Getting rid of bad property---forclosure?

Question

I bought a condo for 300.000 it is now worth about 250.00
has been on the market for 1 year and no bites
I am thinking of forclosure but am wondering what the reprocusions are. I have to get rid of this property because my work is changing ...help..... I can not afford it and am drowning .....

Answer 1

going to get stuck for the deficency balance anyway and get screwed on the credit end, Maybe hire a property management company to rent it out?

Answer 2

When a property is foreclosed, the bank seizes the property and sells it at auction for whatever they can get for it. Or, you can arrange a short sale with the bank, where you sell it for what you can get and the bank forgives the debt.

Two bad things then happen:

First, you get a foreclosure or short sale on your credit report that will be there for 7 years that will pretty much trash your credit rating. Any time you apply for credit in the next 7 years (credit cards, another mortgage, or even a credit check for a rental), you will either be denied outright, or pay high interest with high down payments required. After 7 years, the foreclosure or short sale disappears from your credit rating and you start all over again.

Also, the IRS considers the amount of debt that the bank forgave as income to you. You are then assessed the taxes for that income on a 10-99 that they will send out to you come tax time.

To avoid all that, renting the property out and seriously tightening your belt for a while is about your only option.

Answer 3

If you must move, get in touch with the lender's loss mitigation about a "short sale". You sell the house for what you can get, not what you owe. They take a hit to avoid getting stuck with the home. This is likely to be a negative on your credit, but not as bad as foreclosure. There are also potential tax consequences - the IRS is supposed to tax you on the "income" from not having to pay off your loan. (See the MSN link and IRS link below).

Many loans are at risk of default thanks to insane underwriting in the boom years, and it is in the lender's best interest to stop the downward spiral of defaults, foreclosures, and a market glut of bank-owned property.

If this is your home (not specultive property) and you're in a pinch, lenders would like to keep you in the home so they don't get stuck with it. They can modify your loan terms, put you in a fixed mortgage (instead of an ARM, if that's what is killing you). You might get terms that carry you through to a sale or allow you to rent the place out. This would have less impact on your credit score.

Because you mention "drowning", I will just note that you should look for the opportunity to feel more in control. Right now you don't. With a bit more information, and your options worked out, just decide to feel better. You've done what you can do. Make sure your place stays spotless and organized, both so it is more relaxing for you to live in during this stressful time, and so it shows and appraises as well as it possibly can.

Answer 4

First you must contact your lender and describe the situation. Do not fall behind in teh payments if at all possible. Late mortgage payments are credits disasters. There are ways to avoid foreclosure. If your home value is not less than the principle balance of your mortgage you may be able to sell to investors. You may also be able to negotiate a shortsale of your home if you accept a buyers offer and it is less than what you owe. This also damages credit but you avoid a foreclosure and get to move on. You coudl also consider renting the property until you can manage a sale

Contact you lender and start asking questions.