Shortsale or foreclosure?

[memeaka]

What is the name of your state (only U.S. law)? Illinois & California.

We bought a home in 9/06 in Illinois. My husband's company relocated us back to CA in 8/07. We have had our house on the market since 6/07 and still not sold. We have a offer for $65k less than owed on the balance of the home. All our savings has been depleted staying current on both homes we owe. New home in CA and old home, trying to sell in IL.

We are trying to decide our best next steps.
1.Do we shortsale for $65k less than owed? Then will we have ruined credit and still have to pay back?
2. Or do we foreclose- just walk away? Then what would the repercussions be?
3. Do we attempt to rent , out of state , at a loss of $700+ a month.

Would love some insight from someone with experience and knowledge!What is the name of your state (only U.S. law)?

[FlyingRon]

Originally Posted by memeaka

1.Do we shortsale for $65k less than owed? Then will we have ruined credit and still have to pay back?

Your credit gets tainted when you don't pay the mortgage. The bank has to agree to it. The short sale says they'll take what they get for the sale as payment and forgive the rest of the loan.

2. Or do we foreclose- just walk away? Then what would the repercussions be?

You don't foreclose. You stop paying. The bank then forecloses. The repercussion is that your credit is destroyed PLUS if the house doesn't sell for what is owed, they can still come after you for the deficiency.

3. Do we attempt to rent , out of state , at a loss of $700+ a month.

That is an option, you should have a CPA or some financial advisor tell you if that is going to be viable for you.

The other option not mentioned is selling for less than you owe and YOU coming up somehow with the difference (a second on the CA house, or whatever).

[memeaka]

The funny thing is we went to the bank and applied for a loan so that we could pay the shortage amount. The bank stated we owe too much owning both houses and they would not give us a loan. We had a better offer on the table then than we do now and we tried to explain the loan was to allow us to sell the house and honor our debt. To get rid of that house in IL.They didn't care. Stupid on the banks part.

When we moved back to CA we rented for a year to stay current on our home in IL. Once summer came and with two elementary age kids we decided to see what we could qualify to buy in CA. We bought a much smaller bank owned home and got ourselves settled. The house value has zero equity in it now. A 2nd or is not possible, if we would even qualify.

Our credit is 780 and we have a tried to be honorable on our debt. But feel now what? I guess at $65k less than owed that is the best case scenario.

On a shortsale is the debt always forgiven or is repayment required? And if so when loan paid off then does it come off your credit?

Is there any tax forgiveness being that it was a relocation situation?

[acmb05]

Originally Posted by memeaka

The funny thing is we went to the bank and applied for a loan so that we could pay the shortage amount. The bank stated we owe too much owning both houses and they would not give us a loan. We had a better offer on the table then than we do now and we tried to explain the loan was to allow us to sell the house and honor our debt. To get rid of that house in IL.They didn't care. Stupid on the banks part.

When we moved back to CA we rented for a year to stay current on our home in IL. Once summer came and with two elementary age kids we decided to see what we could qualify to buy in CA. We bought a much smaller bank owned home and got ourselves settled. The house value has zero equity in it now. A 2nd or is not possible, if we would even qualify.

Our credit is 780 and we have a tried to be honorable on our debt. But feel now what? I guess at $65k less than owed that is the best case scenario.

On a shortsale is the debt always forgiven or is repayment required? And if so when loan paid off then does it come off your credit?

Is there any tax forgiveness being that it was a relocation situation?

No bank is going to even accept a short sale until you are behind in your payments. Why should they? As long as you are making payments why should they accept less for the house. If you wish to try a short sale you would have to stop making payments on the house.