Hi, I have question, I own a condo ( in Illinois) which was my primary residence until I brought my house. Now I am not in a position to make payment for both. I cant rent it since it is not considered as a rental property as per our association rule and cannot sell it because it hugely undervalued. I am current on payment. Can you please advice me What is my best option to get rid of it without any financial obligation or ruining my credit. Thank you in advance
2 Answers from Attorneys
There are options. First, you can seek approval for a short sale, meaning that you would list the property with an experienced agent and then apply to your lender to accept the proceeds of sale as full payment. A true short sale would mean you are off the hook, but lenders do consider other financial resources and sometimes keep sellers on the hook for the difference after releasing the property. That may be a concern in your case since you own other property, but lender requirements vary even in similar circumstances from lender to lender and even loan to loan. Second, you can sell on contract, meaning you would be the lender for someone buying the condo. Since you are literally selling, that should not violate the association requirements. You would, preferably, get a down payment to best assure the buyers commitment is solid, then you would receive monthly payments with interest on the balance. Ideally, the transaction can be worked for you to come out ahead each month after making your mortgage payment and in a few years, between market gains and reduction of your loan, you hopefully would be in a position to pay your loan with the buyers obtaining traditional financing on their balance. If feasible, this would be your best option. Third, you can inquire whether the association has any desire to purchase the unit in lieu of a default on your assessment and the property going into foreclosure (unlikely, but you can give it a try). Fourth, you can offer the lender a deed in lieu of foreclosure. This would be similar to the short sale route as far as applying, being off the hook, but instead of selling you would be turning the property over to the bank. Again, there would be a hit on your credit. Fifth, you can allow the property to go into foreclosure, but you will probably face a deficiency judgment against you. Sixth, you can request an experienced condominium attorney to review whether the rental restriction was properly passed and consistently applied.
In any of the cases involving continued financial responsibility, bankruptcy would be a consideration. While that would represent a hit on your credit, you may be facing a hit anyway, you already have another home and that hit in the long run may allow you to best build your net worth and credit.
Real estate attorneys usually work a fairly large radius of their offices. Make a phone call to consult about the specifics of your situation.
Mr. Repay did quite an analysis. The only other thing I would add is to consult with your tax professional, as to potential tax ramifications of a short sale, or any forgiveness of debt.