Need Advice: (800+ credit score) I may need to give my property back to the bank

[Jorge Borges]

I don't want to ruin my credit, but I may be out of options. I hope that members of the BP community can guide me through the bank foreclosure process or help come up with other ideas to save this property.

Background Summary:

I purchased a condo in Lynn (on the water) in October 2022. My first renters moved in after closing, and I rented the unit to them for 4 months. At the end of their mid-term lease, they vacated my unit.

On February 4, 2023, a call was received regarding the fire alarm, and the Lynn Fire Department responded to the building. The issue, as determined by the Lynn FD, was a broken sprinkler line due to a window left open in a unit on the 6th floor. This resulted in a large amount of water leaking into the units below on the 5th floor and making its way down to the basement. As a result, my unit was found to be completely water-damaged, and then a few weeks later was gutted (to the studs) by one of the clean-up contractors the association hired. A claim was made against the building's master insurance since the damages were so extensive - this water leak impacted 21 out of the 88 units in the building.

Fast forward a few years... On July 3rd, 2025, the courts finally compelled the insurance company to settle. However, the settlement amount will only cover a small percentage of the cost to rebuild my unit. I did have an HO6 insurance policy for my unit, but I don't believe the coverage I had will be sufficient to rebuild it.

Given that I have been paying the mortgage, condo fees and insurance or the past 2+ years (since the water damage) without my unit being habitable, and now understanding that the insurance funds will NOT be enough to rebuild my unit, I am contemplating other options such as giving the property back to the bank or filing for bankruptcy. I don't fully understand my options, so I wanted to speak with an attorney or members of the BP community to clarify them and help me make a decision about the condo unit.

In the next 60-90 days, the association will undoubtedly raise condo dues (several hundred dollars) to address other significant updates that the building needs as a whole (such as a new elevator and new electricity throughout the building).

I'm very responsible with my finances and have always maintained an excellent credit score. Therefore, this decision to potentially damage my credit (by returning the property to the bank or declaring bankruptcy) is extremely difficult, but I fear it may be my only option.

Financials:

- Unit is about 470 square feet and is gutted to the studs

- About $150K due on the loan (monthly payment $957)

- Mid-term rent is $2,200 to $2,400 per month

- Rehab cost is between $70K-$100K

- Monthly Condo Fees: $506 (likely to go up $100-$300 in the next few years)

- ARV is about $260K-$280K

[Dan H.]

Quote from @Jorge Borges:

I don't want to ruin my credit, but I may be out of options. I hope that members of the BP community can guide me through the bank foreclosure process or help come up with other ideas to save this property.

Background Summary:

I purchased a condo in Lynn (on the water) in October 2022. My first renters moved in after closing, and I rented the unit to them for 4 months. At the end of their mid-term lease, they vacated my unit.

On February 4, 2023, a call was received regarding the fire alarm, and the Lynn Fire Department responded to the building. The issue, as determined by the Lynn FD, was a broken sprinkler line due to a window left open in a unit on the 6th floor. This resulted in a large amount of water leaking into the units below on the 5th floor and making its way down to the basement. As a result, my unit was found to be completely water-damaged, and then a few weeks later was gutted (to the studs) by one of the clean-up contractors the association hired. A claim was made against the building's master insurance since the damages were so extensive - this water leak impacted 21 out of the 88 units in the building.

Fast forward a few years... On July 3rd, 2025, the courts finally compelled the insurance company to settle. However, the settlement amount will only cover a small percentage of the cost to rebuild my unit. I did have an HO6 insurance policy for my unit, but I don't believe the coverage I had will be sufficient to rebuild it.

Given that I have been paying the mortgage, condo fees and insurance or the past 2+ years (since the water damage) without my unit being habitable, and now understanding that the insurance funds will NOT be enough to rebuild my unit, I am contemplating other options such as giving the property back to the bank or filing for bankruptcy. I don't fully understand my options, so I wanted to speak with an attorney or members of the BP community to clarify them and help me make a decision about the condo unit.

In the next 60-90 days, the association will undoubtedly raise condo dues (several hundred dollars) to address other significant updates that the building needs as a whole (such as a new elevator and new electricity throughout the building).

I'm very responsible with my finances and have always maintained an excellent credit score. Therefore, this decision to potentially damage my credit (by returning the property to the bank or declaring bankruptcy) is extremely difficult, but I fear it may be my only option.

Financials:

- Unit is about 470 square feet and is gutted to the studs

- About $150K due on the loan (monthly payment $957)

- Mid-term rent is $2,200 to $2,400 per month

- Rehab cost is between $70K-$100K

- Monthly Condo Fees: $506 (likely to go up $100-$300 in the next few years)

- ARV is about $260K-$280K

 How did you determine the rehab cost?  It seems very high for 470’ of interior only.   It is about 2 times what I would expect (I expect $35k to $50k). 

You do not indicate what you are expecting to get from the HOA settlement with the insurance.

$150k (owed) + $100k (rehab cost that seems very high for 470' interior only) minus the HOA settlement is less than $260k. This tells me that is you paid for a fee based mls listing you could likely sell for more than $150k.

I recently placed an offer on a down to the studs condo rehab of $352,500 (our only contingency was HOA, we waived inspection and financing contingencies) that had an ARV of ~$570k. I was told that 4 higher offers were received. With preferential financing terms, after the rehab, holding, and selling costs we were projecting a profit of $30k to $35k. The offers greater than mine I question their cost of money (mine was preferential at 5% for $250k - only those not needing a loan were beating this) and their underwriting. It seems very thin margin.

My point is between your equity position and the insurance settlement, I do not see the need to suffer a fore closure.  

Good luck