facing foreclosure in California, where to turn for advice?

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facing foreclosure in California, where to turn for advice?

Dennis Nikolaev
Member since 2019 · 84 posts · 32 votes

it looks like a hopless situation for me.

I had all of my life savings put in Yucca Vally short term rentals In  early 2022. got 4 nice villas at 20% equity. then 2 things happened: rates went up and demand for vacation rentals in that location went WAY down. 

I was loosing 20 to 15k per month. I sold 2 of the 4 properties at a significant loss. However, 2 remaining properties I can't sell, even bellow my equity in it. For example the number 4 property is a hilltop modern beauty. amazing views, premium neighborhood.  I paid $1'025'000 for it, then upgraded it. in summer of 2022 it was appraised for $1.15 million. 

now it is listed for $799k and there are no takers.

I am facing a foreclosure on both of the remaining properties. 

I'm still current on my payments but by now all the hope is lost.

all of my life savings are gone, and now I'm about to have collectors on my back for the rest of my life.

I need an advice how to navigate through giving up on the properties.

Dennis

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Minna Reid
Real Estate Broker · Jacksonville FL & Middletown CT · Member since 2008 · 1k+ posts · 632 votes
3y

Bankruptcy is a good solution when you have massive debts, but if it's just the properties that are behind, a short sale is generally a better solution, especially if you can settle the debt through the short sale (which is the result 99% of the time). 

You also have to qualify for Chp 7, you don't just get one.

It's also a myth that property "goes back" to the lender in bk. There is no such thing. The lender still has to foreclose on the property after the bk to get title, so now you're looking at not only a bankruptcy, but a foreclosure after. If the only debt problem is the mortgages, attempting a short sale would be the easiest way out of this, with the fastest recovery time. OP should find a very experienced short sale agent locally and have a conversation.

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  • Dennis Nikolaev
    OP
    Member since 2019 · 84 posts · 32 votes
    3y

    to make it more difficult, I got my family of 6 move in with relatives in Virginia.

    feel free to question my intelligence 

    0Reply
  • John Slater
    Real Estate Coach · Riverside County, CA · Member since 2017 · 238 posts · 157 votes
    3y
    Quote from @Dennis Nikolaev:

    it looks like a hopless situation for me.

    I had all of my life savings put in Yucca Vally short term rentals In  early 2022. got 4 nice villas at 20% equity. then 2 things happened: rates went up and demand for vacation rentals in that location went WAY down. 

    I was loosing 20 to 15k per month. I sold 2 of the 4 properties at a significant loss. However, 2 remaining properties I can't sell, even bellow my equity in it. For example the number 4 property is a hilltop modern beauty. amazing views, premium neighborhood.  I paid $1'025'000 for it, then upgraded it. in summer of 2022 it was appraised for $1.15 million. 

    now it is listed for $799k and there are no takers.

    I am facing a foreclosure on both of the remaining properties. 

    I'm still current on my payments but by now all the hope is lost.

    all of my life savings are gone, and now I'm about to have collectors on my back for the rest of my life.

    I need an advice how to navigate through giving up on the properties.

    Dennis


    Hey Dennis, tough situation for sure.  I was going to say On DMonte, which is listed, aside from keep dropping price, all the way to break-even point (mortgage balance) eventually there isn't much else you can do, but I just saw its showing pending online... so did you manage to get it in escrow?  It's about stopping the bleeding more than anything else.

    On Sun Via, same thing again, it's reducing the price until it sells.  It really sucks, sorry, it's tough to sell right now with the interest rates, even tougher on the higher value properties, even with extensive marketing which I'm sure your agent is doing.  

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    3y

    @Dennis Nikolaev The only alternative I can see is to Short Sale them, if the mtg balance is higher than what you could net from a sale.

    You will need to talk the Loss Mitigation dept of your lender and hire an Experienced short agent, they will know what to do and how to handle the process.

    0Reply
  • Dennis Nikolaev
    OP
    Member since 2019 · 84 posts · 32 votes
    3y

     is it short sale agent or short sale attorney?

    what do I do with the agent I have e now?

