Foreclosure in Las Vegas>Question Details

Willy, Both Buyer and Seller in 89129

WHAT ARE THE CONSEQUENCES FROM WALKING AWAY FROM MY HOME I BOUGHT FOR 500K?

Asked by Willy, 89129 Tue Feb 26, 2008

the home is 3700 sq ft and i bought it as an investment property. my wife has enough income and a good enough credit score to repurchase another at a reduced value. what will be the negative consequences of walking away besides a lower fica score and the money i have already put into it?

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10
You ask this question very casually. Do you think it's morally right to walk away from your obligations? It doesn't sound as if you can't afford the property, it sounds as if you want to walk away from it because it hasn't performed as you thought it would. You bought a very large home, as an investment, you have a good income and a good credit score. You're wondering "what can happen?". What kind of people are populating our country these days?
2 votes Thank Flag Link Thu Feb 28, 2008
Willy,

Lets put it this way .. there's nothing positive about it because it will follow your credit for the next 6 or 7 years ..

Also keep in mind, any credit cards or any lines of credit shared with your wife will now travel down the same road as you - downhill.

Roberta dropped a very good article and it's pretty much on the mark .. I'm surprised, because most articles give a lot of misinformation and offers consumers a very false presentation and a misguided view of what really happens - and you as a consumer doesn't find out all the little details - until your life falls apart.

here's a few examples:

"Your lower FICA score will pose obstacles for you in the future in that you may not be able to exercise options that would have been available to you .."

Translation: your mortgage company (like any of your creditors) does a "Universal Revue" every 30 to 45 days of your account ... it's the same one that's used right before the closing and it covers all of the accounts in your bureau, like Visa, MC, Neiman Marcus, Home Depot, (Victoria Secrets) any standing car/boat loans, even the utility companies .. and like clock work, your car and homeowners insurance will come due and premiums are based on your credit history - a bad history and your premiums go up , etc, etc ...

What starts, is the domino effect .... being late 30/60/90 days starts the ball rolling, then starts the other creditors changing their fee's and their rates from 9.99% to $29.99% (depending on your states usury laws) .. and depending on the delinquency, they either limit or just disconnect you from any credit as your FICO score drops from 780 to 480.

"The cost of higher credit may negatively impact the perceived savings you envision from walking away from the current property and buying a replacement at a discount..."

Translation: your wife will have to carry you for the next 5 or 6 years.

Like some of the others have said here ... get with your mortgage company, try for a short sale or an adjustment to the payment, just keep climbing the ladder until you can ring somebody's bell.

Think about it Willy ... you now have the Bank of America leading an initiative on Capitol Hill to dump the cost of low-performing mortgages on taxpayers ... would you like it if 10 people dumped their bad debt on you.?

Does the word "*responsibility*" fall into place at any point here.....?


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1 vote Thank Flag Link Thu Feb 28, 2008
Hi Willy,

There was an article in the WSJ about this last Oct. I think it covers most all the possible downsides of walking away.

http://online.wsj.com/article/SB119266868024662861.html?mod=…

One thing I would add for anyone else that might be reading this post. It's about taxes due on a foreclosure / short sale. It had been the amount of debt forgiveness from the loan would generate a 1099 as gross income. In Dec. '07 The Mortgage Forgiveness Debt Relief Act of 2007 became law. It allows up to $2 million of the cancelled debt on a principal residence mortgage, tax free through Jan. 1, 2010.

http://www.govtrack.us/congress/bill.xpd?bill=h110-3648&…

Unfortunately for Willy, it doesn't apply to investment property. I would suggest seeking some legal / tax advice to avoid any surprises.
1 vote Thank Flag Link Wed Feb 27, 2008
This is a deficiency judgement state. That means that the seller can actually take you to court and come after you for the difference. I have seen it done.
Lenders are wise to the fact that sometimes a husband and wife buy seperately so in the case of an FHA loan, they will pull both your credits despite the fact that only one is buying.
I've seen cases in which the person with good credit bought another home to take advantage of the market only to find that the balance of the old property after judgement was added to the new property.
Best case scenario is that they 1099 you.
Credit, well... you know.
You asked.
You should consult with an attorney and see if they can do a deed in Lieu of foreclosure (give the house back to the bank), although usually not an option on a non owner occupied, or if you have two different lenders.
Have look at this, it outlines options here in Nevada.

http://myhomeinvegas.com/lasvegasforeclosure.html
0 votes Thank Flag Link Mon Aug 3, 2009
Randoma@@: You people seem to equate some level of "morality" to walking away from an investment.

