Posted on: 06th Mar, 2009 12:53 pm
I purchased an investment property in California in 2006 and refinanced in 2007 with cash out. I can't keep it rented to make the payments. I am 3 months behind. I am not sure what to do. I have one renter and all utilities are paid so they are in my name. I want to just walk away but I don't know what my obligation is to the tenant as far as utilities etc. are. I am not sure what the best answer is. Seek short sale, foreclosure, or deed-in lieu, bankruptcy? I am also concerned with 1099 after its all over and not sure what the laws regarding this are either. Can anyone give me advice on what to do?
Hi rilo,
Since you are already 3 months behind, you can go for either a short sale or a deed-in-lieu or a bankruptcy. But bankruptcy should be your last option as it can hurt your credit badly. A short-sale would be a better option in this regard as it is less damaging on your credit, generally dropping it by 75-100 points. In case of a short sale you might be required to pay the deficient loan amount amd taxes on it.
However there are certain exemptions to it as per Mortgage Forgiveness Debt Relief Act. However, if you want to keep the property, you can send a hardship letter to the lender and go for a loan modification.
As far as your obligations towards the renter is concerned, it depends on the kind of agreement you have with him/her. I think you should inform them about your present situation and the decisions you are going to take in this regard.
Thanks,
Jerry
Since you are already 3 months behind, you can go for either a short sale or a deed-in-lieu or a bankruptcy. But bankruptcy should be your last option as it can hurt your credit badly. A short-sale would be a better option in this regard as it is less damaging on your credit, generally dropping it by 75-100 points. In case of a short sale you might be required to pay the deficient loan amount amd taxes on it.
However there are certain exemptions to it as per Mortgage Forgiveness Debt Relief Act. However, if you want to keep the property, you can send a hardship letter to the lender and go for a loan modification.
As far as your obligations towards the renter is concerned, it depends on the kind of agreement you have with him/her. I think you should inform them about your present situation and the decisions you are going to take in this regard.
Thanks,
Jerry