Help with Short sale

[Anbrifer]

Below if my original post and I was adviced to come to this forum with my questions. I really need some hlep/advice on my situation.
Hello everyone:
I am new to the forum and this is my first post. I am looking for advice/help that you can provide on my situation, well here is my story. I bought a house in Corona CA in 2005 with 20% down and a fixed 30 yr loan at 5.75% I am sure that I bought something that I was able to afford an I put my savings into the down payment in 2006 right at the beginning of the housing slowdown I was relocated to Texas I tried to sell my house in Corona but as you may imagine none was willing to buy it so I decided to put it for rent. I had been renting the house since September 2006, albeit the rent does not cover all the expenses associated with the house I had been covering for taxes, insurance, HOA and 10% of the mortgage (rent pays for 90%) for the last 2.5 years and I was holding my ground on keeping the house. Unfortunately my tenants got hit by this economy and left the house at the end of the year, so I thought that I can continue with the payments until a get a new tenant but so far I haven’t get anyone to rent it aside of this the house is now worth $40K less that what I own this equates to $170 less than the price I paid for it. I can only keep paying for it for this month and after it I don’t want to keep putting good money into something that may never get any of my money back besides I can not keep paying for the house. Is any of you on a situation like this? can you give me your thoughts/advice on what can I do if I decide to let the house go and its consecunces? If I decide to keep the house (and pray that in 2-3 yrs everything will start going back to normal) will the bank (countrywide loans) be willing to play ball with me until I get tenants on the house? Does the anti-deficiency law covers me partially since I used this house a primary residence for 17 months of the last 3.5 years?
I appreciate any advice you can give me.
Thanks
Anbrifer

[The Professor]

Application of California's anti-deficiency law (CCP Section 580b) depends upon the facts as they exist at the time you purchased the home, not what happens later. Since you occupied the home in conjunction with the original purchase, and the loan in question was created at the time of the purchase, seems to me it is "non-recourse." Bottom line is you lose your 20% investment, but your loss other than hurting your credit rating stops there.

I hope you didn't buy in Texas. They don't have anything like CCP Section 580b.

As always I recommend you contact a lawyer here in California (or licensed in California) to review your purchase and loan documentation to provide an opinion on application of CCP Section 580b to your situation.

Take care,

Daniel

[Anbrifer]

Thanks Daniel:
Why would you hope that I did not buy in Texas? Yes I bought a home in texas back in 2006 after I moved from CA, I am doing very well with my house here and I had been dealing with the home in CA until last month that I lost the tenant. What I am trying to do is to cut my losses and get the house in CA out of the way specailly now that I don't have renters. Does having a home in TX affect the way the CA anti deficiency law works or applies? What would happend if I get a debt cancellation about 40K?

Thanks, Anbrifer

[The Professor]

No it won't. The point I was making is Texas does not have anti-deficiency legislation like California does. And it has one of the shortest foreclosure periods (if not the shortest). Twenty-one (21) days on non-residential. Fifty-one (51) days on residential.

Daniel

[Anbrifer]

Daniel,
Thanks a lot! for your responses. I am going to take advantage of your knowledge on this field to ask for your advice/guidance, as explained in my original post here is my situation. I bought the house in Corona back in March 2005 and I did things the right way 20% down, 30yr fix with income enough to pay everything related to the mortgage, taxes, etc. I was relocated due to job changes to TX in 2006 and rented the house in CA, soon after I move to TX I bought a house here again with 20% down and a 15 yr fix. Since August 2006 I had been with a negative cash flow with the house in CA of around $800.00 per month after taxes, insurance, hoa, PM fees, etc. Now that I lost my tenant I just want to cut my losses plus it has been a psychological nightmare to deal with the house besides the 800 dls that I am putting out of my pocket every month. Thanks god I have a good job, I leave well within my means and had manage to save some money for a rainy day, I don’t have car payments and only own 3k to 4k on credit cards that I am paying at 0% interest over a period of several yrs, my fico is around 790, I have 2 kids and just want to do what is best for my family so I rather put the 800 dls that I am dumping every month on a house that keeps losing value into their college fund. I did a budget and with out a tenant I am in the hole b around 850 dls per month. I am considering a short sale, I am not sure if I will be taxable with all or just portion of any debt cancellation after the short sale but I am willing to take the hit on the taxes and be able to have a normal life. Please advice; I really need help and guidance. thx Anbrifer

[The Professor]

I would encourage you to seek the advice of a tax lawyer relating specifically to the tax consequences associated with a foreclosure. You might also want to look at this thread:
Beware Of Tax Consequences On Forgiven Debt!

You appear to be treating your decision strictly from a business standpoint and I think that is wise.

Daniel