Foreclosure or short sale?

Question

My husband talked me into buying a house 2.5 yrs ago in Sacramento, mortgage payments and bills are under my name. I have tenant living there now, I lost my job 9 months ago and my husband has been struggling with our part of mortgage payments and bills. I have a huge amount of my mom's money under my name in the money market account, I can transfer back to her anytime. I really want to get rid of the house, Is foreclosure or short sale is better? Where should I start and how bad is foreclosure and short sale. Do I have to pay the bank back and tax.

Thanks for your help

Answer 1

short selling is better then foreclosure.

Make sure when you short sell it that you have IN writing that your mortgage company can NOT come back on you for the amount that is left over..

you start with the mortgage company. you have to get there permission to short sell the house and the amount that they will take.  a lot of real estate people know about this and you should be able to call one and ask a lot of questions.  

Answer 2

Short sale is much better, but its also alot harder to make it happen.  With a short sale you sell the house for what you can get and essentially the bank takes a loss on the difference between the sales price and the mortgage.  Problem is they have to agree to the short sale and they are hard to pin down on this and you may have to go back a forth with them for months to make it happen.  Also, they may not even consider a short sale until you have already missed some payments in which case your credit is still hurt even if you can pull the short sale off.  Still, if you can do the short sale you keep a foreclosure off your credit and hoepfully nothing more than a few late payments (or even possibly nothing at all) gets on it.  

With a foreclosure your credit will be effectively destroyed for awhile but you will have to then slowly build it back up.  Also its sometimes possible (but may not that likely) for the bank to come after you for any money you cost them.

Option number 3, which you have not mentioned would be to try to get them to lower the payment or possibly even the mortgage amount.  They won't like it, but they'd certainly rather do this than foreclose on your and then have to sell the place so someone else at a lower price anyhow.  If you want to try this you can contact hopenow.com - they specialize in doing this and can tell you if this is a viable option for you.

Best luck whatever you do.

Answer 3

Foreclosure is the worst of all the options. It does a lot of damage to your credit score. You will always have to report that you lost a home on future mortgage applications. So short sale is better compared to foreclosure, as I had read in an article that banks while evaluating a borrower who had a short sale or foreclosure in his past would probably give slight edge to the short sale.

Answer 4

Your bank should not allow you to do a short sale. You have the money to pay the loan. Shame on you for wanting to somehow take that money off your books and put it on your mom's books in an attempt to force the bank to cover the loss you incurred by purchasing a rental property.

You bought the property, not the bank. It was an investment. Investments carry risk. Suppose the value of the property went up. Would you be asking if you should sell the property and give the profit to the bank? Of course not. When you borrow money to purchase an investment, it is absurd to think that if the investment turned sour, you would not lose the money, rather the people that you asked to lend you the money would incur the loss.

A short sale in your situation would be the same as walking into the bank with a gun and demanding money. Shame on you for even thinking of doing this.

Creditwise, right now a foreclosure is bad. But the rules could change at any moment. Today, a foreclosure will stay on your credit report for seven years and basically make it impossible for you to get another mortgage for five years. Last year, it was four year. People who had a foreclosure thought it would be four years until they could get another mortgage, and now find another year has been tacked on. There is nothing to say that next year, it might not turn into fifteen years until you can get another mortgage. You see, the rules and laws can change at any time.

Rather than play the game where foreclosure is a financial planning tool, why don't you play the game where grownups live up to their financial obligations! The option of keeping the house, getting a second job if need be, or tapping some of that money that you have in the bank to pay the mortgage would be the right, the best, and the appropriate choice!