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Greetings,

Bought my condo in Los Angeles in 2007, and I don't have to tell you what happened next. Now I am more than $200,000 underwater. What the heck should I do? I can't foresee the condo ever returning to where it appraised when I purchased, and I do not want to live in a small condo for the rest of my life (I'm 43 now). I feel the sting most poignantly when entertaining out of town company in my cramped airspace.

Advice please. I welcome any and all.

Max
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We hope that your thoughts about the market ever recovering for your condo is incorrect. Patience might be rewarded.

Failing that, your choices are 1) to work out a short sale deal with your lender, 2) renegotiate your mortgage, or to 3) stop making mortgage payments and walk away when they foreclose.

All three leave you with no equity, so you will be in a rental for a while. Walking away allows you to accumulate a down payment for your next place, but you may need special efforts to rebuild your credit rating.

No easy choices.
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Thanks pauleckler - agreed that there is no easy choice. I'm in favor of walking away, but when it comes down to pulling the trigger, I get very squeamish.

MPH
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Hi Max,

I'd suggest negotiating a shortsale before walking away. If you simply walk away, the default balance will be reported as taxable income. If you short sell, the defaulted balance will not be treated by the IRS as taxable income.

Currently, if you have an orderly negotiated short sale in your past, without an actual default in payments, you can get a new mortgage as soon as 24 months later.

Luck!
Dave Donhoff
Leverage Planner
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If you simply walk away, the default balance will be reported as taxable income. If you short sell, the defaulted balance will not be treated by the IRS as taxable income.

In either case, the unpaid balance should be reported as potentially taxable. And if the short sale or foreclosure happen in 2013, the unpaid balance will not be taxable income as it is from the OP's principal residence.

If a short sale or foreclosure happens in 2014 or later, the principal residence provisions for unpaid debt go away. In that case, the OP would have to look to some other way to exclude the debt forgiveness - likely the insolvency exclusion, given the large amount he's underwater.

To the OP's issue - there is also the potential for a deed in lieu of foreclosure. But I understand those are pretty tough to come by.

--Peter
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Thanks Dave. I have been unable to get the bank to consider short sale because I cannot demonstrate hardship. I don't know how things will change in 2013, but there have been forgiveness provisions in place in California and federally which prevented owners who have been foreclosed upon from having to pay taxes on the amount the banks write off. I consulted with youwalkaway.com and they seemed very knowledgeable on the matter. I will check with them and see what law changes might occur in 2013.

Any advice on how I might get Wells Fargo to bite on a short sale?

I can easily afford my payments, I just dream of having a single family home.

Max
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Max,

I can easily afford my payments, I just dream of having a single family home.

I hesitate to say this... but....

If I offered to contribute $200,000 to your net worth if you promised to be a renter, and avoid carrying a balance on any credit cards for three years... that's a bit under $67,000 per year... would you take me up on it?

If so, walk.

(Shhh... you didn't hear it from me!)
Dave Donhoff
Leverage Planner
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I can easily afford my payments, I just dream of having a single family home.

If this is the case, have you thought of just buying the SFH, and turning your condo into a rental?
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Or buying a SFH and walking away from the condo?

Although, from what I read about California, I wouldn't buy anything there
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There's a new incentive program in California that will pay the homeowner up to $45,000 cash incentive for a short sale. The OP should locate a real estate agent who knows about this program.

This article says $30,000 cash incentive, but it's really up to $45,000, depending on the shorting bank.

http://www.pe.com/real-estate/company-news/20120525-bofa-enh...
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Although, from what I read about California, I wouldn't buy anything there.

Orange County values were up 9.2% year over year.

http://www.nbcnews.com/id/50707476/ns/local_news-orange_coun...

However, if you're a millionaire, CA is not a good place to live. Solid blue states usually aren't.

http://www.nytimes.com/2013/02/07/us/millionaires-consider-l...
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Any advice on how I might get Wells Fargo to bite on a short sale?

I can easily afford my payments, I just dream of having a single family home.



List the house, get an offer and submit it.

It's the only way they're going to take you seriously.

Their servicing lines are jammed with people in actual hardship trying to get a short sale through. It shouldn't come as a surprise that they aren't taking seriously a borrower who views his debt obligation as venture capital when the value dropped.
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Thanks to all of you for excellent points. I'm contemplating walking away, but the sense of urgency is not dire enough to make me do it yet. I will keep monitoring my psyche and take it one month at a time.

Max
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Thanks to all of you for excellent points. I'm contemplating walking away, but the sense of urgency is not dire enough to make me do it yet. I will keep monitoring my psyche and take it one month at a time.


From your description it's not dire at all and never has been.

Quite frankly, it sounds like you're really just looking for someone to ease your conscience by telling you it's OK to go dead-beat on your obligations.

It's my opinion that that should not have any influence at all on your decision, it just complicates things. You're either someone whose word is good or you're not. Don't overthink it.
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And don't forget, if you're not financially distressed, you don't qualify for a short sale. In other words, merely stopping payments isn't enough to qualify.

Michigan Supreme Court judge commits fraud to qualify for short sale
http://www.huffingtonpost.com/2012/11/21/diane-hathaway-mich...
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And don't forget, if you're not financially distressed, you don't qualify for a short sale.
This isn't true, as there are no universal guidelines nor requirements for the successful negotiation of a short sale (which is a private negotiation, after all.)

