Investment property deed in lieu?

Chickamole

LoanSafe Member
Sep 27, 2013
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Hi all. Im new to this forum and desperate for some advice. I bought a home in 2008 for $475,000. Current mortgage is $330,000. Had it appraised....it's worth roughly $98,000. It's in an awful neighborhood that has only gotten worse in the last few years. I was attacked during a visit to the house, my husband had knee surgery and cant go there (because he can't run). I'm afraid of our tenants, afraid to evict them because people will break in and rip out the copper pipes. We purchased the home in March 2008 getting a WF mortgage and the house appraised. The sellers bought the house in Nov 2007 using a rehab loan, WF appraised it on February 2007 for $220k. Long and short is we should have never bought this house. We've tried to do the right thing with this house but it's become a security risk (one of our tenants was killed a month ago). We need to walk away. I called WF and thet said we could apply for a deed In lieu. My concern is we dont have a financial hardship and we have assets, minimal debt. WF has asked for a lot of financial data, I'm afraid to share. We only just stopped paying the mortgage this month. I consulted an attorney who advised me to stop paying, collect rent and let it foreclose. Our down payment was more than the house is worth but I have no interest in recouping any of it, I just don't want the house anymore, we can't keep it. What do we do? I'm afraid of wage garnishment, the attorney told me they wouldn't do that but we make good income. Any advice?
 

TomEason

LoanSafe Guide
Jun 18, 2009
12,390
85
48
SF Bay Area CA
Chickamole

Thanks for your post. Sounds like a delightful neighborhood :huh:. I agree with the lawyer's advice.

If you haven't already, I recommend you immediately stop making all payments including loan payments, property tax payments, etc., and continue to collect the rents until WF finally gets around to FCing.

I don't know your state; many states don't permit lenders to seek a deficiency judgement post FC. Even in those states where it's allowed, it's rare for lenders to sue for deficiency.
 
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eightracker

LoanSafe Member
Jun 22, 2010
142
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(one of our tenants was killed a month ago)
Hard to collect rent from a dead tenant.

I was attacked during a visit to the house, my husband had knee surgery and cant go there (because he can't run).
Where exactly is this wonderful neighborhood?

Stay away from the neighborhood, and collect the rent for as long as you can, using stalling tactics that you can read about on this board.
 

Chickamole

LoanSafe Member
Sep 27, 2013
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The property is in NJ. I just want to be done and over with the house. Any way to accelerate the process if FC is my only option?
 

TomEason

LoanSafe Guide
Jun 18, 2009
12,390
85
48
SF Bay Area CA
Chickamole

Thanks for your update.

In your state, due to court backlogs, FCs take in excess of two years, the second longest of all 50 states.

There's no way to accelerate the FC; you'll be in title for quite some time.
 

eightracker

LoanSafe Member
Jun 22, 2010
142
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18
I don't think there's any way to speed up a F/C sale, as the lender has to follow your state's requirements for that operation.

The only way to hurry up and get rid of it might be to do a deed in lieu, but you don't want that. For one thing, as you know, they'll want to snoop all over your income and assets, and for a second, I understand they will normally ask the mortgagor to sign an agreement to reimburse any loss the lender suffers in disposing of the house. For a $98,000 value, less of course sales expenses, figure 7 per cent, vs your obligation of $330,000, you certainly don't want to agree to that.

If your tenants are still paying their rent, even if it's late or in pieces, that's income you shouldn't ignore.

It sounds like your lawyer gave you very sound advice; why don't you want to follow it?
 

TomEason

LoanSafe Guide
Jun 18, 2009
12,390
85
48
SF Bay Area CA
Chickamole

Thanks for your question.

If I stated that banks won't allow a DIL on an investment property, I was mistaken.

However, a tenant occupied rental property does offer an additional challenge, and that is this. Banks require the property to be vacant prior to finalizing the DIL. So, getting the tenant out could be a spoiler.