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I have two owners who bought a primary residence around 2005-2006 when prices were at a peak. Since then, the owners have moved out and each bought another property using conventional financing. They each now live in these homes as a primary residence. The owners are renting the old property out to a tenant, but are suffering a shortfall of roughly $1,500 /month between current mortgage and tenants rent. The current mortgage payments are on time and not delinquent. The owners do not have a major hardship, other than the difference between rental income vs mortgage.
The owners are looking into short selling this property. Current value is roughly $275,000 and the amount left on the loan is $380,000, purchased for roughly $420,000.
I would appreciate any feedback, additional options, or if this is even possible. If it is possible, what kind of repercussions are we looking at for the owners other than a big hit to their credit.
Their house is now an investment property. There are different rules for owner occ than for investment both in terms of future liability and tax consequences. Your clients need to discuss this with a real estate attorney and a CPA. Worth every penny if they are $1500 in the hole each month right now.
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