Further, negotiating a short sale on a straightforward, non-coerced and voluntary basis is not "going back on your word."

I am familiar with mutually agreed short sales where the lender has waived and forgiven the unrecovered loan balance even though the borrower was not in financial distress. I have also heard of cases where the lender has agreed to a partial balance continuance on unsecured loan terms without any derogatory reporting to the borrower's credit records.

You won't be dinged for negotiating, as long as you're never late on the actual payments (and no, you do not necessarily have to default in order to get the lender's attention... but you *DO* have to have a qualified buyer under contract at current market values.)

Luck!
Dave Donhoff
Leverage Planner
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Further, negotiating a short sale on a straightforward, non-coerced and voluntary basis is not "going back on your word."


No one ever said differently.

The OP goes back and forth with his/her terms, the last post said "I'm thinking of walking away".

However, despite the term vacillation at no time did OP ever use the terms: "negotiate a short sale on a straightforward, non-coerced and voluntary basis." As you point out, a short sale is a private negotiation that is completely at the discretion of the note holder.
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You're probably right, Dave. I haven't processed a short sale package in a long time.
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You're probably right, Dave. I haven't processed a short sale package in a long time.

You usually try to be thorough. Why didn't you take the time to do a bit of research before giving an incorrect statement? The fact that it has been a long time would reinforce your need to double-check first.


Robyn
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You usually try to be thorough. Why didn't you take the time to do a bit of research before giving an incorrect statement? The fact that it has been a long time would reinforce your need to double-check first.

Eh. I don't care about short sales very much. So sue me.
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Eh. I don't care about short sales very much. So sue me.

You present yourself as an authority so I figured that you would share what is most current. The fact that you don't care about short sales very much doesn't have anything to do with giving wrong information. No one will sue you but falling back into the old attitude doesn't help. It's just tiresome.


Robyn
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Robyn, go pound sand. I'm not running for office. I'm not an investigative journalist. I never said I was an authority on short sales, either. It's not my job to exhaustively research the internet over every response I post. Every participant here, based on various comments, should do his own research, anyway. Dave stepped in to ostensibly correct my perception. Good for him. Good for the board. He may be wrong. He may be right. The OP should take the collection of comments and check and double-check them before he proceeds.
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Here you go, Robyn--your opportunity to get it straight from the horse's nouth.

The FHA is offering a webinar on basic credit and liabilities underwriting on February 28th to any interested loan officers, underwriters, processors and other interested parties. Credit history, liability analysis, short sales and non-traditional credit guidelines will all be covered. To register, visit ...

http://www.visualwebcaster.com/FHA/91968/reg.html
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Thanks, Catherine, for the link. I am sure your research in finding the help and explanation will prove invaluable for others. I, myself, was involved in a short sale of my home in Kansas City so I know how it works for Missouri.


Robyn
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Max,

Just want to be clear in my understanding of your position. So, your dilemma is whether or not you should violate your large financial commitment, not over financial necessity or hardship, but over the elbow room occasional visitors have?

Have I got it right?
xtn
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Umm, no actually not the case at all, but thanks for the patronizing reply.
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but thanks for the patronizing reply.

Unfortunately, while these boards have a wealth of knowledge and experience, you get those kinds of responses thrown in. You just have to ignore them - they enjoy their perch on the pedestal they created for themselves.
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Umm, no actually not the case at all, but thanks for the patronizing reply.


LOL, poor you; while it may not be what you expected, it's certainly what you earned.

Perhaps the more of the deadbeats on the boards at youwalkawayfromyourownunfortunatedesisions.com would be more sympathetic to your non problem.
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Unfortunately, while these boards have a wealth of knowledge and experience, you get those kinds of responses thrown in. You just have to ignore them - they enjoy their perch on the pedestal they created for themselves.


Don't be so hard on yourself, not everyone is built for self reliance, it's becoming less and less shameful to ask for a government handout.

And while it's hardly a lofty perch, it is unfortunately becoming more rare as personal accountability continues to erode in this country.
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Don't be so hard on yourself, not everyone is built for self reliance, it's becoming less and less shameful to ask for a government handout.

As soon as the government stops giving handouts to billion dollar companies, I'll start taking a harder line on average wage earners asking for the same handouts.

--Peter
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That's cool, self respect certainly isn't for everyone.
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As soon as the government stops giving handouts to billion dollar companies, I'll start taking a harder line on average wage earners asking for the same handouts.

I'm conservative and I agree with this. Don't know which started first, Great Society/New Deal or corporate cronyism, but our country can no longer afford either. Everyone--from board room to family dining room--has got to stand on their own two feet and return to the days before liberalism began (about 70 years ago) to erode the core principles that made this country great: self-reliance, resilience, ambition and perseverance.

Uncle Sam's Plantation: How Big Government Enslaves America's Poor and What We Can Do About It

http://www.amazon.com/Uncle-Sams-Plantation-Government-Ensla...
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corporate cronyism crony capatilism...

I get to drive by the vacant Solyndra building daily as a reminder....

--
whyohwhyoh
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Clearly not.
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Indeed.
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