Sell, rent or give it back to the bank?

Asked by Linda Atkins, Greenbrae, CA Mon Nov 2, 2009

I've owned a condo in Spyglass since 2001, but moved to another city over a year ago. I had my place rented for a while, but the tenants have moved on. I've tried for the past two months to rent it, lowered the rent, allowed cats and dogs. Lots of people have looked at it, but so far no takers. I will have a $650 negative cash flow per month when it is rented. I'm not sure what the current values are, but suspect that my mortgage is higher than the value.

My question is: should I try to sell it, continue to try to rent it, or give it back to the bank?

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Andy’s answer
Andy, , California
Thu Sep 8, 2011
Linda and Everyone,

The answers here provide many useful information. But there is something we have to pay attention.

This question looks like a real estate question but if we think about it carefully then we can find that is a question about finance and tax eventually. Real estate information here provided by real estate experts help the owner to know the outcomes on each way but which is the best for the owner has to be answered with the owner's whole financial circumstance.

IMHO, real estate experts' information is necessary here but it should not be answered by real estate experts.

This is my opition, not an advice.

0 votes
Leslie Jacob…, , Marin County, CA
Mon Nov 2, 2009
Hi Linda,
I just did a current market analysis for a client in who owns a condo in Spyglass last week. They were pleasantly surprised with the current value. As others have said... it is best to speak to a Realtor that is knowledgeable about Spyglass and get an idea of what your home is worth plus an educated opinion about what your condo should be renting for. I’d be happy to help if you would contact me directly. Warm Regards, Leslie

Brannan Associates Realtors
Leslie Jacobson, SRES
1 vote
Keith Sorem, Agent, Glendale, CA
Mon Nov 2, 2009
I was in the same situation and have some advice that you can use:
1. You should talk with a CPA regarding the tax consequences of any action. Have you filed taxes with this property as a rental?
2. IRS rules your principle residence as where you have lived over two of the last five years. What happens if you sell it at a loss? How does this impact your tax situation?
3. If you decide to try to keep it as a rental, and your financing was based on owner occupancy, the lender may ask you to re-fi into a new loan based on non-owner occupancy. If the value has slipped the property may not qualify.
4. If some of what has happened is not in your direct control (had to relocate due to a job change), you might be able to ask the lender to agree to modify your loan so the payments are lower.

I agree that you should interview a REaltor or two that has short sale experience and develop some options. In most cases you''ll need to prove "hardship" in order to get the lender to agree to either a short sale or a loan modifications. If you short sale the property, you have to wait two years before purchasing your next. If you take the foreclosure route, it's seven years.

So find out your options, their tax consequences and the pros and cons. IMHO you should fight to retain the property. All markets turnaround. We had to do the same thing, in the long term we kept the property for 18 years and sold it for a nice profit. Right now, you cannot see past your next mortgage payment.,

Good luck. Try to do the right thing.
1 vote
Greg Corvi, Agent, San Ramon, CA
Mon Nov 2, 2009
It is a tough time to find good renters, let alone any renters currently. They are in the driver's seat and shopping around for deals. Your situation is somewhat common and there are several different ways to approach your dilemma. You can try to "short sale" it, depending on how many lenders are involved, your current financial situation and some other variables, this may or may not be an option. You could allow the bank to foreclose on it, but then you have credit implications. You can rent it and absorb the loss in hopes the home will appreciate and eventual sale will cover those losses. Or you may be able to do a regular sale.

My suggestion is to meet with a good Realtor, determine the current market value of your home, discuss your personal and financial situation, and then you make the informed decision on how to proceed. I represent a major bank in listing their bank owned properties. I also have been involved in many short sales. Please feel free to contact me if you would like to discuss this further. Good luck with whatever you decide.

1 vote
John Villaes…, , California
Mon Nov 2, 2009
I would look and see how much you owe and get a CMA on how much you can sell it for in todays market. If you want to keep it i would suggest still trying to rent it, just understand that a lot of people are buying right now because of how the market is so it may take longer to fill it. And if you are suggesting to let it go to foreclosure, i would suggest a short sale as you can negotiate certain things in a short sale that would be over looked in foreclosure. To start things off i would contact a local agent in you area so you two could discuss in depth about your current situation and what the real and best option is available for you to take. I may be able to locate a Keller Williams Agent in your area if you would like.

John & Sarena Villaescusa
Cell- 562-818-2671
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1 vote
Colleen Fras…, Agent, Greenbrae, CA
Fri Aug 26, 2011

If you still have it, definitely hang on to it if possible. The rental market in Marin is up 6% year over year.
Spyglass is in very high demand, as rentals and sales, due to the relative affordability, excellent Kentfield School District and easy SF commute. Currently, there are no available units for sale in the complex and the last one that went into contract did so within 6 days. It is bank owned and priced comparatively high. I just sold two units in the complex, one involved multiple offers and the other was a very quick close. Thus far this year 67% of the Spyglass sales were distressed sales, so if you decide to sell short you will not be alone.

I also rented one of the units as an accommodation for my client and it was rented for full price in 3 weeks--no pets and great tenants.

All the best,

Colleen Frasco
Frank Howard Allen Realtors
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0 votes
Stephanie La…, Agent, Greenbrae, CA
Wed Nov 4, 2009
Dear Linda,
Before making any decisions, I would recommend you get a solid market analysis of your home's value from a reputable, knowledgeable local agent. If you bought in 2001, you may not be underwater. A local agent can also provide you with the rental value of the property and assist with finding a tenant. You should also consult a tax advisor about your position if you do decide to sell. If you hold the home as a rental (investment property) for a certain period of time, you may be able to take a deductible loss (vs. no tax advantage to a loss on sale of a primary residence). If you truly can't afford to keep the home, a short sale is the next step to consider, depending on how many lenders are involved. Foreclosure should be a last resort as it has the greatest negative impact on your credit. I have experience with Greenbrae and foreclosures and would be happy to consult with you at your convenience.
Best regards,
Stephanie Lamarre, J.D.
Alain Pinel Realtors
0 votes
Don Tepper, Agent, Burke, VA
Mon Nov 2, 2009
Just to clarify one point: Giving it back to the bank isn't an option. It wasn't the bank's to begin with.

You could try to give it to the bank. It's called "deed in lieu of foreclosure." But lots of lenders, for a variety of reasons, don't do deeds in lieu of foreclosure.
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