Posted on: 03rd Jul, 2008 05:23 pm
Hi,
I have two properties that have seriously devauled in AZ. The worst is my townhouse, on which I owe $111 to the first with SunTrust and $30K to a HELOAN with Bof A. Nothing is selling in that complex except for the REOs, which are selling for about $75K. I have put it on the market for $125K, which, after commissions and buyer incentives, will cover the first but not the HELOAN. I haven't had any serious inquiries, and I am not certain where I will come up with the difference, to be honest. This was my primary residence for 2 1/2 years. I moved out in October. I had a renter in there, but he destroyed the place. I have spent thousands of dollars fixing it up so it can be rented or sold again. I can rent it for $750, which will stil leave me in the hole $500/mo.
The second property is the house I am currently living in, which I bought in October 2007. I owe $163K, I'd be lucky to clear $140K. I could rent it for $850, which would leave me about $500/mo in the hole. I haven't tried to rent or sell this property.
I am current on all payments, but have bled my savings dry. I have good credit (720). I hate to trash it, but I can't go on like this.
In addition to the above, I owe $10K on my car, $25K in credit card bills from an unexpected medical problem that left me with no income for 6 months (also the reason for the HELOAN), and $160K in student loans. I make $120K/year now, should go up to $130K in October.
Basically, I am wondering what option will be the least destructive in the long run. Chapter 7 isnt an option with my income. Chapter 13 would be. But they would undoubtedly have me on the plan for 5 years, then I'd have a BK on my credit report for another 10 after that. Student loans aren't dischargeable, of course. I'd ride through the car anyway, since I need it. The credit cards would be gone. I'd probably give up both houses and rent. No deficiency judgment to worry about, if one applies in AZ on my HELOAN.
Foreclosure would be the next most negative, if I understand correctly, and on my report for 7 years after the sale. I think, with the HELOAN with B of A on the townhouse, I would have a hard time negotiating either a short sale or a deed in lieu. Any thoughts? Also, I am not certain, does AZ have anti-deficiency laws that cover HELOANS, or only purchase money mortgages?? If I am going to trash my credit, I hate to have to pay the $30K HELOAN.
I think I could try for a short sale or deed in lieu for my house. It's in a nice neighborhood, a cute place. But still, nothing is selling.
My final questions are-- is it possible to negotiate as part of the short sale that the creditor does not report the deficiency 1) to the credit reporting bureaus at all and 2) not report it as taxable income? And, how can I determine if I qualify for relief for taxation of the deficiency under the law President Bush signed last year?
Thank you so much in advance for your thoughts - I cant sleep at night.
Robin
I have two properties that have seriously devauled in AZ. The worst is my townhouse, on which I owe $111 to the first with SunTrust and $30K to a HELOAN with Bof A. Nothing is selling in that complex except for the REOs, which are selling for about $75K. I have put it on the market for $125K, which, after commissions and buyer incentives, will cover the first but not the HELOAN. I haven't had any serious inquiries, and I am not certain where I will come up with the difference, to be honest. This was my primary residence for 2 1/2 years. I moved out in October. I had a renter in there, but he destroyed the place. I have spent thousands of dollars fixing it up so it can be rented or sold again. I can rent it for $750, which will stil leave me in the hole $500/mo.
The second property is the house I am currently living in, which I bought in October 2007. I owe $163K, I'd be lucky to clear $140K. I could rent it for $850, which would leave me about $500/mo in the hole. I haven't tried to rent or sell this property.
I am current on all payments, but have bled my savings dry. I have good credit (720). I hate to trash it, but I can't go on like this.
In addition to the above, I owe $10K on my car, $25K in credit card bills from an unexpected medical problem that left me with no income for 6 months (also the reason for the HELOAN), and $160K in student loans. I make $120K/year now, should go up to $130K in October.
Basically, I am wondering what option will be the least destructive in the long run. Chapter 7 isnt an option with my income. Chapter 13 would be. But they would undoubtedly have me on the plan for 5 years, then I'd have a BK on my credit report for another 10 after that. Student loans aren't dischargeable, of course. I'd ride through the car anyway, since I need it. The credit cards would be gone. I'd probably give up both houses and rent. No deficiency judgment to worry about, if one applies in AZ on my HELOAN.
Foreclosure would be the next most negative, if I understand correctly, and on my report for 7 years after the sale. I think, with the HELOAN with B of A on the townhouse, I would have a hard time negotiating either a short sale or a deed in lieu. Any thoughts? Also, I am not certain, does AZ have anti-deficiency laws that cover HELOANS, or only purchase money mortgages?? If I am going to trash my credit, I hate to have to pay the $30K HELOAN.
I think I could try for a short sale or deed in lieu for my house. It's in a nice neighborhood, a cute place. But still, nothing is selling.
