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We own two houses in Michigan. One is vacant, and the bills from both are sinking us fast. We would like to know if foreclosure is the way for us to go. The vacant house has been on the market for about 10 months now. We have no plans of moving for at least 10 years. we just built our current house. if you let if go into foreclosure will we be held responsible for any money as in the difference between what we owe and what the lender sells the house for? I know that it will go onto our credit, but i say oh well. We will end up losing this house two if we continue to pay for both. We have contacted the lender to try to remodify the loan with them, but because we don't live there they are unwilling to work with us. We are so frustrated.
I googled "foreclosure", "short sale", and "deed in lieu of foreclosure". Read up on these actions and consult a real estate attorney.
Sounds like you could be liable to the federal government for TAXES on the difference between what the mortgage amount was and what the lender is able to sell the house for. This sounds absurd and insane, doesn't it? Not only is your credit ruined but you owe taxes too????
Research first before you do anything just so you know what you might be getting into.
The government just passed a law which means that you wouldn't be liable for taxes on the difference between a short sale amount and the mortgage amount so the above advice is outdated.
HOWEVER. Depending on your states laws, if your new home is under the same names as the old one (presumably it is) and you foreclose on the old one, your creditors may still be able to go after your new home to cover the debt.
What is the exact financial situation? What is owed on the old home? Where did the money come from to build the new one? Any Helocs? You need to fill in some gaps here.
Does the law regarding forgiveness of taxes on the amount forgiven on a foreclosed upon home have anything to do with when it was purchased? I know some of the legislation they were looking at was only aimed at the current mortgagc crisis borrowers ... so if for example you bought the home in 1999 or 1975 you wouldn't necessarily be helped out by some of the things they were considering..
But I don't know if the tax forgiveness was one of the laws tied to the time period in which you bought the property.
Oh? And is it also tied to primary residence? Because that was also an issue with some of the legislations -- if they were investment properties it wouldn't count.
a lot of things to look into! Call a real estate attorney to be safe.
Could you rent the first house? That's what we did, had a house, then built another one, rented out the first one. We hope to sell it when the timing is better.
AnthonyB, are you sure that tax liability forgiveness applies to an investment property? I have some friends going through the same thing, and I believe that only applies to your primary residence and that NCGirl is correct....they will be liable for taxes on the difference between loan amount and foreclosure sale amount. People have been freely walking from their homes and screwing the lenders. But the IRS doesn't mess around.
Straight from the horses mouth. I believe that if you lived in the house for at least two years and during 2007, it may still be eligible. You really need to speak with a tax expert.
The best way out of this situation is probably to go on HGTV's "My House is Worth WHAT????"
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I believe that if you lived in the house for at least two years and during 2007, it may still be eligible. You really need to speak with a tax expert.
