what should I do with my house???

Asked by Sandy, Rialto, CA Sat Apr 19, 2008

I bought this house for 390,000 2 years ago and currently I owe 303,000. I got a job in another state and need to move. I tried to sell this house but the market value
for this house came up 290,000. I found the buyer and accepted his offer of 290,000 sale price and it went into escrow. But after 4 weeks in escrow, the buyers have to cancel it because they couldn't qualify for the loan. So I am back to the situation where I am not able to sell the house. Right now my monthly mortgage payment is $ 1700,
I am moving so I can't afford to pay this payment and live where I got the job at the same time. So I thought of refinance, to lower my monthly payments but my mortgage
company said I owe $ 12,000 more than the current house value. So I agreed to pay $ 12,000 the difference that I owe and plus $28,000 more towards my principal. After this payment I will owe $ 263,000 of my loan amount. Still my mortgage company denied refinancing my loan. Now what SHOULD I DO with this house?

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Diane Wheatl…, Agent, Upland, CA
Tue Apr 29, 2008
You are not alone. So many people are in your situation whether it be a job transfer, divorce, new child or another reason that a seller MUST move but they are in a position that won't allow for an easy sale or refinance. It really can appear so unfair to the hardworking, credit worthy individual like yourself.

As there are those of us who once sat on a goldmine of equity in our homes, taking out seconds and third mortgages to capitalize on that equity by spending, spending, spending, now we are having to look at the other side of the coin which includes loss of equity, depreciation beyond their loan balances and over extending themselves to the point that a refinance is nearly impossible due to their now inflated debt ratio coupled with their lack of adequate home equity.

Please understand, I am in no way referring to you in any specific manner. So many of us have become insolvent due to the lending institutions and decline in market values. But what about the seller that has made every mortgage payment on time, has good credit, savings in the bank and continues with good, steady income? I can only assume that the lenders believe that since we rode that high wave of prosperity we should now be prepared to pay it all back as if we are equipped with deep, deep pockets ready to restore the coffers with all that golden prosperity.

Because you are not destitude with a hardship story, poor credit and zero reserves to rely on, it will be very difficult to convince a lender to agree to a short sale. If the lender were smart they would agree to it all day long. Lenders are not in the business of owning real estate, they make loans. Lenders need to accept that the market has left many of us in your exact situation and cooperate with a viable sale transaction even if it means accepting a reduction in the principal balance of the loan they provided you. (playing devil's advocate now) But why should they be the ones to bridge that gap between what a buyer is willing to pay and the impending loan balance when you have shown that you have capital on hand ready to pay down your mortgage to qualify for a refinance? Obviously you are not involvent. The lenders won't help those who can help themselves.

To protect your credit, which I can imagine is very important to you, a short sale is not only near impossible to obtain but detrimental to your credit history for years to come. A consideration would be to lease your home out for as much as reasonably possible to be applied toward your current mortgage payment and pay out the short each month until the market changes and you can once again sell it for more than the mortgage. That day will come. Anything other than that will ding and bruise your credit worthiness and that seems to be all we have to hold onto at this point. If your credit is not important to you then you could simply walk away from the home and stop all future payments hence, foreclosure. It is truly an impossible dilemma that so many have to burden. So sorry. Best to you.
1 vote
Rebecca Cham…, , Palos Verdes Estates, CA
Sat Apr 19, 2008
You can try to sell again for a lower price..but be sure your Realtor checks out their financing before accepting. You can either eat the difference or you can approach the bank to see if your home is eligable for a short sale.

You can try renting out the property.

You can give the property back to the bank, which is not great for your credit, but it is better than if the bank forecloses on you.

I would probably first speak with the bank or have your Realtor speak with the bank and find out your options. Good luck.
1 vote
The Hagley G…, Agent, Pleasanton, CA
Tue Nov 11, 2008
Are you using a Realtor to help you through this process? Especially in Rialto, they should accept a short sale. Your Realtor will help pre-qualify your buyer up front and make sure the process moves smoothly.

I would stop putting money into the house immediately and consult a short sale specialist and/or a loss mitigator to assist you.

