Question: My husband and I invested our life savings and purchased four homes. Two of the homes are in FL, and the other two are in SC. We live in one of the FL homes, and we may be forced to foreclose on the the second home in FL. How is a foreclosure going to affect our homes in SC? Is the bank going to put a lien on the home we live in or the other two in SC? Please I need help.
Answer: – More than likely nothing will happen to your homes in South Carolina if your home in Florida goes through foreclosure, unless you used your South Carolina homes as collateral to purchase your Florida home. Your biggest concern would be a deficiency judgment which would definitely affect you and possibly other real estate that you own. But again, more than likely they will 1099 you for the amount they lost and write it off. But there is always that chance, which is why it’s always better to try to do a short sale instead of just giving up and letting it go to foreclosure. At least with a short sale and a good agent or investor who knows what they are doing can help you avoid a possible deficiency judgment altogether.
I purchased two properties back in 2005 in Florida to flip or resell. One is a house and the other a condo. I owe 400K on the house and it is now valued at around $250K. I owe 211K on the condo and it is now valued at approx. $130K.
Both are rented for 12 months – current leases expire this summer. I never intended to keep these for more than a year, however I am now going into my 4th year.
I tried to sell the house by keeping it empty for 6 months last year with no takers – so I opted to rent it. The condo has always been rented. My credit is good and I have other assets that I do not want to touch. After collecting rents, my outlay over and above the rent is approx. $35K per year.
My options, as I see them:
1.) Hold on hoping that they will return to a breakeven in 5 years. I would be paying out $35K per year, gain some tax advantages and only be out $175K (cash out of pocket)in five years.
2.) If I sell them both now, then I would have to come to the closing with
$231K not counting closing costs. I have no idea where I could get this money. I do not want to sell any assets since I am 62 years old.
3.) I let one of the mortgages go into default so the bank would at least talk to me. I had tried to work through a lawyer for a short sell or deed in lieu, but I found out he was only taking my money and was not very good at this. The bank is now considering a loan modification since I threatened to let it go to foreclosure.
4.) Another lawyer told me there is absolutely nothing I can do since I have assets and that I should just ride it out. Question is: I could ride this out for 5 years and may still have to come to the closing with approx. $200K.
I don’t want to ding my credit much and I don’t want to send these to the bank since the banks have more than they can handle, but these are ruthless times.
I would entertain a short sell with a buyer, but what happens to the deficiency? Do I set up another agreement with the buyer and in this case what does he lien to secure the note – my home?
I would like to sell at least one of these on a short sell basis, but more importantly need some sound advice what what I should do?
Thanks in advance.
This is a tough situation and trust me, you’re not the only one like this. Unless you have a great deal of savings, assets or positive cash flow each month, you can’t keep spending more than your income. Eventually something has to go or you have to make more money. Typically on a loan modification, they don’t want to see any assets. On a short sale, they want you to be 3 months late. If I was in this situation, I would really try hard for the loan modification because if you can get the interest down low enough, you may be able to rent it out and break even so you are not negative each month, then just ride it out for 5-7 years. I actually work with a group of attorney’s who are 95% successful in negotiating loan modifications, so I know banks are doing this pretty regularly.
When you indicate that I should not have any assets – what do you mean exactly? Will the bank then want me to liquidate all of my assets first and then seek a modification. At the rate I am going, I will be out of money in two years, then they will get the property back irregardless, but if I can get a loan reduction then I could probably see this thing through.
Have the attorneys you mention been successful in having loans modified with people that have assets ? How much would it cost approx. to have these attornies take control of this thing and see it through to a loan modification?
Thanks
This is a challenging situation, but you have options and you should take the time to learn what those are. Also, you are not alone, millions of people are facing foreclosure not just in the personal homes, but in the investment properties, as well.
Best thing is to become informed about what your exposure will be. First, look at the foreclosure laws in each of the states the properties are located in. Then determine whether or not a judicial foreclosure or non-judicial foreclosure will be used. You will need to understand how this will effect not only the process but the your potential liability after the proceedings are completed.
You will also need to speak with your tax advisor about the tax liabilities you may face as a result of any losses the lenders take after the sale of your properties.
Spend some time on some informative websites to learn more about what other options you may have. By being proactive you could position yourself better to limit not only your potential liability but you could begin to heal your credit, as well.
All the best to you and please email me if you have further questions.