What happens if your sales price and the value you have in the house are the same. Can you give the deed back to the lender before you fail on the payments in any way. Does it register as a default if you just give it back?

Fr_Chuck

You can only give them the deed back instead of foreclosure if the lender will agree. Some lenders will, others will not. The one lender I was currently helping someone with, would not even consider it unless you were 3 months behind, so each lender will have thier own rules.

Also if the sales value and the loan value are the same, sell it, and pay the loan off.

If you let them foreclose, you will still end up oweing them the difference plus sell fees, attorneys fees and more.

Donoso

chuck, the house has been for sale for a year. It is empty. It costs a fortune to keep. If values are the same and there are no offers wouldn't it make sense to let it go back to the bank. There is so little profit left . By the time it is sold with an agent it will have nothing. Would the repercussions be the same to give the deed back as it would if you went into default?

wayne0418

i'm just cueas but is it in cal? i have a sisterinlaw in the same boat or similiar.

Fr_Chuck

well why would the lender want it back or agree to take it ?? if you can't sell it, they can't either. This is what happens if they foreclose. first they will let it drag out for 3 to 6 months, while they keep adding late fees, attorney fees and collection fees. They they will actually start foreclosure of several months, while again they add more legal fees and late fees.
Then they will sell the house ( adding sell fees) and sell the house for maybe 1/2 of what you owe on it.

So you can expect to maybe still owe up to about 1/2 of what you owe right now, even after they take the house back.

With many lenders going out of buisness because of bankruptcy and foreclosures most lenders are not accepting many homes back, and will try to get all they can from lenders, Not all banks of course, but very commom now.

Can you sell it for less than you owe ( short sale) some lenders will take that since it gets them more often than they get at foreclosure sale.

Also some will take less than owed but require you to do a personal loan for the balance.

So you have to pay the agents fee out of your own pocket ?? alot less harm then most anything else that can happen.

Donoso

Thank you so much for your response. It does seem like the best alternative is to lower the price dramatically to sell. What is short sale. Is it really just another term for forclosure?

Fr_Chuck

no a short sale is where you sell it for less than what you owe.

One of several things will happen.

1. you have to get permission of the lender. If they say no you can't do it

2. they say yes and just accept the offer, in thier contract to do a short sale, the real estate people will not get full commission, so some real estate people will not work with short sale properties

3. They will do a short sale but make you sign a new loan for the balance or part of a balance.

4. And at the end of the year, what ever part of the short sale is not covered by the sale, you get it as a tax debt, so if you sell it for 30,000 less than the mortage payoff, you will get a 1099 showing that 30,000 as a amount you have to pay taxes on.

A short sale still is not a great thing, but still better than foreclosure for the credit report

Donoso

I was up for hours last night reading about short sales on this website. It has a wealth of information. Your insight was very helpful. There is one thing that I found there that is new as of Jan 1. People who have lost their homes due to foreclosure are not going to be taxed for the ghost money that they never really got. I don't know if that is the same with short sales. I have included the link to the business week site as you seem to be well informed on the issue and may be help to others.

Hot Property The new exit strategy: A short sale - BusinessWeek