Profile picture for FirstTimeForcloser11

Should I walk away from my home.

IN my neighborhood we had key-dropping and some people walked away. So the house went into foreclosure. IN the last 4 months HUD came into the neighborhood and cleaned up the homes and put them on sale. Example: 2005 new construction home sold $260,000. IN 2010 the homes had a value of $230,000. After HUD came into the homes sold for $170,00! Now all the homes are valued at the $170,000 price and the Banks will not re-negotiate any modifications, because they say the prices are to low.
If the home is now assessed at $170,000 and I hold a $260,000 loan. It could take decades for the home to appreciate back to just $200,000! So, the government, was "helping" and all it did was make things worst, by dropping the prices by $60,000 or more!
Should I just walk away?
Who is responsible for this HUD?
  • April 02 2011 - Lake Stevens
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Answers (11)

It's a heck of a spot to be in, but before you make any rash decisions get some professional advice.

Have you spoken to any Realtors in your area?  Get an opinion from a Realtor first.  You are saying assessed value.  Usually assessed value is the term used for real estate tax computation.  Those valuations never line up with actual value.

The other person to speak with is an attorney who specializes in foreclosures.  There may be options for you to pursue which are less damaging then walking away. 

Before making a move that severely damages your credit see if there are other alternatives for you to pursue.

  • April 02 2011
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Thanks for you question.  First, let me test my understanding, you want to walk away just because home values in your neighborhood have dropped?  I hope not as I don't have enough time to explain the negative impact that will have on you for years to come.  Now, if you can't afford your payments that is a different story. 

No, HUD is not to blame.  We are to blame, too many people got loans they couldn't or could barely afford with no money down and not so good credit.  We could blame the buyers or the lenders for making it so easy to get a mortgage when they shouldn't have.  Looking back and placing blame is not going to help us now, let's look forward.  Just think how much the houses would be worth had HUD not come in and "clean" them up????  $150k????
  • April 02 2011
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Wow, you're actually considering doing the very same thing you're complaining about. If the people hadn't walked away from their homes, the values wouldn't have depreciated. Maybe you should think about that a little more.
  • April 02 2011
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Profile picture for Connie Klemme

you've already got two really good answers.   So, instead of adding another, I'm just asking...are you not able to make the payments? and why would you throw away all that you've paid into a house and destroy your credit simply because values have dropped.
 
I know nothing about your neighborhood and have no crystal ball for the future...but would suggest thinking about long term plans..-was the value artifically too high when you and neighbors bought?  or is the value artifically low now??  either way...which is worse?...staying there with the issue you've got or the new issues that would be created by walking away?
Hope you find the answer... maybe talk to someone that walked for this reason and see how they feel a year later.   hopefully someone like that will comment.

  • April 02 2011
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As same as the home prices dropped very quickly from the bubble times to normal time (we didn't mention to 'from the bubble times to depressed times'), the distress sale price is not a normal home market value and its future value is not going start from there, if it drops $90K in very short of amount of times then it will be returned to its value also in very short of amount of time in the normal market.
  • April 02 2011
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this is not legal or tax advice. seek appropriate counsel.

Walking away will result in foreclosure. WA State is what is called a non judicial non deficiency foreclosure state through our Deed of Trust statutes. what means is the deficiency for the foreclosing lien holder is wiped out after foreclosure.

BUT, the deficiency for non foreclosing junior lien holders is NOT wiped out. the lien holders may pursue the dificiency.

Generally, a short sale with full release and waiver of deficiency is the best option over foreclosure and deed in lieu. the borrower must be able to document financial hardship in most cases.

  • April 02 2011
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Profile picture for FirstTimeForcloser11
Actually, this information was from a direct discussion with the Bank who owns my home. The Bank Assessed the value at $170,000! or $90,000 less than the mortgage!
  • April 03 2011
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Profile picture for Frieda Triebel
It is most unfortunate how the severe recession has affected so many people.

Before making any decisions, I would suggest you consult with an attorney experienced in handling short sales, loan modifications, and foreclosures.

The best of luck to you.
  • April 03 2011
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Profile picture for sunnyview
You need to get legal advice to see if negotiating a walk away, short sale or deed in lieu from the bank would help or hurt you. It will take you a long time to pay the difference between your value and what you owe so you need to consider all your options up front before you decide to so anything.

Also, take a look where you bought in the cycle of the bubble here to see how long it might take for your market to come back. It is a terrible situation, but you need to get legal advice to make a plan that will move you forward past this. In the end, you may decide to stay and pay, but you need to explore all your options now to make the best choice.
  • April 04 2011
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Profile picture for shasta_steve
First off I don't think HUD is responsible for your house losing value.  HUD and everyone else involved in the mortgage industry were the main cause of the bubble because of lax oversite and outright fraud but the reason prices are so low in your area now is because that is what people are willing to pay.  

Now if you decide to walk or not is something you have to decide for yourself.  In my mind this has become a kind of every man for himself.

Ok from what I understand Washington is a non-recourse state.  I have no idea about your loan or if it is really non-recourse but if it is then your loan contract is pretty simple.  If you stop paying on your loan, then the bank takes your house.   You owe nothing including taxes on the loan. 

Non-recourse loans are pretty common among big business and walking on "investments" is also pretty common, only they use other terms for it.   The Mortgage Bankers let their national headquarters go into foreclosure after they put 5% down on a 75 million dollar loan, all the while telling homeowners it was their moral obligation to keep paying their mortgage. 

I know half a dozen people who have let property go back to the bank and I do not know anyone who regrets it.  I do know a couple of people who short sold their house and most have told me if they had it to do over again they would have just went the forecloure route but that is another option.  It is going to hurt your credit either way but depending on how may loans your have and other things not always as much as you would think.  Looking at your situation you are 100k underwater if you factor in the cost to sell your house.  I would have to ask myself if my credit was worth 100k and how much money I would be saving renting for minimum of about 3 years. 
  • April 04 2011
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Jayne is right on the money.  Assessed values are 'considered' to be market value, but aren't.  They are based on old data.  Talk to an agent in your area specializing in your neighborhood.

For example, the same thing happened in a local Olympia neighborhood.  I represented a two buyers who purchased a different homes for $200,000 and $205,000 from the FDIC.  Less than a month later, same age, same street, similar condition and smaller homes sold for $220,000.  So the 'dumping' of a few of the FDIC homes, didn't hurt the market as bad as some of these neighbors (I talked to a few) thought it would.

Yes, the market is down in the time since they bought their new homes 4 years ago, but not as much as the $200,000 sale alone would indicate.

Good luck.
  • April 04 2011
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