Has anyone moved for work and let thier house go after several years of renting?

[scott777]

In 2006 I was laid off in Michigan and after 9 months found a job in Washington. We contacted a Realtor and were told we were better off trying to rent it out as property values had tanked and we were about $50k underwater at the time.

Fast forward to today and we have had renters but the rent does not cover the mortgage and the maintenance on the house is beginning to be unaffordable. Because of that debt we cannot afford to buy in Washington either.

My wife and I have started to kick around the idea of letting the house go back to the bank and shake the dust off our boots and move on.

House details; 2006 refi (when I was laid off to free up cash) 80/20 220k interest only 10 yr ARM
with Midland, 58k 5 yr ARM HELOC with GMAC. Appraisal at $295k. Market analysis today at $140k (3 years -$155k)

Our renter has a lease with us until June 2010 that we intend to honor and won't do anything until then.

But our worry is since the house is in Michigan (recourse state) that both the first and second could come after us for the deficiency. Has anyone had a similar experience and had the banks actually come after you for the deficiency?

Thanks

[Maurice Bedard]

It is to early to tell how these deficiency judgments play out, but for the most part, lenders have not pursued borrowers who default on their mortgages. With that said, we are only 2 years into this crisis and lenders may start suing borrowers who walk away or they might realize that the consumers have nothing left to take.

You may want to pursue a short sale. This is a negotiated agreement between you and the lender in which the lender voluntarily agrees to accept the sale price of the property as full payment of the loan. You can may be able to protected against a deficiency judgment in a short sale.

[scott777]

Thanks for the reply.

How does a short sale work when there are two mortgage companies involved? Do both have to approve the short sale?

Or do we work with Midland and if we get a deal then negotiate with GMAC on a settlement?

[weneedpeace]

Hi,

We're an active duty military family and can relate somewhat to your position.

Purchased March 2006, after being stationed in the same area over 10 years.
Transferred out of area in early 2008. Husband was deployed. Medical issues with child at the same time. Depressed real estate market already in late 2007 (concentrated military area with tons of 'for sale or rent' listings, along with short sales already coming into the inventory. Leased at a loss averaging $1,000-$1,300/month after property management fee and other house related expenses. Was advised by all professionals to lease the home, as a short sale was a shot in the dark. Late 2007 was really the first wave of military transfers, and there was very little information on what to do.

Details:
VA 6% 30 yr mortgage
No HELOC or 2nd
Purchase price: $288,000
Appraised value at the time: $295,000
Total financed with VA funding fee: $296,000

Current value:
$220,000 (approx based on all comps including traditional sales and closed short sales)
Current payoff:
$285,000

Tenant moved in early 2008 and is currently paying $1545/month. With all expenses, we're still negative $1,000-$1,300 now in 2009. We had been *making it work up until this Summer by treading water, sinking, treading water, sinking* over a year after the tenants initially moved in. Tenants are in property until Spring 2011. We're trying to hang on until then, and then go the short sale to deed in lieu route once the home is vacant. State law mandates that a short sale buyer must honor the tenant's lease. With the concentration of foreclosures currently on the market, it's not attractive for an investor and would not be an appropriate fit for a family seeking a primary residence, as they'd have to wait until Spring 2011 to take occupancy.

I've sought guidance from military legal, state real estate attorney (multiple including landlord-tenant specialities and an attorney associated with our state's association of Realtors, along with three residential Realtors that operate in our neighborhood that I personally know the reputation of. My property manager's Broker, who I've personally known for years. I've had a delegate forward a letter of concern to our lender, and also have communication with a state Senator and have consulted with several non for profits and the grassroots group through VRSAM, that is an outreach to politicians regarding the HAP (Homeowner Assistance Program) for military personnel.

We are not primarily residing in the property. We have a VA loan and do not qualify for the HAMP Freddie/Fannie programs. It's a difficult spot to be in.

I'm hoping for a loan modification to adjust our principal balance to coincide with the current market value. That should alone bring our payment down where we can keep the home... if the lender agrees. Husband is scheduled to deploy soon, and we're hoping that we can get this resolved before that occurs. Our tenants are also military, and we don't want them to be displaced. However, we also have to be able to take care of our family. And, as of April of this year, that's become increasingly harder as we've depleted reserve savings for repairs along with family needs that have been neglected for over a year and a half. (We have elementary aged children).

The frustrating aspect is that we personally know other military members who walked away after they transferred. Did not even list their homes by short sale, as they didn't want to contend with the frustration. In some ways, I do beat myself up that we went this very difficult route but husband had a platform change and was in intensive training. He also had an elevated clearance that we wanted to preserve while he was in training, in case it came up for review. Honestly, with his returning from deployment and walking into a potential surgery for our oldest, I had a lot running through my mind and did not even consider short sale as an option. In our area, it was still 'taboo' and something that people weren't speaking of. Working in real estate as a transaction coordinator, I knew that first hand that people still spoke of it as a 'bad word' so I felt we had to take the lumps and **** it up... that position changed when my husband and I began skipping meals, had the gas company show up at our 'four walls' to shut us off, and were running our only means of transportation on fumes with two children in the household.

We have to take care of our four walls at this point.

Meanwhile, I have peeked in on available rental listings. Our tenants are paying a great rate, where my property manager said they should be able to easily find something in the same area. If something can't be worked out with the lender, they can move at anytime, and we'd work something out with their rent so they'll have upfront monies for security deposit and moving expenses (plus their security deposit with us after move out which is held in escrow). It's just the best we can do under the circumstances.

Sorry that is long winded.. I haven't encountered many others who also had to transfer for work (whether military or civilian) who had homes they left behind that they're leasing..

If I were in your shoes, I would consult with a landlord-tenant attorney for your state. If you can get an end result to short sale this to an investor (maybe your area has better statistics for this than ours!) and the tenants can remain in the home, that would be wonderful!

[bodhi141]

Scott777, I would really like to have your email address. Our situations are nearly identical. I have rented out a house in Michigan for a long while now. I live in another state and the Michigan house is draining my resources. The house is occupied but I intentionally let the tenants go month to month so I can act without breaking any contractual obligations. I am debating a short sale as we speak. I applied for a loan modification but was denied on the basis that the home is not owner-occupied.