Another one of the kids moved out of my rental property. That only leaves 2 and they can't afford to pay the whole amount. They don't know anyone else that could move in there.
I can't afford to make the payment without having the rent covered...I can't even afford one month without renters. I think I need to get out of the rental business. I would put the house on the market but I can't afford to pay the mortgage until it sells.
I am thinking of going to the bank and doing a voluntary foreclosure. My credit is already bad so it wouldn't really affect that...might even improve the debt to income ratio. I think there might be some tax implications by doing this but I don't know.
I am just at a loss. I don't know what else to do.
** Forgot to mention that I wouldn't make any money on a sale...I would actually be lucky to get what is owed on the property.
Need Some Advice
February 3rd, 2013 at 09:57 pm
February 3rd, 2013 at 10:59 pm 1359932378
February 3rd, 2013 at 11:09 pm 1359932970
That said, you could always list it in the interim and see how that goes - I think it's good to at least try and sell it. I am not sure of the legal details if you fall behind on payments while trying to sell - but foreclosure is usually a pretty lengthy process. It could make more sense to fall behind on other payments while you just get it sold. But I just don't know in your case what would be best. I do think it would make sense to try to sell before just giving up.
February 3rd, 2013 at 11:18 pm 1359933508
There is no tax ramification in 2013. There could be some state tax ramifications. But any "forgiven debt" will not be taxable for the Feds - they extended that tax break for 2013. Except I will edit this to say that is for primary residence. I suppose you could have a tax issue as it is not your primary residence? I do not know the answer off the top of my head. Could be tricky - how much is the loan?
February 4th, 2013 at 12:22 am 1359937323
February 4th, 2013 at 12:47 am 1359938877
February 4th, 2013 at 02:02 pm 1359986529
Consider consulting an attorney, one with specialization in foreclosures/short sales/taxes. We did, and we got some good information.
MM is the tax expert, but my understanding is that unless you've lived in the house 2 of the past 5 years, it is an investment property, and you would pay tax on any forgiven debt.
Also, yes, definitely be proactive, and talk to your bank about a short sale. What we did is contact our mortgage company, and found out the appropriate department that handles loss mitigation. Send them a letter (via FAX or email) explaining in detail your situation. When we did that, they sent us a packet of information to fill out. We did that back in August. It took August/Sept/Oct just to get the paper work through. And, we were aggressive with it.
Also, another option is "deed in lieu of foreclosure". That's when you transfer the deed over to the bank instead of going through the foreclosure process. Less expensive for the bank. (Maybe that is what you mean by a voluntary foreclosure?) You definitely need an attorney on your side if you're going that route.
None of this is fun. And, I'm not sure from a credit score stand point if short sale/deed in lieu/ or foreclosure really makes much difference. But, if you simply stop paying the mortgage, you open yourself up to future law suits from the bank. They can (will?) sue you for the balance owed. Deed in lieu or short sale avoids that possibility.
Also, one last note. How much equity do you have in your current primary residence? If you have much at all, your bank could try to take a second position on your house. That is, they could force you to take out a second mortgage on the house you live in to cover (at least part of) your deficiency on your rental. If you are upside down on your house, don't worry about that.
Hope this helps. Consult an attorney.
February 5th, 2013 at 01:56 am 1360029387
February 7th, 2013 at 08:47 pm 1360270079
Deed in leiu of foreclosure seems the best route??
Good luck!