    @Wayne Brooks 

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    3y
    Quote from @Dennis Nikolaev:

     is it short sale agent or short sale attorney?

    what do I do with the agent I have e now?

    @Wayne Brooks 

    So, are the properties listed in the mls now? Are you at the lowest price where you can pay the mtgs off? If so, and they won’t sell for that price, your agent should have advised you about a short sale.  A Lot of agents 1) don’t really know all the intricacies/procedures/rules/strategies to do a short sale and 2) don’t want to do all the extra work involved in one, for no extra fees.
    Attorneys are not great for negotiating/processing shorts sales…they often slow the process down are not needed.

    If it comes to that point, have a talk with your agent, and their broker, about switching to an agent with short sale experience.

    You would need to show a financial hardship though….as in you can Not afford to pay the negative cash flow indefinitely.

    1Reply
  • Henry ClarkPro Member
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    3y

    Run the numbers.  What numbers work for you?   Then talk with your lender.  

    Mid term why did the market swing?  How are other STRs doing in the area?  See if you can book.   What do you see in there bookings and price?  

    0Reply
  • Henry ClarkPro Member
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    3y

    Although obvious.

     Why does interest rates going up have any impact on your investment?  Would like to hear your situation.  Thanks. 

    0Reply
  • Dennis Nikolaev
    OP
    Member since 2019 · 84 posts · 32 votes
    3y

    @Wayne Brooks thank you

    @Henry Clark interest rate got me because when I sold my old portfolio it was 3% . by the time I closed I could get only 9%. and now there are fewer buyers with this rate. 

    yes, many new rentals suffer in the area.

    0Reply
  • Henry ClarkPro Member
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    3y

    What type of loan is the 9% with?  What are terms?  What type of finance company?

    0Reply
  • Account Closed
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    3y
    Quote from @Dennis Nikolaev:

     is it short sale agent or short sale attorney?

    what do I do with the agent I have e now?

    @Wayne Brooks 

    As far as lenders go; a foreclosure, short sale, bankruptcy or deed in lieu are treated the same. Someone didn't get all of their money and that concerns lenders.

    It seems you have done what can be done and now it's time to ask the question of where do you want to be in a few years when you recover.

    If you do a "strategic" bankruptcy (just a fancy way of saying starting over and doing better next time) you can be back in business debt free with bad credit and no creditors hounding you. Talk to an attorney. It's all totally survivable.

    It will take 90 to 120 days to go through the process and then you can start rebuilding.

    Banks won't lend to you in the future until you clear the deck and rebuild your credit anyway (usually through small loans at first and secured credit cards. It isn’t easy but it teaches discipline and gives you another chance.

    Don’t give up, just understand how the system works.

    1Reply
  • John Slater
    Real Estate Coach · Riverside County, CA · Member since 2017 · 238 posts · 157 votes
    3y
    Quote from @Dennis Nikolaev:

     is it short sale agent or short sale attorney?

    what do I do with the agent I have e now?

    @Wayne Brooks 

    Dennis, you need a good agent. But you aren’t in short sale world yet. If you get there then yes not every agent knows how to handle them, but again, based on the numbers I saw, your not there yet and have room to work. 

    0Reply
  • John Slater
    Real Estate Coach · Riverside County, CA · Member since 2017 · 238 posts · 157 votes
    3y
    Quote from @Account Closed:
    Quote from @Dennis Nikolaev:

     is it short sale agent or short sale attorney?

    what do I do with the agent I have e now?

    @Wayne Brooks 

    As far as lenders go; a foreclosure, short sale, bankruptcy or deed in lieu are treated the same. Someone didn't get all of their money and that concerns lenders.

    It seems you have done what can be done and now it's time to ask the question of where do you want to be in a few years when you recover.

    If you do a "strategic" bankruptcy (just a fancy way of saying starting over and doing better next time) you can be back in business debt free with bad credit and no creditors hounding you. Talk to an attorney. It's all totally survivable.

