What are my options for selling a home in negative equity?
January 24, 2012 by
Filed under new construction jobs
We moved into our new home Dec 2005 in Jax, FL. A few months later, my husband recd a job offer from Microsoft, so we moved to WA. Due to high home prices in Redmond, WA, we decided to rent a place in WA. So far, since May, we have had to pay a mortgage payment and rent payment each month that total aver $4K. After settling from the move, we looked into selling out home in FL. The home builder has now dropped their prices for new construction in that neighborhood. When we moved, the home that we bought for $240K was selling for $280K. Currently, the new homes are $216K. We have been trying to find a renter knowing that we cannot get the entire mortgage payment ($1965), and have dropped our asking rental price down to $1000. Still nothing. It’s a brand new place, nothing’s wrong with it and is in a fabulous location.
What are my options? We can no longer afford to make this mortgage payment and are in serious financial trouble.
TIA!
A appreciate everyone’s quick responses.
To AEN – in case there was any confusion, there is negative equity. We currently owe $242,000 and the current retail is $216,000.
I don’t want to be foreclosed one and have my credit ruined. That’s why I’m researching other alternatives.
What exactly is a short sale?
If the lender okays it, do I just get a normal signature loan for the difference?
Should I get in contact with a mortgage broker, as well?
1) stop paying…and get foreclosed on…credit ruined…hard to get another mortgage.
2) Arrange a short sale with the bank…basically talk with your bank to see if you can sell it for less than what you owe.
3) Deed in lieu of foreclosure…basically you talk to the bank and see if they will just take the deed to your house instead of foreclosing.
Response to Additional info:
You need to contact the LENDER. Mortgage broker isn’t going to do anything for you…they collected their fees and really don’t care anymore. You need to contact the bank (LENDER) to see if you can work out some sort of payment plan along with option 3 above. A short sale will only work if you find someone willing to buy it at the lower price AND convince the LENDER to accept it…basically put together a presentation showing that with all the costs it is better for the lender to accept the short sale than to foreclose. There are tax consequences…the difference between what you owe and what the bank accepts can be considered income and you can be taxed on it.
I would also contact the builder to see if they are willing to buy it back…its not as likely since they are selling them a lot cheaper now…but they could be the potential buyer for your short sale.
I hate to say it…but in that situation with falling prices…a short sale is not likely…though some other people (ie jerry) on this thread look like they are willing to give it a shot.
By all means contact the LENDER first to see if they can work something out…btw…ruined credit is not the end of the world…you can always recover from it…just make sure to LBYM it
good luck!
p.s.
Most people don’t consider taking out a loan to cover the difference between what you owe the lender and what the house would sell for…you have to understand that, that loan will be unsecured and therefore be at an extremely high interest rate…if you could get such a loan. In general most people will just let the house be foreclosed on…
You might want to try offering a lease option to a potential buyer who needs to straighten some things out financially or credit wise before they’re eligible to buy. This may open up a new market of customers. Unfortunately you may have to take a loss on the property or do a short sale just to get rid of it. To have a short sale you would have to contact your lender and try to sell the house for less than it’s worth. The lender may or may not require you to pay the difference. In your case the lender would probably agree to do a short sale because they would lose more money if they had to foreclose and auction the property or worse have it sit on their books for months while they try to sell it. You definitely do not want to stop paying. That’s the dumbest idea I’ve ever heard. No one would extend you credit (at least not at a reasonable rate) for years.
First you can try to sell it back to the builder. Sometimes they will re buy there property for what you owe on it. Second you can sell it to a buyer who’s credit isn’t top. Sell it to them in a lease option. Ask for $10,000 down and the amount that you need to cover the morg. on the home every month for the next 2 years and then they have to get a morg. on there own. The 10,000 they gave you will be applied to the the loan as to all other payments they have made over the past 2 years and what ever is remaining they have to get a morg to pay you off. but this helps the first time home buyer. and you. just remember that after 2 years you have to deduct the 10,000 and what ever you charge them monthly, and that is what you will get back at the end of two years.
Poker den is correct. However, see if you can refinance or work something out with your lender.
If that doesn’t work, then see if you can find an investor that is willing to short sale your house while waiving the deficiency judgement against you.
Regards
You did not state what the financing amount was on the Florida property. If the current estimated sales price is less that the amount owed on the property you are sort of stuck. I have personally seen situations where condo owners would see the value of their unit drop to less than the existing mortgage. The only thing you can do in a case like that is to try to ride it out and hope for prices to turn around. Since that is not likely to happen in time, the problem cannot be resolved with a sale. It sounds like the move to Microsoft was not a good idea. Perhaps the only thing you can do is to quit the Microsoft job and move back to Florida and try to re-establish yourself until the market turns around. This might take several years. Other than that the only other option would be to try to get more money out of Microsoft.
This is not an easy situation because if you were to sell the Florida home now you would end up possibly owing money to the bank, and that would have to be paid at closing in order to clear the mortgage lien on the property.
If you rent the property you run the very real risk of having the tenants stop paying rent, trash the property and move out without notice. You may then have an even worse nightmare to handle. A long-distance rental like this is fraught with peril.
Tia,
I have helped another person in a similar situations as yourself. He lives and works in DC now and use to live in Raleigh. He had his house in Raleigh and was facing foreclosure at the end of last year because he was unable to afford paying for two places on a monthly basis. I was able to help him stop the foreclosure and relieve him of his headache. I would like to speak with you to see how we can work together to help you out of your situation.
Best Wishes,
Jerry