Originally Posted by
calligaro7
My father is willing to put a large down payment on a new home for us, but is afraid he could lose that money if we short sale or foreclose on the condo. If we purchase a new home and short sale of foreclose on the condo can they come after the new home? Should the new home be in my dad's name? What are we facing besides bad credit?
Hello calligaro:
The bank won't even consider a short sale unless you are way behind on your payments. Of course, your credit will already be impacted by then. Plus, I doubt you'll be able to arrange a short sale if you tell them the truth - which is your father is going to bale you out. If anybody is going to be baled out, they want it to be THEM, and not YOU. In addition, depending on your state law, a short sale does not make you immune from the bank seeking a judgment for the deficiency. Should you enter into a LLC (as previously suggested) with the intent to defraud your previous lender, (and that looks to ME like what you're doing), then the corporate veil can be pierced, and those assets would be vulnerable. Plus, the above advice assumes that you CAN lease/option your condo on terms that are favorable to you... I wouldn't make that assumption.
Here's what I would suggest. You want to move. Instead of having your father put a LARGE payment down on your new home, have him put down just 20%. You can get a fixed mortgage without paying private mortgage insurance. That's good for you. Use the extra capital to refinance the condo loan into one with a low fixed payment. Your upside-down position is probably temporary and if you can wait it out, I suggest this strategy will be vindicated. With a fixed condo payment, you can rent it out at market rates.
This way, nobody is at risk. Nobody is pissed off. There aren't any lawsuits. You are in the landlord business (which can be profitable). And, most important of all, you maintain your pristine credit rating.
excon