We have 2 homes, one we live in and own the other is a rental. We owe about what we can sell it for. Should we foreclose?

Asked by Sharon, West Linn, OR Fri Jul 1, 2011

Our second home is a rental but we are losing about 1,000.00 per month by keeping this home. We are not behind on the mort paymts. We need to get rid of this house. How sould we do it?

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7
David Smid, Agent, Eugene, OR
Sat Jul 2, 2011
Michael provides some good information in his post.

I wanted to make sure we are all clear that the way lenders/banks/credit reporting agencies change their requirements and guidlines on a very regular basis. Today they are for something, then tomorrow against it, then for and then against and so on when in comes to loans. I believe (opinion) that banks will loosen requirements and I'm sure they will also look at short sales and foreclosures in a different light in the future. That "for now" they may look at a short sale and foreclosure the same way, but later that will likely change. Banks/investors are in the business of making money and if nobody can borrow money, interest on that money can't be collected. They want to loan and as confidence builds in the market, so too will loans be more available.

I would like to repeat what others have said: Talk to a few Realtors (this is a good start), attorneys and CPAs. The more information you have the better you will be able to make a decision.

Unfortunately nobody knows the future and the ramifications of todays' decision may better or worsen over time. We can only do our best with what we have.

Keep your head up!
0 votes
Eli Givoni-S…, , Boca Raton, FL
Fri Jul 1, 2011
You should sell it. If you are upside down, you can short sale it. Feel free to give me a call. I would be happy to explain the process to you.

Eli Givoni, Director
Short Sale Department, LLC
561-361-1909
info@shortsaledept.com
http://www.shortsaledepartment.com
Serving all 50 states

MARS Disclosure for General Commercial Communications
IMPORTANT NOTICE:
Short Sale Department, LLC is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit.
0 votes
The Stephen…, Agent, Portland, OR
Fri Jul 1, 2011
There is no easy answer to this question. Make sure it is underwater first, not possible to sell. You can also consider mortgage changes and modifications. Review consequences of various choices.

Short Sale - tax liability, lesser credit problem, no judgement against you.
Foreclosure - greater credit hit, possible judgement against you.
Bankruptcy - we all know... last option.

I'm a Certified Short Sale Agent, CSSA. and happy to help. But there are many choices before you!
0 votes
Michael Babb…, Agent, Lake Oswego, OR
Fri Jul 1, 2011
Hi Sharon,

My office just has representative from a credit reporting agency in our office teaching a class about credit. A foreclosure and short sale have the same impact on your credit score and your ability to buy a home at a later date.

Before making a decision I would recommend talking to a CPA, Lawyer and a Realtor for a CMA to get all the facts and information you need to make an informed decision. Below are the 2011 Guidelines and waiting periord to purchase a home after foreclosure or a short sale. If you are interested in talking more about your options and getting a CPA or would like a referral to a CPA and Lawyer feel free to contact me.

2011 FHA Waiting Guidelines
Bankruptcy – You may apply for a FHA insured loan after your bankruptcy has been discharged for TWO (2) years with a Chapter 7 Bankruptcy.

You may apply for a FHA insured loan after your bankruptcy has been discharged for ONE (1) year with a Chapter 13 Bankruptcy

Foreclosure - You may apply for a FHA insured loan THREE (3) years after the sale/deed transfer date.

Short Sale / Notice of Default – You may apply for a FHA insured loan THREE (3) years after the sale date of your foreclosure. FHA treats a short sale the same as a Foreclosure for now. Credit must be re-established with a 640 minimum credit score.

2011 VA Waiting Guidelines
Bankruptcy - You may apply for a VA guaranteed loan TWO (2) years after a Bankruptcy

Foreclosure - You may apply for a VA guaranteed loan TWO (2) years after a foreclosure

Short Sale - You may apply for a VA guaranteed loan TWO (2) after a short sale, unless it was a VA loan then restrictions apply
Credit must be re-established with a minimum 620 credit score

2011 Conventional Waiting Guidelines (Fannie Mae)

Bankruptcy – You may apply for a Conventional, Fannie Mae loan after your bankruptcy has been discharged for FOUR (4) years.

Foreclosure - You may apply for a Conventional, Fannie Mae loan SEVEN (7) years after the sale date of your foreclosure. Additional qualifying requirements may apply,

Short Sale / Notice of Default – Currently treated the same as a foreclosure with a waiting time of SEVEN (7) years before you can buy again using a Fannie Mae conventional home loan.

Credit must be re-established with a minimum 660 credit score.

Fannie Mae has reduced waiting periods in cases of extenuating circumstances – The death of a primary wage earner seems to be the only one I have been able to identify up to this point.

Preparing to Buy Again after BK, Short Sale or Foreclosure
You should begin looking at your credit at least six (6) months before you are ready to buy again.
Web Reference:  http://www.mdbrealestate.com
0 votes
Dave Sutton, Agent, Portland, OR
Fri Jul 1, 2011
I'd think a good first step would be to get a Comparative Market Analysis from a local Realtor. Then you'd know better how much more (or less) the home will sell for than the mortgage. If it can be sold for more than the mortgage (or if you can find the difference from other assets) you should be able to sell without either short sale or foreclosure.
0 votes
Jennifer Pet…, Agent, Portland, OR
Fri Jul 1, 2011
Hi Sharon,

I'm sorry to hear about your situation losing money every month. The best person to speak with for legal advice is a real estate or bankruptcy attorney. However, here has been the advice attorneys have given to clients of mine. The impact to your credit is less with a short sale than with a foreclosure. If the situation is regarding your primary residence and you only have one mortgage on the home, the attorneys have recommended foreclosure as the best option financially for your family (lender gets the home instead of you paying your mortgage back). In this scenario, there is no cancellation of debt for you to have to claim on your taxes according to the attorneys I have spoken with.

However, if you have a second mortgage on the home or if the home is a rental property as is in your case, the attorneys have recommended a short sale as the better option as your Real Estate Broker can help you negotiate with the lender to get some of the cancellation of debt reduced and the impact to your credit is less than with a foreclosure.

I hope this helps. This was legal advice given to clients of mine by attorneys. If you decide to go the route of a short sale on your home and you need a Real Estate Broker, I would be happy to assist you. The very first step would be for a Broker to conduct a comparative market analysis on your home to determine what the market value is. Once you know the market value, that information will help you decide the next steps with the home. Please do not hesitate to contact me with any questions you may have.

Good luck!

Mandy Lewis
Real Estate Broker, Windermere Realty Group
(503) 522-5803 direct
0 votes
Ron Fowler, , Vancouver, WA
Fri Jul 1, 2011
If you are not behind on it, I would recommend selling it instead of blowing up your credit with a foreclosure. Being a landlord is no fun, especially if you didn't set out to be one in the first place. It sounds to me like you are in "to heck with the cheese, let me out of the trap" mode, which is understandable. Have you tried to sell it yet and, if so, what is the results you have gotten so far? If I can be of any help, please feel free to contact me.
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