Q: My daughter is getting a divorce. She is supposed to get the house but she doesn’t earn enough to make the mortgageA Mortgage is a document granting a lien on a home in exchange for financing granted by a lender. The mortgage is the means by which the lender secures the loan and has the ability to foreclose on the home. payments.
The house has been on the market for the last two months for less than 50 percent of what she owes. She’s hoping to do a short sale.
According to her real estateReal Estate is land and anything permanently attached to it, such as buildings and improvements. agentAn Agent is an individual who acts on behalf of a consumer. A real estate agent represents a buyer or a seller in the purchase or sale of a home. Licensed by the state, a real estate agent must work for a broker or a brokerage firm. An insurance agent helps a consumer purchase an insurance policy. Insurance agents are also licensed by the state.A Real Estate Agent is an individual licensed by the state, who acts on behalf of the seller or buyer. For his or her services, the agent receives a commission, which is usually expressed as a percentage of the sales price of a home and is split with his or her real estate firm. A real estate agent must either be a real estate broker or work for one., she will not have to pay the bank the difference. I’m looking at buying her house (I live in another state) and renting it back to her with the idea that I’ll eventually sell it to her.
She owes about $275,000 and the house is on the market for $125,000. The mortgage company won’t talk restructuring and she has looked at bankruptcy. She has no other debts. Her credit cards are paid up, and she owns her car free and clear, etc. She doesn’t want to hurt her credit, but what steps do you suggest she take?
A: My first question is why should your daughter have to deal with “getting the house”? Is she getting a significant amount of assets from her soon-to-be-ex? Why shouldn’t he have to deal with the sale if the home is that far underwater?
As for you buying it, I wonder if the bank will even permit that. Typically, lenders don’t let close relatives purchase property in a short sale because it could easily be a scam.
You’d probably be better off finding another house to buy for her and allowing her to rent it from you after she declares bankruptcy, if that’s the direction in which she’s headed.
She shouldn’t worry about her credit at the moment. The moment she does a short sale or deed-in-lieu of foreclosureForeclosure is the legal action taken to extinguish a home owner's right and interestInterest is money charged for the use of borrowed funds. Usually expressed as an interest rate, it is the percentage of the total loan charged annually for the use of the funds. in a property, so that the property can be sold in a foreclosure sale to satisfy a debt., her credit history will take a big hit and her credit score could go down by as much as 100 to 150 points.
Speaking of credit, while a short sale might have the least (though still significant) impact on her credit, she might be better off simply doing a foreclosure or a deed-in-lieu of foreclosure, moving out of the home and on with her life.
You’ll want to hire a real estate attorneyA Real Estate Attorney is an attorney who specializes in the purchase and sale of real estate. who can help your daughter with the paperwork and make sure that the “missing money” disappears from her life forever, instead of having the bank sell it to a collections company and come after her for the next 20 years.
If her house is selling for $125,000 or less, you should be able to buy another foreclosure or short sale in the area for a similar amount of money. You and she should find a new property, cut the ties to this house and help her move on. That’s the best way for her to rebuild her life, and her finances.