The mortgage company will sell for what they can get, then trash your credit, then eventually write off the balance. Then, the IRS will tax you on the written off amount and hound you forever on that owed tax.
It depends upon your State.
In California the initial purchase loan is a non-recourse loan, meaning that the borrower can return the house to the lender without further consequence. Now this is true only for the initial purchase loan- those who have refinanced are subject to being sued for the difference between the value of the house and the amount of the mortgage.
There’s also the looming threat of receiving a 1099 for debt cancellation. Cancelled debt, ie the mortgage you walk away from, can be considered income by the IRS. The Mortgage Forgiveness Debt Relief Act of 2007 currently protects against this but the law expires in 2012.
Walking away also affects the value of his neighbors’ properties.
Some good advice here. I would definitely talk to the bank about a short sale. I don’t know all the ends and out of doing this, but it has helped a lot of people out and the bank would rather get something than nothing.
Also renting the home may be an option, if there is someone who will be able to keep an eye on the place. Some real estate companies will help you check out renters and have a list of companies available to fix things.
I saw an article recently where the mortgage company came after the person in default. Since he is going to a new job, the bank may be more likely to come after him.
First, he needs to factually establish the likely selling price of the house (Realtor’s market analysis based on comparables)
The Realtor can also establish a market rental value for the house. If he can rent the house with an option to buy in 1-2-3 years, maybe that is a solution.
but he cannot just make an “assumption” that the house cannot be sold or rented
If market value is low, then seek bank approval for a short sale with no recourse. If the bank is uncivil, then his options are to get legal advice about deed in lieu of foreclosure, documenting that he tried to work with the bank
That is what a civil person would do, imho
First, he needs to factually establish the likely selling price of the house (Realtor’s market analysis based on comparables)
The Realtor can also establish a market rental value for the house. If he can rent the house with an option to buy in 1-2-3 years, maybe that is a solution.
but he cannot just make an “assumption” that the house cannot be sold or rented
If market value is low, then seek bank approval for a short sale with no recourse. If the bank is uncivil, then his options are to get legal advice about deed in lieu of foreclosure, documenting that he tried to work with the bank
That is what a civil person would do, imho
First, he needs to factually establish the likely selling price of the house (Realtor’s market analysis based on comparables)
The Realtor can also establish a market rental value for the house. If he can rent the house with an option to buy in 1-2-3 years, maybe that is a solution.
but he cannot just make an “assumption” that the house cannot be sold or rented
If market value is low, then seek bank approval for a short sale with no recourse. If the bank is uncivil, then his options are to get legal advice about deed in lieu of foreclosure, documenting that he tried to work with the bank
That is what a civil person would do, imho
The lender can still come after you to pay the difference between what the house sold for and what you owe, even if you walk away. Imo, the only real legal recourse is to file for bankruptcy.