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I have a relative who is in a real bind. They have a home in Vegas, and now find themselves in the middle of the sagging market/subprime mess. They have a 100% mortgage (80/20) at the highest market and now owe $380k on a home that lenders say won't appraise for more than $320k. They've tried 7 lenders to refi, of course they won't. The mortgage is going to adjust in Oct, for $500 more...$3300 total! They can get the current lender to fix their rate...at 9.25%! They are not late on anything, they have good jobs. Credit is just ok. But they are thinking that walking away is their best option since they don't want to just throw money away on a home that may not get back in the black for years. They want to move out of state in 2 yrs, so waiting it out is not an option. What would you do?
if the house is truly that much underwater, then yes they should walk away. I would question thought if the hosue is really that undervalued. Lots of appraisers are gun-shy now and undervaluing houses. I would hire a good realtor and get a fair market assessment.
hi, I was reading an on line paper-The Boston Globe. They had an article in
it regarding this big mess. One other thing is if they can provide information that they can not make the payments, the bank, lender may be willing to do a short sale. Which means, if they can find a buyer the bank may be
willing to take the loss. That way they do not have a negative check on there credit rating, and the bank needs not to proceed with foreclosure.
you can have them read this in todays boston globe.
The short sale was going to be what I was going to recommend as well. Call a few real estate agents and query them on short sales. Pay close attention to their first response. Watch for hesitation or a confused response. You want someone who deals or has dealt with these and knows what they are doing.
Of course you should also do as much research as you can on the net to get a good sense of how to go about it.
I was going to recommend a few things. They might or might not work in the Vegas market, depending on how the market is.
1. Can they rent the place out for at or close to their mortgage? If they can, that might buy them some time to see if the market corrects or if they can refi
2. Can they get the bank to put the negative balance at the end of the loan instead of adding it to their monthly payments? It looks like they won't walk away with much, if any equity anyway, so if the lump sum can be tacked on at the end, it will settle when they sell. If the lender is hesitant to do this, then agreeing to sell within a specified period of time might help.
Walk away. There's been some decent suggestions (if they can rent close to the mortgage amount, that's the way to go, but who is going to overpay that much?...it would at least buy them time) but the bottom line is that they stretched to finance something they couldn't afford. I know that sounds harsh, and I am not trying to be, but this is exactly the reason we are in the mess we are in. Walking away is truly the best financial option here to cut loses in the 2 year period you suggested...at least if they wish to stop the risky behavior that got them into this mess to begin with. You got to know when to fold 'em. The only saving grace may be that while the whole country moves toward a credit crunch and impending recession from it, Vegas remains a pretty hot market...it may be one of the only places that does appreciate in value over the next two years. They've already shown a huge propensity toward taking risk with their investments...2 more years might not hurt them.
Thanks all. They can't rent for anywhere close to what thier mortgage is. My concern is that when they "walk away" they will still be saddled with paying the remainder of the mortgage once its sold by the lender. I've read that they mortgage companies won't do short sales unless your far behind on payments...which they aren't yet...
That's one of the problems with foreclosures. You're still not necessarily relieved of the debt once you walk away. And then you can count out future homeownership for a long time.
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