To walk away or not???

Question

I got approached by a friend with the following; I would like to know your thoughts on a possible course of action for my friend:

I have a three bedroom townhouse which I bought  at the height of the market in 2006. I bought it for 400k. It is now worth 170k in terms of market comps. I am paying 2300 a month.

Room rentals are about $600 USD per room in my area. I have a basement which is semi-finished.

Thoughts? My thought is that she adds a fourth room in the basement and rents out the entire house and just holds it for the long run. She is considering a move to another state for other purposes.

The friend is thinking of just walking away and letting the bank foreclose on her. She already got the mortgage adjusted to this new lower rate.

James H. · Answer

As long as she moves to a place with a lower monthly payment and works on straightening her credit out over the next few years, I would suggest a short sale and then just walk if she can't get one approved. But if she is going to continue to waste her money on high monthly bills and not repair her credit, it doesn't matter one way or the other.

Andrea M. · Answer

Maybe a short sale?

Prashant P. · Answer

Has she tried to refinance.  She may qualify for are HARP refinance if her mortgage Ike's owned by Fannie or Freddie.

Has she tried to rent out the whole house with the semi finished basement?

Roselynn Lewis · Answer

William D. My friend's credit score in the 500's (not good). But does have a good job as a consultant for a major consulting company. Recently completed a masters degree so if the person changed jobs would get increased pay.

William D. · Answer

It is tough to answer without knowing more details. Does your friend have a high paying job where holding the property long term isn't much of a burden. Do they currently have a 780 credit score and want to keep their score high?

At the very minimum they should see if they can negotiate a waiver of deficiency for a consent judgment instead of just walking away.