My final questions are-- is it possible to negotiate as part of the short sale that the creditor does not report the deficiency 1) to the credit reporting bureaus at all and 2) not report it as taxable income? And, how can I determine if I qualify for relief for taxation of the deficiency under the law President Bush signed last year?
Thank you so much in advance for your thoughts - I cant sleep at night.
Robin
just an update: i got an offer on the townhouse. it is shockingly low ($66k), but reos there are selling for $70k and there ar eno retail sales at all. so, teh first mortgage holder may accept it as a short sale. i've applied for a short sale with full release, but would still have to deal with the taxation of cancellation of debt. it was my primary residence for 24 of the last 60 months, but i haven't gotten a fianl answer from my tax attorney as to whether that protects me under the new mortgage relief laws. i still have the insolvency exception, however, so it looks like i'm ok re: federal taxes. will have to pay state taxes on the cod though.
the second mortgage holder, however, will get $1000 from the sale... they will definitely want me to take back un unsecured note to go allong with the short sale. no telling for how much, but my realtor thinks 25-30% of the $30k i owe is possible. same tax analysis.
assuming the short sale of the townhouse is approved, i can stay in the house i own and in which i currently reside. it is still $40k under water, but i can pay that down over time, and it is in a decent neighborhood, with public schools i coul send my son to when he starts first grade.
i'll keep you posted re: the short sale. we submitted the info to both lenders on 9/5; lender 1 had it in their system 9/8; negotiator assigned 9/10; waiting for them to revire file and make the introductory call to me and my realtor (estimated time = 5 business days). lender 2 can't even tell me if they have the fax... they said it can take up to thirty days to be entered into their system!!
the second mortgage holder, however, will get $1000 from the sale... they will definitely want me to take back un unsecured note to go allong with the short sale. no telling for how much, but my realtor thinks 25-30% of the $30k i owe is possible. same tax analysis.
assuming the short sale of the townhouse is approved, i can stay in the house i own and in which i currently reside. it is still $40k under water, but i can pay that down over time, and it is in a decent neighborhood, with public schools i coul send my son to when he starts first grade.
i'll keep you posted re: the short sale. we submitted the info to both lenders on 9/5; lender 1 had it in their system 9/8; negotiator assigned 9/10; waiting for them to revire file and make the introductory call to me and my realtor (estimated time = 5 business days). lender 2 can't even tell me if they have the fax... they said it can take up to thirty days to be entered into their system!!
Hi,
I guess you have posted your query in some other thread or forum. may be you couldn't locate that and have just shared your thoughts here. Ok, keep posting here and let's hope something good turns out for you.
Take care
I guess you have posted your query in some other thread or forum. may be you couldn't locate that and have just shared your thoughts here. Ok, keep posting here and let's hope something good turns out for you.
Take care
The townhouse I owed $141K on just closed for $60K. CPA says insolvency exception will negated the federal taxes, but I will get hit with state tax. Also, the HELOC is recourse to me, so I am still on the hook for that. I owed $29K, they got $5K at closing. The "Recovery" department is supposed to be calling to work out terms of repayment.
The house is under contract now, too--- I owe $163, it got three offers from 3 different buyers, all for $75K. It is being reviewed now, but my realtor says that is the fair market value. The Mortgage Relief Act will negate the fed taxes on this property, but I will have to pay state taxes here as well.
I used my tax refund to settle the $50k in credit card and personal loans... that was just a miracle.
I live in an affordable rental now, and after bills, have $1500/mo to throw at the HELOC, then the car, then my student loans (and the taxes next year). My FICO is trashed, but it was worth it. Thanks for all of the support!
The house is under contract now, too--- I owe $163, it got three offers from 3 different buyers, all for $75K. It is being reviewed now, but my realtor says that is the fair market value. The Mortgage Relief Act will negate the fed taxes on this property, but I will have to pay state taxes here as well.
I used my tax refund to settle the $50k in credit card and personal loans... that was just a miracle.
I live in an affordable rental now, and after bills, have $1500/mo to throw at the HELOC, then the car, then my student loans (and the taxes next year). My FICO is trashed, but it was worth it. Thanks for all of the support!
Hi R_L_Dugas,
If you short sale the property, the lender will have the right to demand the deficient amount from you. You can apply for a deed in lieu foreclosure wherein you will be able to sell off the property but you will not have to pay the deficient amount. Moreover, the taxes for the forgiven amount will be forgiven depending upon the Mortgage Relief Act. However, as far as the state taxes are concerned, you'll have to pay them.
Thanks
If you short sale the property, the lender will have the right to demand the deficient amount from you. You can apply for a deed in lieu foreclosure wherein you will be able to sell off the property but you will not have to pay the deficient amount. Moreover, the taxes for the forgiven amount will be forgiven depending upon the Mortgage Relief Act. However, as far as the state taxes are concerned, you'll have to pay them.
Thanks
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