Posted on 10/10/2011 11:27:43 AM PDT by RetiredArmy
Need assistance from the FRpeer Nation out there. I have a dear friend whose son has lost his job and will have to relocate to take a new job. This person owns a home and has a family.
The deal: the market here is in terrible condition and there is little if any hope of selling his home. He has considered walking away from the mortgage. Just pick up and tell the mortgage company what is going on and that he is simply leaving, here is the house, come and get it. Then rent on the other end.
My friend is in a condition over this. He thinks his son should just hang in there. But, the son insists on doing this. I told him that I was glad that I did not have that decision, because in this day's markets, I would be in the same boat. I would probably not be able to sell either.
So the question is, what happens if this son walks away from his mortgage? Just tells the company come and get it, I am gone. What is his legal consequences? Can the mortgage company just sell the house for what they can get for it and hold him responsible for the remainder or what?
If any of you out there can provide me information, or a place that I can pass on to my friends to assist them and their son, I would be most thankful. Thanks.
By the way, the house is in Alabama and he is moving to Florida for the job which he already has taken by the way.
If I have to choose between destroying my credit (for a time) and wiping out my mortgage debt, or adding $200,000 to $300,000 to my debt, I’ll choose the former every time. That is the choice a person that is seriously upside down in their mortgage is making.
The situation may be different for purchase-money and refinance deeds of trust. Consult an attorney; I'm not an attorney.
The son should get a Property Management Company to rent his home for him.
1) That way he can his home and sell it when the market gets better.
2) It will allow him to focus on the new job.
3) It will give him money for his home
4) It will not hurt his credit compared to walking away
Hope this helps.
A) Tell him to go to either Angie’s List or the Better Business Bureau web page to locate a good Property Management company.
What I was trying to say was that rent may not come close to covering his monthly payment. I know that with some of my friends that is the case. In my case it was a difference of around $2000 a month. That’s a lot.
Contact a local apartment management company and rent it out when he moves. While he still has good credit buy one in the new area (prices are low)
He can continue making payments from the rental income, and then with luck the market will go back up and he can have a house he owns that someone else paid for.
I did this with 14 units. It was surprisingly easy. I told everyone i know how to do it- no one else did, but they all complained that I should give them some money when I got rich.
0) Take the job and drive asap to the new location....sleep in the car ...etc...
1) move the rest of the family into one room
2) rent the other rooms
Also, second mortgages, and etc, are usually not "non recourse" loans. In other words, you can't walk away from said loans without being liable for a deficiency.
PS: I'm not a lawyer ... get a lawyer if you want to follow this path.
Companies started checking future hires’ credit back in the 80s. I worked for a company that forced me to fire a woman two weeks after I hired her. They checked her credit after the fact. I wanted to resign in protest but couldn’t afford to.
As for walking away from a mortgage, a man’s gotta’ do what a man’s gotta’ do. And I wouldn’t feel guilty about it. As far as I’m concerned somebody got paid for those mortgages with the bail out money from taxpayers. So anything they get today is profit.
If you they are going to go the rental route, they need to get a professional property manager. The rental business is not for the weak of heart. I have been a slumlord for years and I have seen novices rent their homes and get totally screwed in the deal. Damage to the property and not getting rents on time or at all. Tenants need to be heavily screened and held accountable. There are tenants that just go from place to place looking for weak landlords. Trash the place and don't pay rent. They then move on to the next place when the sheriff shows up for eviction. I don't care how clean the people look when you meet them, they will screw you.
The average professional manager gets 10%, but you make that up in the speed in which the place is rented and maintenance costs. I don't know what the requirement for PM are in AL but a chat with a local Real Estate agent can help screen to find an honest one.
Do I make a decision that affects my ability to get a job for 7-10 years (and credit, and rental properties, and anything else that requires a credit check)? Or, do I stick myself underwater for at least that long, if not longer - but have more flexibility in my finances?
That's why I'd advocate for "C" .... try and figure something out in the middle. Work out something with the bank. Rent. Make "interest only" payments until the market gets better. Or something else that I don't know about.
It's a tough situation, to be sure.
"Walk Away: The Rise and Fall of the Home-Ownership Myth" by Doug French
"This elegant and fact-filled book by Mises Institute president Doug French examines the background to the case of "strategic default," or walking away from your home, and considers its implications from a variety of different perspectives. The thesis here is that there is nothing ominous or evil about this practice. It is an extension of economic rationality."
—It’s a tough situation, to be sure.—
I’ll agree. One thing about the job front though: Many organizations, in the current climate, are not holding mortgage problems of any sort against an applicant. The exceptions would be jobs in the financial industry or security clearances since one of the reasons for the credit check is to ensure you may not be easily incented to do something nefarious to fix your debt.
—It’s a tough situation, to be sure.—
BTW, the only one that really concerns me is the job hit, because I know a LOT of people who live very happy lives and have NO credit. I don’t mean “bad” credit. I mean they pay cash for everything. It’s very freeing too, except when they try to rent a car with a debit card. ;-)
Credit is way over rated. But it’s easy for me to say since I’m in the highest bracket. But maybe that is because I use just enough to keep it there.
We had a situation like this come up last year. Guy interviewed well, was extended the position. HR dragged their feet on getting the Credit Check done, and it was really, really awful. This was on like a Wednesday, and the guy was slated to start on Monday, or something along those lines.
There was plenty of hand wringing and angst over what should be done. Finally, it was decided that we needed to go with the original plan, and move ahead with the hire.
Guy turned out to be a complete dud. Showed up when he felt like it. Had no logical reasoning ability (position was for a computer programmer, that's sort of a pre-requisite. :-) ).
The Credit Checks are done for a reason, IMHO. It may not be the be-all end-all, but it's a good start. Same with drug testing, if a person KNOWS that they're interviewing for a job, then they need to put the bong away for a bit. If they don't have the discipline to do something as benign as that, then they likely won't make for a good hire.
I hear ya. My wife owned some rental property years ago before we met. She has warned of this headache. Never again is her feelings and we have friends at church who are in the same boat renting out some house now.
Don’t want to hijack your thread, but I have a related question. What happens when the homeowner dies? Will the bank go after his heirs if the house isn’t worth the amount of mortgage?
I’d talk to an attorney who specializes in bankruptcies. Have your friend’s son explain the situation to him/her and get their advice.
Ditto that. When I bought my house recently, the guy working with my wife and I dropped his pen and gawped when he saw our scores. The meeting - which started out as a bit contentious as we were making a serious upgrade over the current house - went smooth as silk from that point forward.
There are always ways to get around things, but good credit just makes stuff so much easier.
0) Take the job and drive asap to the new location....sleep in the car ...etc...
1) move the rest of the family into one room
2) rent the other rooms
***
Even better. He’ll need warm clothes to sleep in the car.
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