What would you do?

[DownAndOutNow]

Okay, here's my story...

My sister and I inherited our mothers home when she passed away last year. It is an area of Northern California that leads the country in defaults and short sales and is predicted to be the next "ghost town". Shortly before she passed away my mother refinanced the property into a loan at 6.375%. So, now my sister and I are on title and making the mortgage payments and paying the taxes to the tune of about $1400 month total. We have had very bad luck with tenants, the most recent one we had to evict after they were 6 months behind on rent (8 months into the lease). The market value for rent in the area, for similar homes is about $800/month if we could find a tenant who will actually pay.

The bank is owed about $215K. The home will sell for about $150K. My sister and I both own our own homes so this property is treated as an "investment" property. So, what would you do? Sell it as a short sale and take the hit on our otherwise great credit records as well as face the tax consequences for the COD? It seems like the lesser of many evils. Has anyone else been in this situation? I'd love some feedback and other peoples opinions.

Thanks

Down & Out, now...

[Jillian118]

Is the loan assumable? Meaning that someone else can take it over? Is it just your mom's name on the loan now and you are just paying on it??

[DownAndOutNow]

Thanks for the response Jillian. As far as the loan being assumable I am not positive but I don't believe it is. And I don't think that my sister and I are on the loan but we are on title to the house that is securing that loan, the title part I am positive about just not whether we are on the loan.

D & O, now

[Jillian118]

I would consult with a real estate/probate attorney to tell you the truth. If your mom is the only one on the loan and you have in essence been paying it in her name after she has passed, im not sure what they can do to you if you decide to let it go, or what would happen even if you wanted to sell it later.

[SillyWorld]

Last I heard CAL is a walkaway State so you should be able to let it go and when the bank sells it you can refuse to sign over the Deed unless they pay you back for the payments you made up to date

I would get a Lawyer ASAP

[HopingtoFind]

Originally Posted by DownAndOutNow

Thanks for the response Jillian. As far as the loan being assumable I am not positive but I don't believe it is. And I don't think that my sister and I are on the loan but we are on title to the house that is securing that loan, the title part I am positive about just not whether we are on the loan.

D & O, now

This makes a huge difference.... if you and your sister is on the title but NOT on the loan, then you can simply walk away and your credit will not get effected. Credit only gets effected if you're on a loan.
You should be able to figure out if you're on a loan or not, have you signed loan documents promising to pay lender x amount of money. If you haven't done that, then you're not on the loan.