Profile picture for stl25960

To foreclose or not to?

I purchased a townhome in Orlando in 2007. The market was already declining, so I thought I received a reasonable deal. I put 5% down. The house has reduced in value 44% thanks to 2 foreclosures in the development. I am considerably upside down ($100k). I relocated out of state for work where I make a good salary, but have virtually no money left to "live off" at the end of the month...I live with my significant other and don't even have a rent bill and yet I cannot even afford to contribute to a retirement account. I am current on my mortgage, have no credit card debt, an almost perfect credit score and because of my salary I do not qualify for any of the government programs. I would like to stop "spending" and start saving, so I am contemplating letting the bank foreclose on my house. Is this a reasonable idea? If I did not foreclose, how long will the 2 foreclosures impact the price of my unit...if my house netted the current average price per square foot for the entire neighborhood (not just the development), I could be out of the place in a year. Someone smarter than me, please answer?

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April 05 2010 - College Park
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Answers (21)

Real Estate is local, I would hire a local Short Sale Mediation company and check into a couple...not just one that your Realtor works with but see if you can bring one that you like together with a Realtor that you trust. It is all about credibility so you have to do your homework! 
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June 12 2011
Profile picture for Mr Caveat
why did you not do your research in 2007 before buying that house?

If I did not foreclose, how long will the 2 foreclosures impact the price of my unit...


i hate to tell you, but this is what your house is worth now. period. those two foreclosures are just the tip of a much larger iceburg that ends with the homes actually not being worth what you paid for them. inflation adjusted, you will NEVER see that home worth what you paid for it again.
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July 30 2010
You should first hire an attorney, then a Realtor, then a credit counselor and finally an accountant. 
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July 30 2010
Legal advice is the best answer per Jordan.  Foreclosure will affect your credit for some time, two-seven years or more, a short sale should be considered as well.
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July 30 2010
As many people have stated in response to this question.  Talk to an attorney that specializes in real estate related matters.  Legal advice will help you to weigh all of your options and make an informed decision.
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July 22 2010
Profile picture for Mr. Bubble
The problem with a short sales is that the lender may still come after you for the amount of the loan loss. I know know if they can in your state and circumstance. It'll trash your credit pretty good too.
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July 22 2010
Profile picture for sunnyview
Talk to the attorney FIRST. They can gice you your legal options and explain the tax consequences in full and they will often consult for a reduced amount for the first meeting. Then if it makes sense for you, talk to an agent about a short sale.
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June 22 2010
Talk to an experienced short sale real estate professional about a short sale.  Then talk to an attorney experienced in short sales, the IRS (irs.gov), and an accountant.  You will know the dangers and benefits of a short sale and a foreclosure and how to protect yourself and will feel comfortable making a decision.  
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June 22 2010
Why are you wanting to walk away from the home?  Are you wanting to walk simply because of the loss of value?  Honestly that's not a very smart thing to do.  The market will come back, so why not wait it out instead of throwing away your money and damaging your credit.


My advice is to wait out the market.  Also try contacting your lender and see if they'll work with you in lowering your interest rate.  If you don't at least try you'll never know.

You may also want to look into renting your home.  What's the rental market like in your area?  Can you rent your home and have the rent cover the mortgage payment?

It's never a good idea to walk away from a home or let foreclosure happen because of a temporary reduction in value.  The market will come back. 

Talk to a local Realtor, if you honestly believe you can get the current average price and the Realtor concurs and supports the agreement with facts, put the house on the market.
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April 22 2010
Profile picture for CORONA NICK

Walk and stop throwing your money away...lol

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April 13 2010
Because you are/have relocated, that's reason enough for a Short Sale approval, which beats allowing foreclosure. You could end up with a deficit though, but after two years, you can be eligible to purchase another place providing your credit is decent.

A modification is another option and so is renting it out. I'm in Central Florida and would be glad to discuss it at further length with you. Right now my firm, Watson Realty, is handling many Short Sales and has a team ready to help along with our title company.

Of course, for legal advice, an attorney would be the person to counsel you as to what your options and risks would be.
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April 13 2010
A couple options you may want to consider:
1.  Rent your property out to off set your expenses,
2. Contact your current lender to see if loan modification is an option for your.
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April 13 2010

I would recommend speaking with an attorney to determine what the best choice would be for your specific situation. Only an attorney can offer you legal advice specific to your situtation.

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April 06 2010

Brady,

You offered no real advice other than you should talk with someone offline. 

It is my opinion that anyone that attemps to take conversations offline,  usually indicates that they have nothing of value to offer.  If on the other hand you do have something of value to offer ....Offer It...offer the advice and you will be suprised how many folks will seek you out!

For Example:

"Please keep in mind that with only 5% down on the unit when you purchased it, you likely are paying PMI (Private Mortgage Insurance) If this is true then there are things you should know and expect from day one....."

