Need serious help ASAP

**karlsd** · 11-14-2008, 07:41 AM

I have a Condo in St. Augustine Florida. Purchased 3 years ago as a "2nd Home" (actually an investment property). Purchase price of 215K...3 Years later a

tax assessment came back at 160K. I financed 95%. I have a 5 Year interest only ARM. My original intent was to buy and sell quick. I got stuck with the

property. The back up plan was to rent until I get a buyer. It has now been three years of renting. I cannot sell without taking a major loss. I am

upside down by 500 a month (total expenses = 1500/month vs. rental income of 1000/month). It costs me 6K a year. I am into the property for approximately

30K. I would love to walk away from the property now and cut my losses. I would like to do this without hurting my credit. I have contacted the bank

(Wells Fargo) and I am going to pursue a loan modification.

***Just received word back***

"We reviewed your proposal for payment reduction for the above -referenced account. Based on the information provided, we are unable to accept your proposal

at this time for the following reason "Not a Valid hardship"

Yet, i have provided proof that between my Primary residence in NY, this property and all my other bills, I am carrying a -$1,882.88/month balance. Which is

100% true!!! yet they do not see a valid hardship.

I was hoping that the the "Hope for Home Owners Program" would help me. But according to the bank, it would only help me if the property was my Primary

Residence and that it does not pertain to me. My loan is current and ive never been late on a payment. A slight adjustment will not help. My next option

is a short sale. The property is currently listed at a very undervalued price, zero hits. Another option is an in deed of leiu of foreclosure. I may go

this route if the bank approves. If they do not, I may just walk away and take the credit hit. I believe its a 7 year black mark. If that occurs I will

just stay put in my primary until the credit clears.

I am now prepared after receiving their judgment to stop the auto payments from my checking account and stop paying the bank. I do not see this property

EVER getting back to the way it was, it is in the middle of no where, no jobs...its a college town for renters only. I screwed up and I want out now. I

just need 2 questions answered from all of your fine professionals:

1. What exactly is the credit hit here? Is is 7 years? What exactly are the implications as far as my credit goes? My credit is good otherwise. After 7

years (if that is the #), does everything go back to normal?

2. Here is the biggie. Can they come after me for anything? Now and in the future? Will they just take the place and that's it?

One more. If i do foreclose, how long will this take? I have tenents in there, what will be their fate? When will they get kicked out? Can I keep

collecting their rent?

I just want to add, that I have always been a very responsible person, I repay my debts and always pay my bills on time. Walking away from this is not what

I want to do, however this property is stressing me out mentally and physically for now 3 years. I cannot afford to put myself through this for what could

be 10-15 years to just break out even. help Help HELP!

**La Jolla Real Estate** · 11-14-2008, 10:26 AM

Unfortunately you signed the loan documents agreeing to repay the money the bank gave you to purchase the property. You will be made accountable in one way or another. Sorry if I can't jump on the bailout bandwagon. The market will bounce - real estate is not a quick buck market. Personal responsibility has gone down the drain.

In foreclosure, your tenants lease is done (at least in CA) and they will be evicted. If you were to sell to a private party, the lease would be honored.
Anticipate a 300 point hit on your credit with a foreclosure. In 7 years it will be gone. The bank can pursue you for the balance from a foreclosure.
Don't keep collecting the rents from your tenants, that's weak.

A short sale is probably your best option. fyi, the bank will be less likely to approve it while you have tenants in there. Most important, make sure you find an agent very experienced in short sales. You can probably find one here.

**karlsd** · 11-14-2008, 11:31 AM

"The bank can pursue you for the balance from a foreclosure."

Just called, not true..at least not Wells Fargo. They will take the property, sell it, send me a 1099 whcih outlines what was owed vs what they got for it and I am responsible for claining the difference on my taxes. My relationship with the bank is complete. They cannot come after me for anything.

"Don't keep collecting the rents from your tenants, that's weak."

Dude, what is week is the asshole that sold me this property at an over valued price and how Wells Fargo configured their loans (70/30 interest only ARMs) to get me in, so they can get their mortgage...a mortgage is shouldn't have qualified for to begin with.

It was just a question. I mean if im gogin into forclosure and still paying propert fees and management fees and my tenents are still loving there someone is gogin to get that money, why not me? Im already 30k in this whole...so big deal i make 950 a month for a few months till they takle ti away.

"A short sale is probably your best option. fyi, the bank will be less likely to approve it while you have tenants in there. Most important, make sure you find an agent very experienced in short sales. You can probably find one here."

The place has been listed for a year at 100K!!!!!!!!!!!!! I paid 215...NO ONE is buying anythgin in Florida

**La Jolla Real Estate** · 11-14-2008, 11:53 AM

Just called, not true..at least not Wells Fargo. They will take the property, sell it, send me a 1099 whcih outlines what was owed vs what they got for it and I am responsible for claining the difference on my taxes. My relationship with the bank is complete. They cannot come after me for anything.

Yes, you are right. If you had a second that was SOL from a first foreclosing, then they would pursue you. My bad.

