Asking on behalf of a friend...

[memama]

Our friends received a chapter 7 discharge a little over two years ago. Initially they planned on reaffirming their home, but their attorney neglected to file the paperwork, thus it was never reaffirmed and they've just done the "stay and pay" situation for the past two years. Earlier this year they relocated for work and, due to paycheck issues and time off, have been unable to pay their mortgage payment; in fact, they've only paid roughly two full mortgage payments for the entire *year* so far. They receive certified letters once per week from their mortgage company that they need to get caught up "or else"...they call and pay minimal amounts to keep the mortgage company off their back and then go about their day.

The home is currently for sale but is NOT selling. Although they have some equity in the house, they stand to only make about $5,000 at their bottom dollar price after all taxes and fees are paid. Initially they wanted to call the bank to see about cash for keys, but in my experience they will only do that after the foreclosure has taken place and since their house is vacant, their mortgage company probably won't play along with that. Regardless they need to call their bank and ask where to go from here, but they were wondering if anyone has any advice. They feel torn; obviously it's crazy to let a house go that has equity, but given the fact that they're probably at least $6000 behind on their mortgage it doesn't seem like such a bad idea to just "walk away". I suggested renting, but they absolutely refuse to rent the house out. The only other option I see is walking away since they cannot afford their mortgage, their rent in the new area, and all of their bills. Utilities on the house are still running around $400/month and their mortgage is $1200/month...it's in the unaffordable range at this point.

Their realtor is recommending a short sale to just "get the house out of their names".

[justbroke]

What is the question? If they didn't reaffirm, they just need to decide if any equity is worth fighting for. They also need to decide on HOA dues and upkeep until the home is sold (with HOA fees being dependent on if they actually have those). Certainly, a short sale would help speed up the process since it is not required for a bank to actually foreclose.

[memama]

There are no HOA's where they live (lucky dogs...), but they are still paying for all utilities (as all of them are still connected) and about $120/month for lawn maintenance. As it is, the house is costing them quite a bit of money that could probably be put to better use elsewhere.

They don't have a snowball's chance in H*ll of getting caught up with their mortgage at this point. They're in a not-great situation which is where the sale of the home would be wonderful financially, but it's just not moving. It's been listed for several months and has seen almost no interest at all. Yet other places for the same price or even more expensive are selling...

If there is equity in the house, is it likely that a mortgage company would even approve a short sale? They have about $35k in equity if the house sold at what other places are selling for. They are really pulling for a cash for keys deal, but I don't see that happening. Then again, I'm not super familiar with how that works, so...

[justbroke]

Does the equity already take into account on the arrears (missed payments, legal fees, etc)? I know you wrote that it's about $6K, but that would be just too juicy for a bank not to have foreclosed in the last year.

Additionally, to sell it quickly, it may turn into a short sale. Especially if it's eligible for a foreclosure, the foreclosure price may not be that great. As for utilities, I don't know why they are paying that much. If they are worried about summer "mold" they can certainly leave the A/C on, but it doesn't need to be on 64, 68, or even 72. They can leave it set at 78F or maybe higher if it's just to abate the development of mold. They should have turned off the hot water heater and most of the other appliances. An unoccupied home shouldn't consume $400/month in services.

Do you know why they haven't tried to just put it on the market? Again, a short sale may actually be something to pursue once a Realtor has done a CMA to see what it could be sold for. Maybe they'll get lucky and it will sell at asking or shortly lower than asking. Let a Realtor do all the work since they don't occupy the home. I don't see the problem?

[kawh]

...they are still paying for all utilities (as all of them are still connected) and about $120/month for lawn maintenance. As it is, the house is costing them quite a bit of money that could probably be put to better use elsewhere.

They don't have a snowball's chance in H*ll of getting caught up with their mortgage at this point. They're in a not-great situation which is where the sale of the home would be wonderful financially, but it's just not moving. It's been listed for several months and has seen almost no interest at all. Yet other places for the same price or even more expensive are selling...

What does the realtor say are issues? Would it do any good for them to hire someone (since they ARE paying so much in upkeep monthly) to do things like stage it? If the realtor is suggesting short sale, there must be some issues.

[memama]

JustBroke: The house has been for sale for a few months now with almost no interest-they even fired one realtor and hired another one because they thought he wasn't doing his job. They've had maybe 2 or 3 showings and have had an open house almost every weekend, with a total of ONE person coming by during those open houses. I guess the way I see it is that they have very few options, but a short sale just didn't make sense to me since they have some sort of equity in the house. I only know roughly what other houses are going for in the area, and I don't believe they've had an appraisal yet so the $35k figure was what they had told me they had in equity. The $6000 figure is how much they are behind *total*. Like I said, they get certified letters at least once per week regarding the foreclosure, so they call the bank and ask them what it would take to make them happy, they pay that amount (they've made four payments of $600, so $2400 total in the last 6 or so months, or equal to two full mortgage payments), and then the cycle repeats itself. I have no idea what is taking the mortgage company so long to make that foreclosure step, but then again I'm a total noob when it comes to that stuff...But what they are really hoping for is some sort of "cash for keys" deal, which like I said earlier I don't think they'd do because our friends are no longer in the home *and* it isn't a foreclosure yet.

KAWH: From what I was told, the realtor suggested short sale because they needed the house to sell, like, YESTERDAY They haven't been able to keep up with payments and they need to get out from under the house. Right now they owe in the 140's and the house was valued and listed at around $175k. Because of taxes and fees at closing, my friend said they really cannot accept less than $160/$165k. Because their house does have equity and because they don't want to just let it go, I think that renting would be the best bet, but it's something they refuse to do. Yet they cannot afford to sit on it any longer...

[pcn]

[QUOTE=justbroke;578204]Does the equity already take into account on the arrears (missed payments, legal fees, etc)? I know you wrote that it's about $6K, but that would be just too juicy for a bank not to have foreclosed in the last year.
QUOTE]

35k equity sounds like a good reason for the bank to foreclose. What in your experience is the rough area where equity needs to be for a bank to foreclose? 5k, 10k? Thanks.