Foreclosure of Condo (sale, foreclosures, to rent) - Chicago Suburbs - Illinois (IL) - City-Data Forum

Coldone · 01-26-2010, 09:50 PM

I was just wondering just in case I decide to do something for purely financial reasons...

I have a mortgage of a studio condo which I bought 6 years ago for $96k with 3% down. I currently owe something like $83k on it. There are 1br condos in the same area now going for $45k, so you can only imagine what this place would sell for. I have no great love for the place and no difficulty making the payments, but it ties me down and investment-wise it wasn't smart for me to do. I have a 5-1-1 ARM on it. It adjusted once and I'm at 3.75% interest. The contract states it can only move a total of 1% up and whatever down each adjustment, so it would never really be a big deal after the adjustments finish.

I'm wondering if I could just cut my loses, stop making the payments and default on the place. That way I could just sit here saving the $700 mortgage payment a month until the process goes through and I get evicted. I can then rent somewhere else. I really don't care much about what it does to my credit because I don't plan to really use credit again. This place is my only debt.

Also, I'm still paying PMI.

What happens if I do this? Can the bank come after me and sue me for the value of the place? Does the PMI make it a wash and they don't care? Will this process cost me anything or is it a win win for me?

Humboldt1 · 01-26-2010, 10:00 PM

You sound like an excellent candidate for a strategic default. If I had put down as little as you and did not need my good credit (sounds like you are okay renting and may be in cash next time) I would consider this as an option. You should certainly consult with an attorney before doing anything.

Coldone · 01-26-2010, 10:54 PM

Thank you for defining the term. I just need to find out what the consequences besides the credit rating drop are.

millennialmom · 01-27-2010, 05:11 AM

I'm not a legal expert but from what I understand, once the mortgage company takes a loss on the eventual sale of your condo (after you go thru foreclosure), they can come after you for the loss they incur. If you have the means, it could result in a judgment against you and you end up paying anyway. I'm not sure about your monthly assessment. Definitely check with an attorney before doing this.

Mt-7 · 01-27-2010, 05:16 AM

The world has gone mad.
Have you no regard for the others in your community? They get stuck for the cost of common areas as you sit tight and save?
Sorry I just do not get it.
And yes I have had mortgages, several of them and occasionally they were a tiny upside down but I stuck with it. I completed my obligation. I do not see where you are unable to afford food or utilities, you just do not wish to pay your mortgage.

chet everett · 01-27-2010, 05:56 AM

Depending on the STATE laws you might be liable for a whole pile of dough to both the condo association and the lender.

If you have a judgement entered against for the nearly $40K gap between what you owe and what the place might sell for that is going to be one heckuva whole to climb out of.

oakparkdude · 01-27-2010, 06:06 AM

Although Illinois is not a non-recourse state (meaning in IL banks can go after your assets in foreclosures), my understanding is that in reality, this almost never happens. Best to consult with an attorney, of course.

cubfan3 · 01-27-2010, 08:20 AM

$700/month mortgage payment? How much would your rent be if you left?

((Current Mortgage + Assessments + Taxes) - Tax Deductions) - New Rent = X

If X is only a hundred bucks or so, what's the point?

Also remember to factor in whatever equity you're currently getting should you choose to rent.

Finally, have you considered renting the condo out while you live elsewhere? That way you could leave, maintain your credit rating, AND get someone else to help build your equity. It can't be that tough to be a landlord for a studio unit...

billiken · 01-27-2010, 10:50 AM

Quote:

Originally Posted by cubfan3

Finally, have you considered renting the condo out while you live elsewhere?

That's what I was thinking, too...Especially if you live somewhere were studios regularly rent at $700/mo.

Coldone · 01-27-2010, 11:01 AM

Quote:

Originally Posted by cubfan3

$700/month mortgage payment? How much would your rent be if you left?

((Current Mortgage + Assessments + Taxes) - Tax Deductions) - New Rent = X

If X is only a hundred bucks or so, what's the point?

Also remember to factor in whatever equity you're currently getting should you choose to rent.

Finally, have you considered renting the condo out while you live elsewhere? That way you could leave, maintain your credit rating, AND get someone else to help build your equity. It can't be that tough to be a landlord for a studio unit...

My association fees are around $200 a month and constantly rising. People in buildings around here are renting out 1BR for about $700. I will be forced to pay PMI for another decade or two to get down to the current (and I think it will drop more) prices to get to 80%. Remember, purchase price $96k, value is below $45k, so I have a long way to go. Renting it out would be at a loss and I'd be responsible for everything within the condo and I still have a long-term tie to it. Also, my property taxes are $3000 a year and rising, so I want to look into my options because I'm not sure this is worth it.

Thanks for the response.