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Sell a property at a loss or walk away and let it go into foreclosure?

Hi,
 
I am looking for financial advice regarding a condo I have that is currently a rental and want to sell the property but will be selling it at a loss of at least 10k.  Would it be better to let it go into foreclosure if I do not plan to purchase another home for more than five years or take a private loan out and pay the deficit down.  If I let the property go into foreclosure will BOA come after me and sue or garnish paychecks for the loss debt?  Would letting a short sale be a better option?
 
Problem is I have never missed payment and do not have any financial hardships.  We just do not need the condo right now.  I bought it before I married my wife, since then we have moved into father-in-laws house and have our first child.  We rent his and might within the next five years purchase his home. Since the property is only under my name only my credit would take the hit. 

Thanks,
Todd
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April 23 - Saint Louis
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Answers (11)

Since you do not have a hardship and you can afford the home. The banks will probably not be willing to work with on a short sale. I agree with many others, that you're better off keeping the property till ether you pay enough off to sell or the market has increased enough to sell. For $10,000.00 difference it's not worth running your credit if you can afford the home. 

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April 30
Why do you want to let your rental foreclose as opposed to continuing to lease it? If you let it foreclose, the lender and any lien holders may come after you for the deficit, the same goes for short sales unless you have something in writing stating that they agree not to pursue the debt. If you are not in a financially binding position you should really consider the consequences before taking any action as well as talking to your CPA about how this will affect you in the future financially.
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April 30
I'd suggest leasing it out until the time you reach a point that you can pay off any differences in the selling price and what you owe. Other than that I'd guide you towards a short sale. BOA has gotten better and you may qualify for their fast track program.
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April 30
Without having more information my thoughts are this. If you can sell it for a loss and bring the money to closing or get a separate loan for the difference and pay it off then do it. If you let it go you will screw up you life for no apparent reason. It used to be a short sell was better on your credit report than a bankruptcy now it affects you same way for just about the same amount of time. If you don't have a financial hardship you are inviting a lot of legal liability into your life that is unnecessary. If you can afford it and you try to claim bankruptcy  or just let it go they will come after you for the debt. 

Good Luck,

Cathy
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April 25
Don't even think about letting it go into foreclosure for only $10,000 and don't try a short sale. My experience with BOA has been terrible when it comes to short sales. Example: A deal I was working with them had the clear to close in 2 weeks and the day after that notice  I got a call they would foreclose instead. The buyer was not happy and the seller got a foreclosure on her credit. The house sat empty for another year until finally it was sold for $80,000 less than what I had secured for them.  
If you can rent your condo until the value goes up enough so you can sell it and not need to bring a check to the closing than do it.  
Check with a local agent maybe the market value is more than you think.
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April 23
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A users mentioned Seller Financing.  If I offered this as a perk to purchasing my property, how would that affect getting another home loan down the road is say five years?  Would that count towards what I can borrow for new home?
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April 23
You would owe the IRS for the deficiency.  This is worse than the credit hit.   Keep it as a rental, put it with a company to manage, over the years you WILL make money
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April 23
Todd, I think you should exhaust all option before taking a credit hit of a foreclosure. The affects of a foreclosure will follow your for a long time. Have you thought about seller financing? It is not ideal when you still owe on the property, but in its basic terms you could sell the property to someone else with seller financing where they would continue to make payments to the lien holder. The down side is that you would still be on the hook for any payments not made, but with the right purchaser we have seen this deal work out beautifully! The ownership of the property would then transfer after the debt is paid. Some mortgage holders will even allow you to sell the property and the buyer assume the same terms of the original loan. 
 
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April 23
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If you are able to rent the property and cover your expenses stick it out.  The market goes up and down in cycles this is normal and if you live long enough will realize a low vs a high in market value.  If you could never cover your rent and have to pay out of pocket and can't afford it sell at a loss and take the loss as a learning experience never to over extend yourself beyond your means.  Never foreclose!
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April 23
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Walking away over a 10K underwater condo would not be smart. In your state of MO, lenders can get a deficiency judgement that will follow you after the sale and after your credit recovers.

You are better off in most cases with small amount to deal with it by either bringing money to the closing table or keeping it as a rental for another few years to see if the market recovers a little more of your underwater value.

Contact several agents in your area and see how much you could actually sell for now, then you can make a solid decision about what to do.
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April 23
That is a good question and one that many people have faced in recent years. Where is the condo located? Are you sure you would sell for that much less than what you owe? In many areas home prices have increased and maybe your loss wouldn't be so bad. 

If you do not plan to buy a house for a number of years having a short sale or foreclosure on your record may not be as devastating as it is for others. However you are correct that the lien holder could come after you for the deficiency or at a minimum send you a 1099 and the IRS will tax you on the deficiency. All lenders are different and have different policies. Have you ever attempted to rent the condo and use that money to maintain your mortgage payments?

I would be happy to talk to you in more detail about your options if you are interested. 
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April 23
 
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