    It will take 90 to 120 days to go through the process and then you can start rebuilding.

    Banks won't lend to you in the future until you clear the deck and rebuild your credit anyway (usually through small loans at first and secured credit cards. It isn’t easy but it teaches discipline and gives you another chance.

    Don’t give up, just understand how the system works.

    @Account Closed
    You’d suggest bk instead of short sale?  (If he needed to short) curious why? 

    0Reply
  • Account Closed
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    3y
    Quote from @John Slater:
    Quote from @Account Closed:
    Quote from @Dennis Nikolaev:

     is it short sale agent or short sale attorney?

    what do I do with the agent I have e now?

    @Wayne Brooks 

    @Account Closed
    You’d suggest bk instead of short sale?  (If he needed to short) curious why? 

    For a couple of reasons.

    You can't get blood out of a turnip.

    He states: "I am facing a foreclosure on both of the remaining properties. All of my life savings are gone."

    He has no money. If he is successful on one short sale, there is no guarantee on the second. He has other creditors who are going to start going after him. He hasn't stated, so we don't know if any of the loans were recourse. That would be very bad. Obviously he has tried the best thing and that is to sell. That isn't working. From an asset preservation point of view he stops making payments immediately. Bankruptcy saves the lenders from losing even more money during a prolonged foreclosure. It puts the inventory back into the marketplace much faster. Few know this, but you can still negotiate with the bank in bankruptcy and some people end up keeping their property. All collection harassment stops by law giving him relief. 

    If he doesn’t file for bankruptcy and holds on for a little while longer while getting the 1st short sale and then is forced into bankruptcy anyway, it is conceivable the trustee will seek a "claw back" on preferential payments complicating both his and his previous lender's life. And so on.

    A single short sale (in this particular scenario) simply puts a band-aid on a severed foot. We want him healthy and whole and productive. As long as he is in this situation he can’t possible get to that point again.

    But, I may have missed something. ;-)

    3Reply
  • John Slater
    Real Estate Coach · Riverside County, CA · Member since 2017 · 238 posts · 157 votes
    3y
    Quote from @Account Closed:
    Quote from @John Slater:
    Quote from @Account Closed:
    Quote from @Dennis Nikolaev:

     is it short sale agent or short sale attorney?

    what do I do with the agent I have e now?

    @Wayne Brooks 

    @Account Closed
    You’d suggest bk instead of short sale?  (If he needed to short) curious why? 

    For a couple of reasons.

    You can't get blood out of a turnip.

    He states: "I am facing a foreclosure on both of the remaining properties. All of my life savings are gone."

    He has no money. If he is successful on one short sale, there is no guarantee on the second. He has other creditors who are going to start going after him. He hasn't stated, so we don't know if any of the loans were recourse. That would be very bad. Obviously he has tried the best thing and that is to sell. That isn't working. From an asset preservation point of view he stops making payments immediately. Bankruptcy saves the lenders from losing even more money during a prolonged foreclosure. It puts the inventory back into the marketplace much faster. Few know this, but you can still negotiate with the bank in bankruptcy and some people end up keeping their property. All collection harassment stops by law giving him relief. 

    If he doesn’t file for bankruptcy and holds on for a little while longer while getting the 1st short sale and then is forced into bankruptcy anyway, it is conceivable the trustee will seek a "claw back" on preferential payments complicating both his and his previous lender's life. And so on.

    A single short sale (in this particular scenario) simply puts a band-aid on a severed foot. We want him healthy and whole and productive. As long as he is in this situation he can’t possible get to that point again.

    But, I may have missed something. ;-)

    @Account Closed I just shot a bk attorney friend the hypothetical scenario.  They are investments properties so lender could go after any deficiency.  

    0Reply
  • Account Closed
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    3y
    Quote from @John Slater:
    Quote from @Account Closed:
    Quote from @John Slater:
    Quote from @Account Closed:
    Quote from @Dennis Nikolaev:

     is it short sale agent or short sale attorney?

    what do I do with the agent I have e now?

