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Personal Finances / Buying or Selling a Home


Subject:  Another Underwater Thread Date:  2/8/2013  11:20 AM
Author:  Dmon826 Number:  124703 of 128947

Hi all,

First, let me take a moment to say thank you in advance for taking the time to read this and offer me any advice you may have. It is much appreciated.

I came on here to post this question about a situation I'm going through and ask for your help, only to see that another similar thread had been started in the past day as well. However, this one's a bit different and so I'm starting a new thread for it. Hopefully this makes it less confusing.

Anyway, here's the situation. It actually has to do with my mother-in-law's home, not mine. She lives in Florida and has been talking for a few years now about moving up to the Philly area to be closer to her three kids. And for some brief background, she is low-income, disabled, and living entirely off of Social Security Disability. She put her name on a waiting list for a HUD housing community in the Philly suburbs a while back, and her name's come up and she's been invited to move up here. However, she has to decide in the next week or so if she wants to make the move, and part of that process involves figuring out what to do with her current home in Florida.

Obviously, per the title of this thread, that home in Florida is also fairly underwater (70k left on it vs. being worth 50k or so). She has been trying to find out whether walking away from it or short-selling would be better. From what I could find out, there are three main differences: 1) credit implications, 2) tax implications, and 3) the bank's ability to come after the 20k deficiency. In her case, 1) the credit implications are not that big of a deal because she just went through a bankruptcy last year and so her credit's already mostly shot; 2) the tax implications seem to be nil because of the current law (through 2013) forgiving that deficiency as income on a primary residency; but it's #3, the bank's ability to come after her for 20k, that seems to be worrying her. Now, she really doesn't have much to come after (her car?), but this is still her big concern. Short-selling in general seems like a better option, if it's doable, but I'm trying to figure out if it's worth it or not for her. It seems like a lot of trouble even finding a buyer, and that's if the bank will go along with the plan at all.

I have a few specific questions, if anybody knows the answer to any of these:

1) Are there any negative consequences of walking away that I've failed to consider aside from the three I laid out above?

2) If she chooses the short-sale option and the bank agrees to it, does she have to keep paying her mortgage until a buyer is found?

3) This is more of an opinion question, but would you recommend going through the trouble of trying to short-sell or should she just walk away?

4) When someone is debating short-selling vs. walking away, is this something they generally talk to the bank/lender about or is the fact that you're going through that decision-making process something you to try keep secret from them?

That's all I can think of for now, but I'm sure I'll think of more questions over the course of the rest of the day. Also, I'm sure I've left out some pertinent information, so feel free to ask me any questions you may have. Any general thoughts you have are more than welcome. I'll be around all day and through the weekend checking in as I try to sort this out.

Thanks again for any help you may be able to provide.
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