I have two houses and was wondering would bit be better to short sale or put it up for rent the I owe thirty thousand more then appraisal value of the home. The mortgage alone is 1000 a month. The house is worth 120000 and we owe 150000
1 Answer from Attorneys
Its not a question of which option is better. There are pros and cons to each. One may be better for you in your circumstances.
Is there only one mortgage on the property? If not, then you would have to negotiate a short sale with all lenders. Even if approval is given to short sale the property, the lender(s) may still want you to pay the difference between what you owe and what you sell it for. Do you have the cash to do that? If not, I had clients who did a short sale. The bank made a deal with the clients to pay the difference and then reported the deficiency as a charge-off amount, thereby hurting the client's credit. Are you prepared to have this happen to you if your lender takes a similar approach? The nice thing if this works though is that once the property is sold, you are free of the home. At that point, any deficiency becomes like any other unsecured debt in that it can be negotiated down. While you may not have $30,000 lump sum, the bank may end up settling for 25% (around $7500) which is much more doable if you can take the temporary hit on the credit.
If the short sale does not appeal to you, you might consider renting until you are at least at the break-even point of being able to sell the home for what it is worth. This could be a few years or less depending on if the property values come back or not. That may also depend on where your home is located (city or rural? close to jobs that any tenants might have?) The downside to this is that if you rent it out, are you going to hire a property manager or be your own landlord? If you are your own landlord it means that you have to be careful at screening your tenants. And even if you are careful, what if your tenant loses his/her job and cannot pay rent? Then you will have to evict the tenant and re-rent, a process which could take several months. Are you prepared to have a small cushion to see you threw any lean times like this? You mention you have another home - is that in a different state or area? If in another state, it will mean that it will be more difficult to be your own landlord. Its not impossible, but it does make it hard when the landlord is out of state. You will have to make sure that you comply with the landlord-tenant law in the state where the property is located which you would be renting out.
Anyway, these are just a few things to consider.
Related Questions & Answers
I have two houses and was wondering would it be better to short sale or to put it up... Asked 10/01/13, 2:04 pm in United States Georgia Real Estate and Real Property
If title was not properly filed with court was the sale legal? Asked 9/25/13, 8:56 pm in United States Georgia Real Estate and Real Property
If my brother owns 4/5 of a piece of property and I own 1/5 of the property... Asked 9/25/13, 1:03 pm in United States Georgia Real Estate and Real Property
What is better to do a short sale or a foreclosure? How does it affect my credit?... Asked 9/25/13, 5:38 am in United States Georgia Real Estate and Real Property
What is the likely hood of a lender coming back for repayment of negative balance... Asked 9/25/13, 5:08 am in United States Georgia Real Estate and Real Property