Buying a property from a spouse & Short Sale
I recently got married and upon the final details found out that my spouse's condo was behind on payments because she had accidentally let the insurance lapse and a pipe burst.
I was just beginning my real estate/rental journey, listening to pod casts regularly and reading forum posts. I have some money saved up to put a down payment on my next property, but now I have all sorts of questions about my family's current predicament.
Current options:
1. Pay $12k for a loan modification in which my wife's lender will set the loan back to current.
2. Attempt a short sale (lots of questions coming below about this) in which I buy the property from my wife.
3. Let my wife's lender foreclose on the property.
We currently live at her property now, but have other options if we need a place to live. I currently rent out my house that I owned prior to our marriage.
So #1 is kind of a crappy option because it will take my savings for my next rental property, plus I will have additional costs to repair the water damage.
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I'm interested in #2. If I can buy the property on short sale, then my wife is free and clear of the debt and from a credit standpoint it is better (even if barely) than having a foreclosure.
The stats are as such:
Loan owed - $150k
Property value - $133k
Property value with water damage - $121k
I would like to get a loan for $97k put down $24k (20%) and make a short sale offer.
Questions:
1. Who offers these type of loans? I've called some traditional banks and it seems that nobody likes this plan. Plus most state they'd have to get an exception for the husband/wife thing. (Note - Title/Loan is in my wife's name only since she owned it before we got married)
2. What else do I need to be aware of other than this may take a long time to complete?
3. Does this option make sense, or should I just use my money on a totally new rental property and utilize our ability to live elsewhere in the short term?
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Questions for 3rd scenario (foreclosure)
1. If my wife's credit goes in the tank for a foreclosure, does it affect mine now that we are married? Obviously I wish we could avoid this, but from a financial perspective, if I know I can use my great credit going forward and will be handling all financial items, do I care about using my savings to dig out of this hole, or just go forward with much easier loans, which I can get approved for with much less hassle.