JR: No, not an INVESTMENT, and OBLIGATION.

Randoma@@: When I buy AAPL at 200 and it drops to 67, I have zero compunction about walking away from it.

JR: If you bought it on margin, I wonder how fast your investment house would take to seize your bank accounts and put a lein on your assets.

Randoma@@: Why should I attach some moral equivalence to walking away from a home, which you agents and lenders have pushed as "investments" for the past several years?

JR: I’m sure you have no morals to attach to anything, pal.
0 votes Thank Flag Link Thu Jul 30, 2009
You people seem to equate some level of "morality" to walking away from an investment. When I buy AAPL at 200 and it drops to 67, I have zero compunction about walking away from it. Why should I attach some moral equivalence to walking away from a home, which you agents and lenders have pushed as "investments" for the past several years?

Moreover, as to credit scores, when one cannot afford the payments on one's home, perhaps iots better that one's future credit is tightened. In addition, there is no shame in being unable to afford a mortgage at this point. The unemployment rate has hit historic levels while simultaneous precipitous drops in housing values have led tot he current situation.

It seems to me that the crowd who refers to a mortgage obligation as a "moral" obligation has some vested interest in the price of homes not continuing to drop (i.s. agents and lenders) and those people are the very vultures which blew the bubble in the first place.

I find no reason, even credit report destruction, to stay in an underwater home which has little to no prospect of resuming its value in the near future, particularly if the homeowner is unemployed and faces running through their life savings just to meet some fictitious "moral" obligation until such time as that homeowner will have to vacate anyway and at such time as they have no money left.

People are not stupid.
0 votes Thank Flag Link Thu Jul 30, 2009
Your lower FICA score will pose obstacles for you in the future in that you may not be able to exercise options that would have been available to you. If you are able to buy a new home, car, apply for an equity line......these lines of credit will come a a higher cost. The cost of higher credit may negatively impact the perceived savings you envision from walking away from the current property and buying a replacement at a discount.
0 votes Thank Flag Link Tue Feb 26, 2008
Deborah Madey, Real Estate Pro in Brick, NJ
MVP'08
Contact
Willy, if you plan on possibly wanting to sell the home before you get foreclosed on, let me know. I specialize in listing short sale properties. Short sales are when we would ask your mortgage company to accept less of a payoff than what you owe them to get you out of the home. This will not affect your credit as bad as a foreclosure. It may be possible to do a short sale in your situation. If you want, give me a call on my cell at (702) 203-6688 and I will be happy to go over your options with you. I have quite a few people in this same exact situation right now, so you're not alone. Whichever option you choose, good luck.
0 votes Thank Flag Link Tue Feb 26, 2008
Hi Willy. No one will give you a loan for some time after "walking away" so I think repurchasing something else is probably not an option. Only the combination of a lawyer, accountant, and tax advisor and perhaps us lowly agents can give you a complete answer to the consequences. Why do you need to walk away from it? Did you buy it to flip or to rent out? When did you purchase it? email to me the property address and I might have some ideas for you. There may be other alternatives rather than just walking away but would need to talk to you in person/by phone to better advise.

Best of luck.


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John A. Brassner, MBA, Realtor
Windermere Summerlin Real Estate

Cell Phone: 702-808-9816
Fax: 702-995-0488
Email: john@john4realty.com

10777 West Twain Ave, Suite 105
Las Vegas, NV 89135
http://www.NevadaRealEstateCenter.com
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0 votes Thank Flag Link Tue Feb 26, 2008
Willy,
I also live in 89129 zip. What you might want to do is speak to the lender to get a loan modification to help with the terms if you want. To answer your question is a foreclosure will stay on your credit for 3-5 years maybe more. I work closly with 3 major banks and you may want to try a short sale(this depends on a few things. If you would like to call me we can discuss the more private options and consequences that may apply to you. i can be reached at 702-682-0404.

Thank you,
Dave Grant
0 votes Thank Flag Link Tue Feb 26, 2008
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