This would have been a good opportunity to offer advice about what you shoudl know and or expect.

If you are not going to provide advice on the forums be prepared to answer pointed questions from lenders and agents that participate on the threads.  You can always choose to ignore the questions!

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April 06 2010
Andrew,
   Not here to argue, you are entitled to your opinions and I never said not to approach the lender, but you must make sure you know what your options are. Just because you contact your lender and ask them what your options are does not mean you are making the smartest move or that you are being advised. When someone speaks to a lender, they are often speaking to a note taker and nothing more.
The lender employs first response script readers and nothing more. They will send out a package that often sends people in strange directions that are not always in the sellers benefit and therefore are a waste of time.
Which is why I said the initial post writer needs to seek a local person who knows about short sales as well as someone knowledgeable about real estate.

Less than 30% of short sales are successful, do you know why?
Does the lender educate the borrower as to the pitfalls of doing one thing versus another?
Will the lender disclose the trends of dealing with PMI?
Does the transaction involve more than 1 note?
Does the transaction involve more than 1 lender?
What has the seller attempted thus far to advance his/her situation?

Sure while most of what he/she posted points to the necessity / advisement of a short sale, it does not mean that the lender will approve the short sale and good advice can make a difference....

In regards to keeping everything public:
1. I would never expect anyone to go over their private details even if it appears anonymous.
2. I am not here to educate other agents, nor seek their approval
3. I did not specifically suggest that the person contact me, but they should seek the advice of someone that works with short sales on a regular basis in the local area.

Would you ever expect a loan applicant to give you all the application details in a public forum and for you to be held responsible / "Quoted" on your advice? Nothing is ever as it appears and there are ALWAYS details that get in the way. Speaking in & working in generalities may work up to a point but that usually stops at a crucial point.

I went further than most responses that state, "talk to your lender"
Yes that will be a crucial step in the process, but in my experience sellers often fail to state all the facts or details both big and small. They do not do this on purpose, but it does happen and it makes a difference if the information is correct from the beginning or if it appears that the seller is back peddling to achieve a short sale.

Simply stating that the hardship is that he / she relocated out of state is not a hardship. Proper financial information must be taken into account and PROVEN as part of the hardship. The extent of the hardship will determine what the lender will do. Based on this, the seller must be willing to accept certain conditions...... in short there are no easy answers beyond... "Talk to your lender" & "yes, a short sale appears to be a viable option"

If that is what this person wants to hear, then I am sure they got that point thus far. But I believe the next questions will include, what will happen after contacting the lender, what can I expect, how long will the process take, what happens if I don't do this or that .... etc...
All of which suggest they speak to a local professional.
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April 06 2010
Dear College Park,

Maybe thinking about renting it out - or lease purchasing the property would and could save you some money out of your own pocket every month. 
Don't give up - you're values shouldn't drop just because other properties near you forclosed.
Talk to a trusted lender - let them do some research for you and discuss options.
Short Sale is a way to go - but don't just trust anyone's advice - call a local appraiser and see if they will do some research for you on the values of the market where you are. They might charge you 40-50 dollars but at least you would have a professionals option on the values.

Good Luck
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April 06 2010
Brady,

What you know-

1. hardship is relocated out of state now having to carry the departure residence while resetablishing in another state.

Appraoching the lender for a short sale is the wise move, wht taking it offline woiuld benefit the OP is beyond me.  I would never trust someone who attempts to bring a conversation offline, the only benefit to the person that is asking it to go offline is that there "advice" won't be scrutinized buy other profesionals. 
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April 06 2010
Each foreclosure is different for each owner who must go through the situation and I would never venture to advise anyone based on the information you have supplied.
Additional details are needed if we are to evaluate the potential of pursuing a short sale or attempting to ride out the situation.

In short, if you are having financial difficulties in paying, have a verifiable / true hardship that is making it impossible to pay your mortgage then we should look at the potential of a short sale.

A couple of other questions must be answered and likely not in the setting of a public forum.
Who are the lenders
In Depth review of finances (Income/Expenses)
Cause / Review of the hardship
Possible alternatives such as workout negotiation / modification, settlement, short sale.

Please keep in mind that with only 5% down on the unit when you purchased it, you likely are paying PMI (Private Mortgage Insurance) If this is true then there are things you should know and expect from day one.....

I will not sugar coat it, this is not going to be a free ride.. you do not have to default on your mortgage to be considered for some options.
Find someone that knows what is needed to know about short sales and real estate that can help you understand what your options are.
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April 06 2010
Have you talked to your lender yet?  That is always the best place to start.  Good luck.
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April 05 2010
Why not approach them with a short sale rather than let it go to foreclosure?
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April 05 2010
It's best that you seek qualified legal counsel before you make any decisions. Seek a real estate attorney for the best advice for your situation. Even if you let the property go, the lender or mortgage insurance company can try to collect any deficiency. Talk to an attorney.
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April 05 2010
 
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