    @Wayne Brooks 

    @Account Closed
    You’d suggest bk instead of short sale?  (If he needed to short) curious why? 

    For a couple of reasons.

    You can't get blood out of a turnip.

    He states: "I am facing a foreclosure on both of the remaining properties. All of my life savings are gone."

    He has no money. If he is successful on one short sale, there is no guarantee on the second. He has other creditors who are going to start going after him. He hasn't stated, so we don't know if any of the loans were recourse. That would be very bad. Obviously he has tried the best thing and that is to sell. That isn't working. From an asset preservation point of view he stops making payments immediately. Bankruptcy saves the lenders from losing even more money during a prolonged foreclosure. It puts the inventory back into the marketplace much faster. Few know this, but you can still negotiate with the bank in bankruptcy and some people end up keeping their property. All collection harassment stops by law giving him relief. 

    If he doesn’t file for bankruptcy and holds on for a little while longer while getting the 1st short sale and then is forced into bankruptcy anyway, it is conceivable the trustee will seek a "claw back" on preferential payments complicating both his and his previous lender's life. And so on.

    A single short sale (in this particular scenario) simply puts a band-aid on a severed foot. We want him healthy and whole and productive. As long as he is in this situation he can’t possible get to that point again.

    But, I may have missed something. ;-)

    @Account Closed I just shot a bk attorney friend the hypothetical scenario.  They are investments properties so lender could go after any deficiency.  

    That was the sense I got, too.
    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y
    Quote from @Dennis Nikolaev:

    it looks like a hopless situation for me.

    I had all of my life savings put in Yucca Vally short term rentals In  early 2022. got 4 nice villas at 20% equity. then 2 things happened: rates went up and demand for vacation rentals in that location went WAY down. 

    I was loosing 20 to 15k per month. I sold 2 of the 4 properties at a significant loss. However, 2 remaining properties I can't sell, even bellow my equity in it. For example the number 4 property is a hilltop modern beauty. amazing views, premium neighborhood.  I paid $1'025'000 for it, then upgraded it. in summer of 2022 it was appraised for $1.15 million. 

    now it is listed for $799k and there are no takers.

    I am facing a foreclosure on both of the remaining properties. 

    I'm still current on my payments but by now all the hope is lost.

    all of my life savings are gone, and now I'm about to have collectors on my back for the rest of my life.

    I need an advice how to navigate through giving up on the properties.

    Dennis


     Dennis

    Sorry you have to go through this, have you considered filing Ch 7 BK, that way the collectors cannot continue to come after you? As part of the Ch 7 you can note you wish to relinquish the properties and they go back to the bank

    That is not an easy decision but it is what would get you back on your feet the fastest.

    7e investments53 Reviews
    WebsiteView Page
    0Reply
  • Minna Reid
    Real Estate Broker · Jacksonville FL & Middletown CT · Member since 2008 · 1k+ posts · 632 votes
    3y

    Bankruptcy is a good solution when you have massive debts, but if it's just the properties that are behind, a short sale is generally a better solution, especially if you can settle the debt through the short sale (which is the result 99% of the time). 

    You also have to qualify for Chp 7, you don't just get one.

    It's also a myth that property "goes back" to the lender in bk. There is no such thing. The lender still has to foreclose on the property after the bk to get title, so now you're looking at not only a bankruptcy, but a foreclosure after. If the only debt problem is the mortgages, attempting a short sale would be the easiest way out of this, with the fastest recovery time. OP should find a very experienced short sale agent locally and have a conversation.

    3Reply
  • Dennis Nikolaev
    Member since 2021 · 15 posts · 4 votes
    3y

    Thank you all. It gives me an all-around perspective. I still have a little bit left from the proceeds from the sale of 2 out of 4 homes. If I file the bankruptcy I understand all the assets I have must be liquidated. So, a Short Sale sounds like the best option. 

    What is the best way to find a short sale specialist?

