Profile picture for NYJints

Any other options beside a short sale or foreclosure if house is worth less than you owe?

I live in NY State and want to buy a larger house. Right now, we owe $145K on our house and it's worth only $130K in the market we're in ... due to the plethora of foreclosures here. We have great credit, and I don't want to do a short sale and I'd like to avoid a foreclosure. Do I have any other options? The market in our local community is probably only going to get worse over the next few years b/c the school and town are threatening some mind-boggling tax hikes, which will likely increase foreclosures in the area. Thanks.
  • January 27 2013 - Harrietstown
  • 3
    3Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

Answers (11)

You always make money when:

You buy UP in a DOWN market. Make no mistake... the market is rebounding...

I would get your home asap and live happily knowing you bought in a great undervalued market!

Cheers!
Richard.
  • March 27 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

You are certainly in a tough position.  The only solution is to do what others have already suggested - pay off the debt you owe at the closing. 

I'm not sure renting is an option either - you need to talk to a good banker because owning 2 properties at the same time may have more of a negattive impact on your ability to purchase than a smaller down payment will. 

Also, on renting - if you have a FHA loan on your present home and want to do a FHA loan on your new purchase, this is not possible.  You can't have 2 FHA loans on residences.  It's just not allowed.

Also, there are tax implications here.  You truly need professional advice that no one here can properly give you.  You need to speak to an attorney and an accountant before doing anything. 

And, if you will be getting a FHA loan in the future, you need to get your home on the market immediately because FHA loans become much more expensive beginning in June.

Bottom line - talk to the rightr professionals to create a plan that works best for you.  If your area values are going to continue to go down, it makes sense to sell before it gets worse.  Every month you pay your mortgage it's actually now a loss due to loss of equity.  But, again, only the right professionals can properly guide you.
  • March 14 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for user0656247
My wife and I just had the same problem, condo was upside down, we grew out of our condo because we had kids and wanted a big house with a yard .  Most banks will not let you short sell if your not late on payments.  Plus short sale and foreclosure is a big hit on your credit and your not buying a new house for at least the next 2-3 years because no lender is going to give you a loan. We owed 95K sold for 87K, took the hit and moved on.  Yes we had to bring 13K to closing but were out of there and now looking for a new house to buy and moving on with our lives.
Sell it for whatever you can get, take the hit and move on with your lives if its that important to you is my advice.
  • March 14 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Food for thought:

If it's going to get worse do you really want to buy a larger (and more expensive) house now? 

Let's say your house that's worth $130K drops in value 10% over the next 3 years.  That larger house you buy for say $200K will also drop in value 10% over the next 3 years. You'd lose $13K on the smaller one versus $20K on the larger one.
 
  • March 13 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

I agree with Christopher on this one do a rental ( two to three year) minimum or a long term rent to own the rent to own almost like a land contract if you will 
to many people are opting for the for closure or short sale to just work the system when they do not have to take the hit on their credit so many more people need to rent now and cannot buy you are in a better situation to lease just make sure you do your homework on the tenant and a back ground check
Holly Hurd
Coldwell Banker Weir Manuel
  • January 28 2013
  • 3Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for JoshBarnettREIB
You can try a deed-in-lieu.  
  • January 28 2013
  • 4Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

When you sell your home, you have to make good on your loan to the bank. This means paying the lender back for the balance of the loan. You can do this either from the proceeds of the sale when it's a standard sale and the home is worth more than the loan. Or you can pay for the difference out of your own pocket if the sales price does not cover the loan amount. This is often described as "bringing cash to the table". Or you can get the lender to agree to take a lesser amount as payoff which would be a short sale.
  • January 28 2013
  • 4Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Do a rental, or a long term rent-to-own (just remember you have to pay off the mortgage balance at the end). If you need cash upfront to purchase your next house a rent-to-own works great. If you don't need the cash upfront than simply renting the home may be best. In a rent-to-own there will be less operational costs associated as well. It is pretty easy to get 10% down for a rent-to-own, and typically you will have a very strong tenant because they are putting money down.
 

  • January 27 2013
  • 6Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for ScottBROKER209
The only other option is to simply bring cash to he table.  Years past (1992 era) it was a common thing to do.  I don't see it happening to often today because most people take the easy way out and do a short sale.

Since you want to buy and not rent following this transfer of sale...its really your only option.  It may mean less of a down payment on the 'NEW' home, although you can possibly get a seller credit on the next sale to help with the losses.

Scott Cary-Broker
  • January 27 2013
  • 3Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Due to the strength of the rental market throughout most of the US and presumably in your area of NY, I suggest running the numbers on renting that home out. There are significant tax advantages of owning rental properties and your upside on equity improvement for the long term on that home is highly likely. You can use the income on the lease to qualify on your new home but keep in mind your debt will also show as a liability. Check with you lender on that as a possibility - Kevin R Kieffer Broker Associate - Keller Williams Realty - Offices in Danville & Walnut Creek, CA
  • January 27 2013
  • 2Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for wetdawgs
Yes, you can bring money to closing to make up the difference between the sales price and the amount you owe.  This is the kindest on your credit.

  • January 27 2013
  • 3Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.