do almost anything to avoid foreclosure. I've had people say "I don't care; I won't need credit for the next few years." To which I reply, "How do you know?" You never know what the future may bring. Maybe somebody will lose a job / get sick / get sued / want to send a child to school / who knows, and need a loan really badly. With a foreclosure on your record, you're not going to get it, or you'll get a "credit card" interest rate.

One side point -- as a married couple, you both have an interest in the property. That means *both* of your credit reports will show the foreclosure.

There are lots of options to avoid foreclosure -- there are companies that specialize in short sales (where the buyer pays less than is owed). These are tough for Realtors, since the bank's attitude is "If we're not getting paid, nobody is." They will often specify terms such as "no commissions" or "buyer pays all transfer taxes". These make the deal less attractive to buyers, but it's often possible. The main drawback to this is the time it takes -- months in most cases. There are so many such cases the banks are overwhelmed. If you don't have months, this may not work for you.

You can do a deed-in-lieu of foreclosure -- where you just "turn yourself in" and hand over the deed without making the bank actually foreclose on you. This is less paperwork, but nearly as bad for your credit as an actual foreclosure.

Even if you're leaving town, if the property is in reasonable condition or can be fixed up to be rentable, perhaps you could hire a property managment company to rent it out for you. They'll take a month's rent to find a tenant (typically), and another percentage (2-10, depending on how much work they do) for managing it in your absence.

Bottom line -- foreclosure is very bad; avoid it if you possibly can. For legal advice, consult an attorney; he may know other options related to bankruptcy, etc. (Bankruptcy will also wreck your credit for years, of course.) Good luck! I hope you find a way out of this that leaves your credit intact.
1 vote Thank Flag Link Tue Jun 24, 2008
Why don't you rent it again and wait a year?
Don't go for foreclosure if you can avoid it.
By this time next year the market will be a lot better!
0 votes Thank Flag Link Sun Jul 6, 2008
I've lots of experience with talking to lenders and then short-selling properties where the due amount is more than the market value right now. You can and are smart to try to avoid foreclosure, with the money loss, the killer credit hit and, really, the embarassment of foreclosure.

About the realty fee, we have a discounted division of my company so no issue there, and with a short sale banks will negotiate with the Realtor (and is happy to cover that reduced fee).. Let me know if it was just lost in the shuffle of listings or what. Realtybud@aol.com
0 votes Thank Flag Link Wed Jul 2, 2008
Kristin,
An option that you might really want to take a look at is:
There is a company my friend works for that specializes in finding buyers and investors for properties who are either being sold as short sales or foreclosures. This might be a way for you to find a buyer faster for your property. If your husband will go into foreclosure then he will not be able to go on a loan from anywhere between 3 to 5 years on any fannie mae loan. I do not want to put my friends info on this website since i'm new to this site so i'd rather give you his contact info directly. You can contact me at akanevsky@midacap.com
Alina Kanevsky
0 votes Thank Flag Link Wed Jun 25, 2008
We have been working with a realtor this whole time and are thinking about getting a new one. We evicted the tenants (family members) because they live like animals and always had huge messes and multiple realtors told us the house would never sell with those tenants living there. We haven't gotten new tenants yet because the house is so old and so much work needs to be done first (things our family would overlook, but regular people probably won't). Also, we've been told we can get only about 2/3 of the mortgage covered with rental income, and we're not sure it's worth it. Basically it's a huge headache to deal with. We live in Chicago, our realtor isn't very proactive, and we want to be done with it without a scar to the credit score (my husband, as far as I know, would be the only one affected since he bought the house before we got married). Ultimately we would like to move to Texas and begin investing in real estate there and that's not likely to be easy if there's a foreclosure on my husband's record.
0 votes Thank Flag Link Tue Jun 24, 2008
Kristin
You need professional assistance. Are you represented by a Realtor? You should be asking them these questions. There are options but time is your enemy right now. Why did you evict the tenants? Were they not paying rent?
There is too much to cover here, but in brief the amount you owe on the mortgage has absolutely nothing to do the the market price. It sounds as though you as selling without professional representation to save the cost of commission. Big mistake. You need to talk with three Realtor TODAY. They will not charge you. Discuss your situation, learn your options, act quickly!
Web Reference: http://www.hopenow.com
0 votes Thank Flag Link Tue Jun 24, 2008
Keith Sorem, Real Estate Pro in Glendale, CA
MVP'08
Contact
Kristin,
I work for a bank in the lending department and i do have to tell you that your husband is right because you must try to do naything possible to avoid a foreclosure. There are a few options that you might want to take a look at if you house is not able to be sold such as working with a company that specializes in foreclosure buy outs, short sales, ect....however that all depends on where your husbank stand on the mortgage at a current time. If money is a problem there are ways to get financing to be able to get through this rough real state market we are in where people are having such a hard time selling their homes. However to really be advise you property i'd have to have a much better understanding that you are in.
Feel free to contact me any time.
Thank you,

Alina Kanevsky
Lending Specialist

Mid Atlantic Capital
405 Kings Highway South
Cherry Hill, NJ, 08034
Phone: 856-429-2207
Toll Free: 800-232-5171 ext. 501
Fax: 856-429-4118
Cell: 267-474-8050

Email: akanevsky@midacap.com
Web Address: http://www.midacap.com
0 votes Thank Flag Link Tue Jun 24, 2008
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