    Dennis

    0Reply
  • Rob Jacobs
    Real Estate Coach · USA · Member since 2022 · 43 posts · 12 votes
    3y
    0Reply
  • Claude Diamond
    Professional · Rancho Santa Fe, CA · Member since 2015 · 44 posts · 39 votes
    3y

    Hi Dennis, I can only imagine what stress you are going thru right now. No promises but if you want brainstorm a few ideas for 15 minutes maybe there are a few solutions we can come up with.  I have a law degree and 32 years of business experience. Best to you-Claude. P.S. I am free today at 2pm PDT. 

    2Reply
  • John Slater
    Real Estate Coach · Riverside County, CA · Member since 2017 · 238 posts · 157 votes
    3y
    Quote from @Account Closed:
    Quote from @John Slater:
    Quote from @Account Closed:
    Quote from @John Slater:
    Quote from @Account Closed:
    Quote from @Dennis Nikolaev:

     is it short sale agent or short sale attorney?

    what do I do with the agent I have e now?

    @Wayne Brooks 

    @Account Closed
    You’d suggest bk instead of short sale?  (If he needed to short) curious why? 

    For a couple of reasons.

    You can't get blood out of a turnip.

    He states: "I am facing a foreclosure on both of the remaining properties. All of my life savings are gone."

    He has no money. If he is successful on one short sale, there is no guarantee on the second. He has other creditors who are going to start going after him. He hasn't stated, so we don't know if any of the loans were recourse. That would be very bad. Obviously he has tried the best thing and that is to sell. That isn't working. From an asset preservation point of view he stops making payments immediately. Bankruptcy saves the lenders from losing even more money during a prolonged foreclosure. It puts the inventory back into the marketplace much faster. Few know this, but you can still negotiate with the bank in bankruptcy and some people end up keeping their property. All collection harassment stops by law giving him relief. 

    If he doesn’t file for bankruptcy and holds on for a little while longer while getting the 1st short sale and then is forced into bankruptcy anyway, it is conceivable the trustee will seek a "claw back" on preferential payments complicating both his and his previous lender's life. And so on.

    A single short sale (in this particular scenario) simply puts a band-aid on a severed foot. We want him healthy and whole and productive. As long as he is in this situation he can’t possible get to that point again.

    But, I may have missed something. ;-)

    @Account Closed I just shot a bk attorney friend the hypothetical scenario.  They are investments properties so lender could go after any deficiency.  

    That was the sense I got, too.

    Chatted with a bk attorney just now to get clarification.  First option would be to short-sale if that is what is required.  Short-sale being the better of the "lose" the property scenarios.  Deed in lieu, foreclosure being both worse on the credit than a short-sale.  Because they are investment properties, the lender could issue a deficiency judgement.  Cali is a non-recourse state, part of the short-sale negotiation could include the lender not pursuing the deficiency, however if the lender was to pursue it, then filing bk7 would be an option to be absolved from the debt.  Filing BK first, including the properties in the bk absolves from the debt yes, but then the lender would have to issue foreclosure notice as @Minna Reid already said.  Now you'd be looking at a bk and one, or two foreclosures on your credit.  Deed in lieu would deed the properties to the lenders, but its still a foreclosure.

    0Reply
  • Account Closed
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    3y
    Quote from @John Slater:
    Quote from @Account Closed:
    Quote from @John Slater:
    Quote from @Account Closed:
    Quote from @John Slater:
    Quote from @Account Closed:
    Quote from @Dennis Nikolaev:

     is it short sale agent or short sale attorney?

    what do I do with the agent I have e now?

    @Wayne Brooks 

    @Account Closed
    You’d suggest bk instead of short sale?  (If he needed to short) curious why? 

    For a couple of reasons.

    You can't get blood out of a turnip.

    He states: "I am facing a foreclosure on both of the remaining properties. All of my life savings are gone."

    He has no money. If he is successful on one short sale, there is no guarantee on the second. He has other creditors who are going to start going after him. He hasn't stated, so we don't know if any of the loans were recourse. That would be very bad. Obviously he has tried the best thing and that is to sell. That isn't working. From an asset preservation point of view he stops making payments immediately. Bankruptcy saves the lenders from losing even more money during a prolonged foreclosure. It puts the inventory back into the marketplace much faster. Few know this, but you can still negotiate with the bank in bankruptcy and some people end up keeping their property. All collection harassment stops by law giving him relief. 

