How to get my money out

Question

Hey i bought my house 2 yrs ago when the market was up . but now every thing is down.I bought it for 310000.00;but now I am lucky if it appraise for 200000.00. my payment is 2100.00 with out tax/ins.And i payed 10 percent down aimost 31000.00 plus closing cost.which route should i take . I feel like I am throwing my money down the drain. should I try to foreclose;and get some money

William Alston · Answer

Bi Stevens,
I think you misapprehend the use of the words that Mr Holdman used above when he said "if you have assets, the lender would come after you for the shortage."

Your description of the process is precisely what the lender would do to "come after" your assets.

Jon Holdman · Answer

Somewhat depends on the state.  But, most real estate loans, and certainly any loan anyone used to purchase their residence, is guaranteed by YOU.  Its secured by the property.  But if the property is worth less than what you owe, they can come after you and any other assets you have to satisfy the shortage.

Yes, they may have to file suit to get the judgment, at least in some states.  But if there's something worth coming after, they will.

Only a true non-recourse loan would keep you totally off the hook.  Those are hard to get, and usually require 30-35% down payments.

Bl Stevens · Answer

i don't see how they can "come after" your assets. the loan is secured by the property, and their recourse is to sell the property to recover the loss. if they sell for less than you owe, they then must persue a lawsuit for judgement of the difference plus fees. please correct me, anyone,  if i am wrong!

Jon Holdman · Answer

How will you get your down payment back?  If you stop paying, the lender will foreclose.  Since its an investment property, they're not going to be forgiving like they would for a homeowner who's lost their job and is now losing their house.

If you mean you're living in this house, why wouldn't you just stay there and keep making the payment?

If you're just unhappy because you though this was going to be a great investment and now its gone sour, well, welcome to the real world.   I'm unhappy that my stock investments have gone down, too, but at least I could sell them for what they're still worth.

Real estate with leverage is different.  You pay when you get in (down payment), you pay every month, and, in a case like this where the value is down, you have to pay to sell.

Your down payment is gone.   Unless you have no income and some real hardship, you still owe $280K or so to someone regardless of the value of the house.

Rich Weese · Answer

More info needed to discuss. Are you in a deficiency judgement state? If so, are you willing to go BK and start over? Is your income ok to make this payment and stay in the house for 10 years? What could you rent for in a comparable home? Those would be my questions to start with.

Sam Abram · Answer

HI actualy my intention was to sell the house after 2 yrs so i got interest only loan.but now the market when sour. And I have no intention of keeping the house for ever,either way i look its a loose loose situation.so i was thinking of making 1 payment skip 3,but can i do that. you have any advice I am not worried about my credit its under 600 any way.Atleast i can get my down back.

Jon Holdman · Answer

Eh?  How could your foreclose and get some money?  You could stop making your payments, and the lender would foreclose and take the house away.  That would really ding your credit, and, if you have assets, the lender would come after you for the shortage.

You could sell, but you would have to bring money to the table to make up the shortage.

You could try doing a short sale, which would get rid of the debt, but would still ding your credit.

If you were happy with the house when you paid $310K and signed up for a payment of $2100, what makes you unhappy now?  Just the fact its worth less than you owe?  All you have to do is live in it long enough and that will change.

Almost every car someone buys with a loan is underwater until the last few payments.  That doesn't feel like throwing money away. What's the difference?