As far as collecting rents, you are the only one that has to live with yourself...so do what you may. I was mistaken about the whole situation...I wasn't aware people were held down and forced to sign loan docs and purchase contracts...

I do sincerely hope you can find a solution to this. Losing sleep over finances is not fun. In the meantime, check out this blog. May help you live more comfortably in the meantime, and maybe not rush into bad investments in the future. http://www.thesimpledollar.com/

LJ

**karlsd** · 11-14-2008, 02:12 PM

[quote=I was mistaken about the whole situation...I wasn't aware people were held down and forced to sign loan docs and purchase contracts...LJ[/quote]

Love the sarcasm......this is not fun for me and im not looking for some easy way out...ive stuck through this for 3 years and lived through tenents i had to evict who left dead animals in my apt and one live one that was 1/2 dead..along with a so called proprty manager who left town with 2 months of my rent.....mold issues because my tenants would not turn on their dehumidifiers, blaming the structure of the building, who threatended to sue me because their kid got sick.....2 instances where my condo was unoccupied for months at a time without rental income in my pocket.....all this so I can collect 950/month when my monthly nut has been 1500/month........

do you know what its like to work and give your money away..saying no to your wife when she wants to go to dinner and you cant because AMEX put a freeze on your credit limit....or when your 65 year old mother who is on disability, has her car break on her and you cant help her???

No one held me down. I went through a divorce and made some money on our house. I had money sitting in the bank earning 1%. I bought my primary residence and this property. The guy who worked the deal for us bought in for 5 of his own, his uncle (my coworker at the time) bought in for 3.....i got the one. At the time, similar condos were going for 235. i thought i was getting a deal at 215. My intent was to buy and sell. Little did I know that 3 years later, it would be worth 160 and that id be giving away over 500/month with no end in sight.

For argument sake, lets say when i bought this place 3 years ago, it was at a peak that we may never see again in our life times and that i am now stuck paying 500/month for the rest of my life so i can save my credit and my integrity. What in gods name did i prove???

My primary is not worth what i pay for it. but i live in it. and it is also down about 10%. I know it will rebound. Its in a very clean residential area n NY. Im not worried at all. But this place...its in the middle of no where....yes yes yes i should have know.....but i was a beginner...i screwed up..i shouldnt have to pay for this my whole life....or next 20 years....which ever comes first.....

**NB190** · 02-04-2009, 12:14 AM

You have really been through a lot karl. I f I may suggest first decision you need to take is decide that you are not investing new pennies in this condo and build capital parallel to bail yourself out of the current situation.

**karlsd** · 02-04-2009, 07:07 AM

im doing a short sale

bottom line

paid 215...the fair market value is now 100K......this place will never get back to where it was....its pointless to hold it..

**REI GIANT** · 03-14-2009, 03:24 AM

This problem was caused by the government, banks and buyers. By allowing people to buy property that they could not afford has thrown the RE market into a tailspin. What scares me the most is that the government and the banks that helped cause the problem are now trying to fix it. What a JOKE!! I am all about personal responsiblity and I would like to see congress and the banks be held accountable! I know many people who took out horrible loans because the wanted to be RE Investors and have lost everything. I hope that you are able to recover. You should consult an attorney to see what all of your options are. You made a mistake once please don't make another one by trying to do this all by yourself.

REI GIANT

**karlsd** · 03-14-2009, 04:05 AM

i have consulted an attorney. Bottom line is i have 3 choices:

1. keep the property and continue to be upside down 500/month
2. go into foreclosure
3. short sale

Ill break down each choice....someone please correct me if Im wrong:

1. keep the property and continue to be upside down 500/month

Unless this property rebounds, this choice makes no sense. Its simply throwing money away month after month. Its worth 100K now according to the banks' BPO. I paid 215..im already into it for 35K. Because of the location I do not believe it will ever get back to 215...and it will really need to be more like 350 to break out even 10-15 years (or longer) down the road.

2. go into foreclosure

not a good choice, they can come after me, garnish wages. This is a choice that may haunt me for years to come. Not to mention that my credit will be shot for 10 years.

3. short sale

of the 3 choices this makes the most sense. There will be tax penalties and aslight credit hit. But in 3 years ill have the IRS paid back and my credit will be washed. And Ill be done with it.

FYI...ive already attempted a loan modification. No go. There are no programs out there to help investors.

it shoudl also be noted that i have a 5 year Interest only ARM (talk about bad loans). I am in year 3. In 2 years the principle and new interest rate will kick in. That -500/month will turn into -800/month or higher

**strategiclm** · 03-14-2009, 07:56 AM

It looks like your assesment is pretty good.

Though I think it is very likely that the market will rebound nicely in 10-15 years, and the property could well be worth 300k+ at that time, it doesn't make sense to hold on to a cashflow loss that long unless you felt the property would be worth tons more than that.

On the short sale/1099 issue, if you are able to show that you are insolvent at the time of the short sale it will not be a taxable event. I of course don't know whether that applies to your situation.

Make sure that whoever is helping you with the short sale really knows what they are doing, this will give you a higher chance of success.

Do remember that when you do a short sale you have the opportunity to bargain how the lender shows the account on your credit report.

Chris