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What to Do? Walk away, Short Sale or Hold On

I am trying to sell my home in Tucson, AZ after accepting a job in SoCal. Its been on the market for over three months. I keep on lowering the price to get it to sell, but as it is right now I will end up losing over $30k. The bank will not talk to me until I am behind on payments. Should I just walk away from the loan?
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January 12 2009 - Vail
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Hello Mike,

One option to consider, having a property manager give you an idea bout leasing the home for a year or so? Depending of your reserves and other criteria - could be an option.

Good Luck!

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January 12 2009
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Hi Barry,

I have had my listing agent give me an idea of what I can get for leasing my property, but I would be about $1k in the red every month. Unfortunately, the rental rates in Tucson are not that high.

Thanks
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January 12 2009
You have to make a really tough decision.  You're in the same boat as many right now.  Short sale prevents you from having to come up w/ any difference between amount owed and sale price.  However, it will hit your credit rating in a very negative way and you do have to prove financial hardship.  Foreclosure is worse.  Holding on means you have to hang on until things turn around while in a negative cashflow situation.  Questions to put things in perspective...1) in what timeframe do you feel the market will realistically rebound?  2) are you able to manage the negative cashflow for that timeframe?  3) are you willing to continue feeding the "alligator"  4) are you ok w/ having a big monkey on your back for that timeframe  5) how important is your credit rating to you?

On a separate note, you might also consider a lease option to someone who can't quite qualify for a home yet but would like the option to buy it in a year or two.  This time might give someone time to improve credit and save more down pymt money.  Typically, you can ask for a higher rent w/ some of it credited back to the renter/buyer if they end up exercising the option to buy at a later date.  Also, you can typically collect a up-front, non-refundable option fee.
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January 12 2009
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If you can't carry it as a rental and you can't take the loss to sell, you have three choices: foreclosure, short sale or going under slowly waiting for the market to come back. I would choose short sale. It will affect your credit for 3 years from what I read as opposed to 7 for a foreclosure. It will also give the bank the best chance of getting their money back which is the right thing to do. You need to explain the job change and the pending relocation for work to the bank ask for the option of a short sale. You will need an aggressive marketing plan and an agent familiar with the short sale process. I am sorry the bank doesn't want to listen, but the choice should be easy economics for them more money now vs less money later. Do your homework on what a short sale might mean for your credit and make the best choice you can in these difficult circumstances.
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January 12 2009
Also, on the loss issue, it could be that it is passive income and would not help aginst your earned income as a dedcution. Check with your tax man. It would help midigate the losses. I like the lease option too. Your credit will get creamed.
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January 12 2009
Also, Arizona is a deficiency Judgment state, which means the lender can go after you for an amount of money that that they loose in foreclouser, so that is not a option. You could due a Deed in Lieu, but that will still hurt your credit and if they find you can afford it, they won't play ball.
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January 12 2009
Profile picture for Mr Caveat
keep trying with your bank, banks are terrible with keeping track of this sort of thing. ask for a manager, call the 1800 number, ask for that supervisor,call back. its not a myth that people are getting help.

aside from that, ask some people (you arent paying) for some honest feedback on what they don't like about your home. sometimes a "cluttered" feeling goes completely un noticed. its also a quick fix. is your home empty? staged? there are usually inexpensive helpers to get attention. also note that 3 months ago we began what would be the slowest winter for RE since the ' 80s...

lots more people will be shopping during the spring and there is a rather fair chance that sales in your area will pickup. the catch is that you are competing with REOs . dont hold out for prices to "bounce" anywhere.
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January 12 2009
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Thanks, everyone for all the great input! for now i will look into leasing with maybe a option to buy.
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January 13 2009
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OK here is a little more info. I have a first and a second mortgage (both with the same bank). What happens if I just stop paying the second? Or I try selling my home for what I owe on the first mortgage.
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January 13 2009
Regardless,

If you quit paying, your credit will be in trouble.  Defaulting on  the 2nd triggers "default" on the first.  If you have reached that point, you have reached that point.  If there is a way to "fetch a bid" and sell and come to some agreement with the bank... even if you must sign a promissory note for some of the loss... just consider it and any and all options.  It is not this home you will pay the penalty in all likelihood should you walk from it.  It will be every other big ticket item you need financed in some years to come.  It is a tough spot and I wish you well. Keep rockin'.
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January 13 2009
 
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What to Do? Walk away, Short Sale or Hold On
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  • Posted by mike_f70
  • In Mortgage
  • January 12 2009
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