If you like your home and can afford the payments, there is no reason to sell or abandon it just because it's currently worth less than the loan. Calfiornia real estate values continue to rise. Eventually, even your's is likely to catch up with the loan.
If you can't afford the payments, is the house big enough to take in a boarder at a monthly rent or AirBnB "sharers?"
In a short-sale, the lender should agree to accept 100% of the purchase price, minus commissions, closing costs and prorations, as payment in full of the loan. Make sure you get that agreement in writing. Make sure the agreement does NOT include any agreement by you to pay the unpaid portion of the loan, which is referred to as the "deficiency." In California, if the lender foreclosed, it could not recover such a deficiency. So why should it get the deficiency from you in a short-sale.
If the lender foreclosed, it would have to add the house to its pool of such homes and pay the taxes and insurance, and pay to market and sell it. If you find them a buyer, such a short sale is likely to net them more than foreclosing and selling it themselves.
If you refinanced, your tax basis might be less than the loan. Check with your tax preparer on the possible income taxes you might owe on the avoided deficiency, after a foreclosure or short sale.
After you stop making payments, it takes a mininmum of 110 days to complete a foreclosure and then a few more weeks to evict you. Most lenders seem to wait months before starting the process. Some start the process and then don't complete it for years. I ran into a woman who has lived in her home for five years without making a loan payment, and the lender is finally getting around to foreclosing.
If you appreciate this free advice, please remember to refer me to any friends or acquaintances who need a lawyer. Referrals are still our best source of new business.
Do you have a revocable living trust to protect your heirs against probate? Probate takes forever, is expensive, and is annoying. Do your family a favor. Set up a trust, and put all your property, especially any real property, into the trust. Since it is revocable, you can change it, add to it, take property out of it, or even cancel it completely, at any time. We set up such trusts, provide a pour-over will as a back-up for any property that does not make it into the trust, provide you with blank durable powers of attorney for health care and financial decisions, in case you become incapable of making such decisions while still alive, and convey one piece of real property to the trust, usually the family home, for $1500.00. If you would like to hire me to do this, let me know, and I'll send you a list of the information I need.
Dana Sack...
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