Posted on: 23rd Sep, 2009 05:00 pm
we live in arizona and bought 3 residential lots to build homes on (my husband is a builder). we have paid on them for 5 years but can no longer do so. the bank has offered to do a deed in lieu of foreclosure if we provide $85000 cash. we would have to borrow that money and would be in debt for a long time. is it a smart move? how would it affect our credit? would we be able to prove to the irs that we were legally insolvent? in other words, could we prove that our total debts are greater than the value of our assets? we owe a lot more on these lots than they are worth. thanks so much!
Hi stadlerfam!
Welcome to forums!
Generally in case of a deed in lieu of foreclosure, the lenders do not charge the deficient amount from the borrower. I would suggest you to ask the lender as to why they want $85,000 in cash. If you have to pay the money, then it would be better if you could go for a short sale. Here, you can pay the deficient amount and your credit score will only be reduced by 75-100 points.
A deed in lieu of foreclosure will lower your credit score by 250 points. If you owe more than the value of your assets, then I don't think it would be difficult for you to prove that you are insolvent.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
Generally in case of a deed in lieu of foreclosure, the lenders do not charge the deficient amount from the borrower. I would suggest you to ask the lender as to why they want $85,000 in cash. If you have to pay the money, then it would be better if you could go for a short sale. Here, you can pay the deficient amount and your credit score will only be reduced by 75-100 points.
A deed in lieu of foreclosure will lower your credit score by 250 points. If you owe more than the value of your assets, then I don't think it would be difficult for you to prove that you are insolvent.
Feel free to ask if you've further queries.
Sussane
The properties were bought in the company name that was formed as a LLC. We signed personal guarantees but the lots are in the company's name.
If we were to do a deed in lieu of foreclosure, would our business credit be affected only? We have been a few months late and the bank is reporting only to our business credit.
They did appraisals on the 3 properties and they are the different between what we owe and fair market value is around $400K. The market here in Arizona has been hit so hard that the appraisals are coming in so low. The banks will not lend money for lot loans only so they aren't selling. We did get a short sale contract on one of the lots.
The bank said that they would put a deficient judgement out there to be paid back in the future if we don't do a deed in lieu of foreclosure plus $85000 cash. We don't want a judgement of 300-400K but we don't know if it is wise to pay that much money to get out of these loans.
Thank you for your help!
If we were to do a deed in lieu of foreclosure, would our business credit be affected only? We have been a few months late and the bank is reporting only to our business credit.
They did appraisals on the 3 properties and they are the different between what we owe and fair market value is around $400K. The market here in Arizona has been hit so hard that the appraisals are coming in so low. The banks will not lend money for lot loans only so they aren't selling. We did get a short sale contract on one of the lots.
The bank said that they would put a deficient judgement out there to be paid back in the future if we don't do a deed in lieu of foreclosure plus $85000 cash. We don't want a judgement of 300-400K but we don't know if it is wise to pay that much money to get out of these loans.
Thank you for your help!
you don't have any equity in proerty . in fact it is -400K. bank is asking you to pay only 85K.
What else are you searching for?
What else are you searching for?