WI foreclosure deficiency laws

[JohnToolbox]

What is the name of your state? WI

Hi - I bought a house in 2004, then got diagnosed in 2006 with a nerve disorder that makes it extremely uncomfortable for me to sit. I have been trying to sell the house for over 2 years now, and no longer living in it because I can't handle sitting in a car(it's in a rural area, commute would be at least 30 min one way to work somewhere out there).

I bought it with a "2nd" mortgage, or that's what they're calling it even though it's the only lien I've ever had on the property. So the only mortgage is a home equity loan, principle balance is a little under 50k. The loan was based on the "fair market value" from the tax statement of the property, which was just raised to $70k in October 2007. I have a letter from the county assessor saying that this value is within 10% of what my house is worth if I were to sell it in this current market.

I know that deficiency judgements are legal in WI, but from what I've read the "fair market value" must be credited before any deficiency can be collected. So my question is:
1. How is the the "fair market value" determined in a foreclosure case? Is the value on the tax statement carved in stone, or can the bank have an appraiser devalue the property for their benefit?
2. Lets say I let the house go into foreclosure, the bank sells it for $40k, and then has $25k in legal fees for the foreclosure. If the fair market value is $70k, can they sue me?

I hate the house, and it's not likely that I'll be able to live that far away for a long time due to my health condition. If I ever wanted to live there again it would take a $45k surgery and 2 years of recovery before I could. I don't want to buy another house, so having a foreclosure on my credit isn't going to kill me. What I don't want is to be sued for tens of thousands of dollars.

[nextwife]

Please clarify what steps you have taken to dispose of the property, and to work with the lender to avoid FC. The WI Lender I work with will not pursue a deficiency if the buyer is cooperative and makes a good faith effort to sell/deed and reduce the lender losses and wait times. Have you also tried renting until the market turns?

[JohnToolbox]

I have tried selling is FSBO, and also listed with two different agents, the second was recommended by the credit union I have the loan with(and was horrible - he tryed to get me to sign an offer that didn't have a closing date on it). I have also posted my own ads on craigslist and a few other sites and referred potential buyers to the agents to help them try and find a buyer. The credit union has had me paying interest-only payments for the last year and is willing to let me do this until the house sells, but this is only good for them. For me, I am throwing this money in the garbage every month because the interest just keeps building on itself. I explained my position on this to them and they told me they "were here to help, not to hurt" and that they would change my payments to go towards principle only, (but forgot to mention that they were still accruing interest on the loan on a separate sheet of paper at the same time.) So I got statements every month saying that the principle balance was going down, but there was still interest accruing in the same amount that I was paying every month. I feel like they are just trying to take advantage of my situation.

I have also tried to convince them to take the deed in lieu of foreclosure but their response is that they "aren't in the real estate business."

The problem with the house being rented is that it is currently in a half finished state. I bought it in an unlivable state, and began rebuilding it. I have a ridiculous amount of time into fixing it up, but it is not finished. I lived in it while fixing it up, but I can't see anyone wanting to pay rent to live in a house with no sheetrock. The only interest I've had in it is as a tear down, so I don't see a point in wasting more money trying to fix up a house that will just be torn down. I just want out of the payments. I have taken a huge hit in income because of my health, and my wife also no longer has a steady job.

[nextwife]

Originally Posted by JohnToolbox

I have tried selling is FSBO, and also listed with two different agents, the second was recommended by the credit union I have the loan with(and was horrible - he tryed to get me to sign an offer that didn't have a closing date on it). I have also posted my own ads on craigslist and a few other sites and referred potential buyers to the agents to help them try and find a buyer. The credit union has had me paying interest-only payments for the last year and is willing to let me do this until the house sells, but this is only good for them. For me, I am throwing this money in the garbage every month because the interest just keeps building on itself. I explained my position on this to them and they told me they "were here to help, not to hurt" and that they would change my payments to go towards principle only, (but forgot to mention that they were still accruing interest on the loan on a separate sheet of paper at the same time.) So I got statements every month saying that the principle balance was going down, but there was still interest accruing in the same amount that I was paying every month. I feel like they are just trying to take advantage of my situation.

I have also tried to convince them to take the deed in lieu of foreclosure but their response is that they "aren't in the real estate business."

The problem with the house being rented is that it is currently in a half finished state. I bought it in an unlivable state, and began rebuilding it. I have a ridiculous amount of time into fixing it up, but it is not finished. I lived in it while fixing it up, but I can't see anyone wanting to pay rent to live in a house with no sheetrock. The only interest I've had in it is as a tear down, so I don't see a point in wasting more money trying to fix up a house that will just be torn down. I just want out of the payments. I have taken a huge hit in income because of my health, and my wife also no longer has a steady job.

And why is your wife not working? These are the kinds of questions the lender will look at in deciding whether to pursue a deficiency.; People being voluntarilly unemployed, for example, is not something that a lender is very happy to take a loss about.

[JohnToolbox]

She's working, she's just not making $17/hr like she was before, and not working full time. Her name also isn't on the mortgage, I bought the house before we got married. I don't know if that makes any difference or not.

So based on your response, you imply that they are able to sue for a deficiency judgement despite the tax statement's fair market value?