GZood luck - it's tough out there but this can be done!
0 votes
Angela Nunez, , 91710
Fri May 9, 2008
Hi Sandy,
I personally do not like lease/options. I haven't seen this question for you. Have you already purchased a home where you are moving? A relocation would be considered a hardship and a short sale may be possible. However, if you haven't purchased a new home a short sale will make it difficult to qualify for a loan. I would consider an all inclusive trust deed (AITD). If you have an agent ask them about this. If not feel free to contact me.
0 votes
Don Tepper, Agent, Burke, VA
Mon May 5, 2008
As some of the others suggest, look into a lease-option. Short term, that'll bring in slightly more money than a straight rental. And it could result in your being able to sell your home. The question is: How much negative cash flow would you have, and would you be comfortable with that?

However, since you have cash, you might consider just cleanly resolving the issue now. Figure out how low you can afford to go--how much cash you have to bring to closing--and aim for that figure.

Another option is offering seller financing on the property. Rather than a lease-option, sell the property but offer attractive seller financing.

Another option is trying to find another lender, one that will refinance you.

What you really should do at this point is talk to a financial planner or an accountant--one who can look at your finances and your tax situation and provide some guidance on what strategy (sell immediately, hold, then sell, etc.) is best for you.

Good luck.
0 votes
Robert G, Agent, Chino Hills, CA
Mon May 5, 2008
If you will consider a lease option with a reasonable down payment, I might have a buyer for you looking for a property in Rialto or Fontana. Pls feel free to email me.
0 votes
Lisa Blakeley, Agent, Sarasota, FL
Fri Apr 25, 2008
All of the suggestions given have been good advise. What I might also consider is the possibility of a short sale. Many people don't even understand how these work but here is an example of what you could do. In order to even consider the short sale option you have to be 30 days late on your payment but that does not mean you can't then pick up your payments from that point. Being late creates the necessary situation for your mortgage company to consider a "deed in lieu" or a "short sale" option. Call your mortgage company and ask to speak to their "loss mitigation" department and request an advisor. If you are only $12-13000 over in payoff to value, my experience says that they will work very hard to help you. It is not like effecting a foreclosure and if you pay the $12-13K then you should be eligible for a deed in lieu without question or you can take that $12K and keep making payments, drop the price to $285-290K and you might even get a bidding started which will get you out of the hole your in. The short sale or deed in lieu does put a ding on your credit but it's not devastating. And, realistically, your job is elsewhere, you have to do what you have to do. There are many compotent agents that have worked short sales that can guide you through this process. It sounds far more scary than it actually is and you need to stay focused on moving forward and not looking back. The market adjustment has hurt a lot of people but you are in a much better place because you can actually give back a property where the value is not less than what it is owed if you pay the difference, very few people have that luxury. Do yourself a favor and at least look at the possibility and talk with your particular mortage company, they may be more than willing since the value is so close to payoff. Remember the key is to ask for the "loss mitigation" department, they are the experts, not collections or customer service, they have no training in these situations. This is just another avenue if all else fails. Good Luck!
0 votes
Sharon Hodges, , 32408
Fri Apr 25, 2008
My suggestion would be to hire a management company to rent/lease out the house. I also agree with the other agent that lease/option is a good idea; however, if you don't want it on this low seller's market, put it with a rental management company for the next 12-13 months. Hope this helps, /Sharon
0 votes
Joan Patters…, Agent, Rancho Cucamonga, CA
Fri Apr 25, 2008
You could always try a short sale to get your house sold. Even though they take a while to get taken care of with the banks these days, if you can show a hardship in some way it would qualify for a short sale. Let me know if you need any help or have any questions. You can call me at 951-204-1864
0 votes
Tara Steinke, Agent, San Diego, CA
Mon Apr 21, 2008
Dear Sandy,

Here's a creative suggetion.... Talk to your agent about offering the property as a lease-option. I would advertise on Craigslist and similar websites. Advertise it as a lease option opportunity for credit challenged buyers (those with cash available but low credit scores). You can require a size-able down payment (2-3% of purchase price). You would then rent it at an increased rate and agree to have a portion of that go towards the purchase price. So.... for example, let's say the average rental rate for that type of property is $1500/mo. You could charge $1900/mo and agree to have the overage of $400 per month go towards the lease-option buyer's purchase price of $290k. This will get you out of a negative cash flow situation. You require the buyer to clean up their credit and purchase the property within a certain time period (typically 1-2 years). If they default and do not purchase you get to keep their initial deposit and find a new lease-option tenant... or sell the property at that time.

I hope that's not confusing.... ask your agent for further details. If your agent is not well informed as to lease options I would look at finding an agent that is.

0 votes
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