Consult an attorney. That's the best CYA advice I can offer you.
Several people you may want to ask this question are, your current lender, your real estate attorney and your tax accountant.
Best of luck!
Those here that are suggesting you go see a good Real Estate Attorney are right on the ball. We've got a few that we have worked with and also have one that will provide a FREE consultation with our clients. These are questions best answered by an attorney. Everyone's situation is different and depending on certain factors it could be legal or illegal.
Have I seen someone do this legally, yes...unlike most states Arizona allows you to walk away from your home, of course insert legal disclaimer - under certain circumstances/consult an attorney. If you have a toxic asset worth half what you purchased it for and the oppurtunity and means to purchase a home that is better, in a nicer neighborhood, better schools, safer etc it comes down to a business decision in Arizona. Is it ethical, moral that's for the individual to decide.
Now will your lender allow you to complete a short sale after purchasing a new owner occupied home is a completely different situation and question...
You should seriously talk with a Real Estate Attorney.
Don't do anything until you do.
You may not know, but people out there are going to jail for real estate fraud.
Phyllis JC Anderson, GRI, AHWD
Liberty One Realty
Yes, short sales are legal in Arizona. Arizona is a non recourse state in terms of the bank pursuing the borrow for the "short" amount when paying off your mortgage in a normal situation. To review all of the options available to the homeowner in Arizona, see on the attached link for the "Short Sale Advisory" published by the State of Arizona's Department of Real Estate: http://www.arizonahomesland.com/forsellersorlandlords.html
Many people do buy another less expensive home after they sell their home in a short sale.
As always check with our attorney, accoutnant to make sure of your own particular situation.
If you have any questions just ask.
May I wish you the best.
Arizona Homes and Land
Here are the answers to you above question, I understand you are in Phoenix.
It is being done.
It should be.
You should consult a good Attorney familiar with short sales and a CPA to cover all issues.
Remember, Arizona is a non recourse State.
Some buyers really do need another property for reasons that make sense. Some individuals may take a moral perspective on this but without knowing all of the facts it is unreasonable to make such a judgment in my opinion.
It is possible and it has been done without repercussion.
Arizona Homes for ale by a Guy from Iowa
please see my blog with tuips and advice on getting a short sale approved.
What you are asking is for a " strategic default " This is were it makes more financial sense to purchase a lower priced home rather then being under water on yours. If this is the case, you would definitely want to consult a real estate attorney and your account. You would need to know what your liability is to the lender as well as what your tax liability will be on the defiency. My underatanding is that there is no law on strategic defaulting, individual's and companies do it all the time but there are financial consequences. Again these are questions to ask an attorney.
Many people have purchased a lower priced home to help their monthly budget, but to do so and plan the short sale in advance should be discussed with an attorney. To let it go into foreclosure is a buy and bail and is a problem. If you purchased a home and tried to rent the home for awhile and then it became to large a burden, well that may be okay, again check with an attorney. A real hardship is needed before the banks are looking at the short sale applications and if renting the home doesn't work out then having two mortgages could be a good enough hardship to get the banks to work with you. Again, you need to discuss this with an attorney.
A Real Estate Attorney is the person that can properly answer this question. Buying a home and then foreclosing on your current home is a big no, no. In lending circles we call it "Bank Fraud". There could be some bad repercussions from Buying and then Selling Short (credit, taxes, deficiencies, etc.) I know several attorneys that can answer your questions for free. Let me know if I can assist you with anything.
Back to what you actually asked: From what I was told by a mortgage person, a borrower needs to plan on keeping the first house in order to get a mortgage to buy another one. Fannie Mae backs most loans and they will not participate in helping you default on the loan of the first house by giving you a loan on anotehr house. If you ly about your intentions then that would be a legal issue and I don't know how bad that can get. Also, I think it matters how credible your explanation is why you want to buy an additional house. If they think you do it to let go of the first one then they don't give you the loan. This is what I heard. I'm not sure if it works exactly like it.
Brooke C. Martin
Designated Broker, Exit Realty Dynamics
Your best bet is to short-sale your current home (staying current on the payments IF your lender accepts this), thus avoiding foreclosure if possible, OR try a 'died-in-lieu' of foreclosure, and THEN purchase the second home IF you can qualify.
The other option is to purchase the 2nd home NOW while you CAN qualify for BOTH sets of payments, and then rent out the 'old' home (even if it's at a loss) for a year, and THEN try and short-sell it. At least you can show your lender that you tried to keep it as an 'investment' property however you couldn't continue to maintain the monthly 'short-fall' any longer.
In any even, 'buying and bailing' is not ethical or responsible in my opinion, and I'm sure that will draw the ire of some other real estate agents (and sellers) throughout AZ and the US. While it may help you in the short-term (lowering your payments, getting you out from your 'under-water' home), there are other avenues that should be explored first. Such as...how about a loan modification on your current home? Maybe your lender will modify your loan by lowering your principal balance to get you closer to 'market value'? This IS a rarity, but It's worth a try and you can at least show your lender that you tried to work with them prior to either (a) short-selling the home OR (b) allowing them to foreclose.
Hope that helps!
Century 21 All Star, REALTORS
What you are proposing is called a "Strategic Foreclosure" Here's an article to read
Keep in mind that if your loan has an option for a deficiency judgment (again talk with an attorney) you may open yourself up to attachment to your next home.
Many owners think that they can get a bank to do a short sale just because they are upside down on the value of a home, but the bank is not going to allow a short sale just because it would be nice for your portfolio or make you sleep better at night. You have to be behind in payments and have a hardship for them to allow their bank to loose money for you.