Cheat Sheet Q&A
Today’s topic: Trapped with an underwater property
I am unemployed right now and I cannot make the payments (on a piece of land I own). I have a loan on the property that I still owe about $20,000 on and the realtors in the area are telling me that the lots are only selling at a very low price - $4500, when they do sell. I thought I was doing a good thing when I purchased the property, thinking it was a good investment, and now it has be on the verge of ruining my financial life. The bank will do a deed in lieu, but will hold me responsible for the deficiency. I don't know whether to do that or go through a foreclosure. This is my only debt and I have historically had good credit.
Do you have any advice or do you have a contact that can guide me through this? I would also appreciate your prayers.
Bottom Line: First and foremost I do think you should consult a legal professional to review your specific legal options and so you fully understand the implications of your decision. I have two I will recommend offline (btw, you should never have to pay an upfront fee to for an initial consultation). That being said I’ll breakdown what the possible outcomes maybe and what I’d likely do in your situation.
1st option: Sign the Deed in Lieu:
So the bank will take your property back but will seek a deficiency judgment against you. So you no longer have the property but instead have a judgment for approximately $15,500 against you that will have to be paid back within 3-5 years of time. Once the judgment is made is then becomes unsecured debt. We’ll come back to that topic in a moment.
2nd option: Letting the property go through to foreclosure:
So you let this play out through the court ordered repossession of the property. The bank would then have the ability to seek a deficiency judgment against you for the difference of what the property sells for in a foreclosure auction. There is a chance they wouldn’t but since they already indicated that they would hold you to the deficiency for a deed in lieu I’d say they’d likely pursue it in the foreclosure process as well. Here’s the other consideration… The bank has up to 5 years to come after you for the deficiency after a foreclosure.
The long term impact of a deed in lieu is significantly better than a foreclosure. A deed in lieu will create a negative credit event that would most likely significantly impair your credit for approximately 2 years. Eventually you’d be able to put it in the rear view mirror credit wise if you otherwise were on track. Conversely a foreclosure is significantly worse. Foreclosures will cause credit impairment for up to 8 years and permanently remains on your credit report even after it is no longer impacting your score. Since employment is a serious consideration at this point as well; a foreclosure can also impair your ability to obtain employment with certain companies and with many financial companies.
So what should you do?
First and foremost seek a legal opinion and understand all of the implications. Were it me I’d seek the deed in lieu. I mentioned that the deficiency becomes unsecured debt at that point. That matters because in a worst case scenario the debt could be discharged via bankruptcy if needed.
God bless and best wishes on the best outcome to a very difficult situation.
If you have a topic or question you’d like me to address email me: email@example.com
Before you book airfare… Another airline company is charging for carry ons:
Bottom Line: If you fly even occasionally you’ve likely become aware of the need to identify the bag fee policy for the airline you’re flying so you can factor the baggage fee cost into the total cost of flying. The one type of baggage that you don’t likely think twice about, unless you fly Spirit Airlines, is the carry on. Virtually every airline, save the a la carte Spirit, will allow at least one carry on per person. Until now.
Frontier airlines has just changed its carry on policy. Going forward Frontier will charge $20-$50 per carry on based on its size. With this potentially adding $100 per person round trip to your trip, you’ll want to account for that additional expense when pricing airfare. It’s a frustrating experience to arrive at the airport only to realize that the cost of flying will be hundreds of dollars more than what you had anticipated.
2 of the best cities for home flipping ROI are in Florida:
Bottom Line: I’m not advocating home flipping by any means. Home flipping is a lot like day trading in the stock market. Some people are very good at it and make a lot of money but 90% of day traders lose money. I don’t know what the breakout is with home flippers but we all know people who were financially devastated several years ago when the housing market turned who were in the home flipping business.
For the purpose of defining this story, a flipped home is a property that is resold within six months of its purchase. So on to the top 5 cities for flipping ROI courtesy of 24/7 WallSt:
- Palm CoastFlorida: 57% avg. return
- OmahaNebraska: 59% avg. return
- Daytona Beach: 68% avg. return
- Pittsburgh, Pennsylvania: 89% avg. return
- Reading, Pennsylvania: 131% avg. return
If you don't vote a straight party line, do you find yourself voting for Congress based on the President (and your feelings regarding the President):
Bottom Line: Voting for members of Congress for the purpose of providing balance to Presidential power certainly isn’t a new concept. As a country we’ve spent far more time with a Congress that is balanced in power relative to the party of the President; than we have with one party in complete control of the Federal Government. That being said the number of likely voters who do intend to vote for members of Congress this year based on their opinion of the President is nearly 50%.
According to the PewResearchCenter 46% of likely voters will consider their view of the President as a significant factor in who they vote for in Congressional races this fall. Given the low approval ratings of the President this would suggest that unless his approval significantly changes we could be seeing red come November.
What our Federal Government has done in the last year:
Bottom Line: Speaking of the Federal Government… The current Congress has a nickname right? The do nothing Congress. Now I’m actually of the mindset that more often than not I’d rather they did nothing than pass more laws (or to pass laws that would eliminate previous ones but that limited Government view aside I think you’ll be surprised by what they’ve done in WashingtonD.C. over the last year+.
First how many laws do you think our Federal Government should pass in a year? How many do you think they have passed?
Well the “do nothing Congress” in conjunction with the President have actually passed 55 laws. That’s nearly one per week!
Next up… How many Federal agencies do you think we have? Ready for this… We currently have 466 Federal Government agencies. So if you visited every agency at a rate of one per day it would take nearly two years to see them all!
So those 466 Federal agencies were asked to produce 4,291reports. That’s nearly 12 per day! Do you think the average member of Congress or the President does read them?