    If he doesn’t file for bankruptcy and holds on for a little while longer while getting the 1st short sale and then is forced into bankruptcy anyway, it is conceivable the trustee will seek a "claw back" on preferential payments complicating both his and his previous lender's life. And so on.

    A single short sale (in this particular scenario) simply puts a band-aid on a severed foot. We want him healthy and whole and productive. As long as he is in this situation he can’t possible get to that point again.

    But, I may have missed something. ;-)

    @Account Closed I just shot a bk attorney friend the hypothetical scenario.  They are investments properties so lender could go after any deficiency.  

    That was the sense I got, too.

    Chatted with a bk attorney just now to get clarification.  First option would be to short-sale if that is what is required.  Short-sale being the better of the "lose" the property scenarios.  Deed in lieu, foreclosure being both worse on the credit than a short-sale.  Because they are investment properties, the lender could issue a deficiency judgement.  Cali is a non-recourse state, part of the short-sale negotiation could include the lender not pursuing the deficiency, however if the lender was to pursue it, then filing bk7 would be an option to be absolved from the debt.  Filing BK first, including the properties in the bk absolves from the debt yes, but then the lender would have to issue foreclosure notice as @Minna Reid already said.  Now you'd be looking at a bk and one, or two foreclosures on your credit.  Deed in lieu would deed the properties to the lenders, but its still a foreclosure.

    You are forgetting the rest of his problems. He has other creditors. 
    One can borrow money again two years after filing chapter 7. Sometimes even sooner. 
    However, if one of his creditors files a collection or judgment, he has to either pay those off and wait a couple o fyears or he has to wait until they drop off the credit report in seven years.
    A short sale doesn't address his problems.
    0Reply
  • Timothy W.
    Attorney · Raleigh, NC · Member since 2008 · 4k+ posts · 1k+ votes
    3y
    Quote from @Dennis Nikolaev:

    it looks like a hopless situation for me.

    I had all of my life savings put in Yucca Vally short term rentals In  early 2022. got 4 nice villas at 20% equity. then 2 things happened: rates went up and demand for vacation rentals in that location went WAY down. 

    I was loosing 20 to 15k per month. I sold 2 of the 4 properties at a significant loss. However, 2 remaining properties I can't sell, even bellow my equity in it. For example the number 4 property is a hilltop modern beauty. amazing views, premium neighborhood.  I paid $1'025'000 for it, then upgraded it. in summer of 2022 it was appraised for $1.15 million. 

    now it is listed for $799k and there are no takers.

    I am facing a foreclosure on both of the remaining properties. 

    I'm still current on my payments but by now all the hope is lost.

    all of my life savings are gone, and now I'm about to have collectors on my back for the rest of my life.

    I need an advice how to navigate through giving up on the properties.

    Dennis

     Foreclosure isn't hopeless.  It's a reset.  It might be wise to get an attorney now while you can take in some rental money to pay him/her to guide you through your options.   There's all kinds of legal advice in here from nonlawyers but none of it matters if you need to initiate legal proceedings.

    0Reply
  • Justin R.Pro Member
    Rental Property Investor · San Anselmo · Member since 2015 · 659 posts · 599 votes
    3y

    @Dennis Nikolaev sorry to hear.

    Just an idea.

    1. Get long term renters in there so you at least get some revenue and stability.

    2. Try like hell for a loan modification, or a refinance with an interest only loan. If you can break even and let time happen you will be okay.

    I think if you can get by for another 2 years things will get better. I don’t suggest you using up all your remaining personal emergency money for this though.

    0Reply
  • Kevin Maher
    Member since 2021 · 23 posts · 4 votes
    3y

    Seen others just quit making payment and collect the rent money until bank forecloses.  Might be 2 years before that happens.  Seen some go 5 years last time. Stash the cash you will need it.  

    0Reply
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