The ‘big move’ is a MarketWatch column that looks at things inside real estate, from navigating in search of a new home to applying for a mortgage.
Do you have any questions about buying or selling a home? Want to know where your next move should be? Send an email to Jacob Passy at TheBigMove@marketwatch.com.
Before the pandemic, my husband accepted the job that required us to go out of state; however, we still didn’t need it because of the telework. My husband and I have two small children. Because of our telework, my father-in-law has been watching our children at our house and they are often there for a few days.
My husband and I have asked our parents to move in with us once we move. Theoretically it’s a great plan for everyone involved: a free kindergarten for us, a reduction in expenses for them, and we all enjoy company together.
The dilemma is that my brothers-in-law have $ 50,000 under water in their hometown. The house has trouble accessing and laying water, costing only about $ 100,000, at best. My father-in-law is a very disciplined man and doesn’t think walking away is the right thing to do. He thinks the best plan is to keep paying the mortgage, even if they don’t live in the house.
Even with a short sale, if the buyer were willing to take on the issues, it would be devastating to get any savings. My husband feels that the best option is to get away with it and take a successful foreclosure. They would live with us and no longer prevent them from paying their mortgages.
Also, my husband is the only son and the appointed estate executive. My husband realizes that every time his father dies (he is 71) the house will be his problem. Should my father-in-law continue to pay or leave? Is there another option we should consider?
It’s important to remember in your letter that even as home values are rising at a steady rate, many Americans continue to owe their homes more than they deserve on mortgages, also known as “being under water” in a home.
The subprime mortgage crisis that caused millions of Americans to find themselves in that location as a result of the subprime mortgage crisis. But even as home prices have risen – in many cases to new highs – 1.6 million homes are still in negative territory in the third quarter of 2020, according to the latest data available from CoreLogic.
It is about 3% of all mortgaged homes nationwide.
Walking away from a flooded home is not recommended, no matter how you cut it. And almost any economic expert would advise your family to avoid it at all costs.
For starters, foreclosures are absolutely devastating to a homeowner’s credit score, and remain on a person’s credit file for seven years. You might be thinking, what’s the difference? Well, what if your new life plan doesn’t work? Your family and your son-in-law have been together for a short time; this is very different from eternal coexistence.
If your son-in-law decides they need their place, they may have problems with the low credit score they would have after running for rent. Are you and your husband willing to act as a guarantor in such a situation?
Foreclosure is not about getting out of jail. You’ve canceled the opportunity to make a short sale because it would hurt your brother-in-law’s savings, but that’s with the execution that can happen.
“Under current law, a lender could refuse a loan, sell the property and sue the parents to judge the shortfall – the difference between the sale price and what was owed on the loan plus taxes, insurance, fines and fees,” said Rick Sharga, a veteran of the mortgage industry and RealtyTrac real estate data executive vice president of the company.
Don’t miss it: I plan to retire soon. Should we sell our house while prices are high – and rent for two years?
Federal law stipulates that retirement savings such as 401 (k) in corporate-sponsored retirement accounts are exempt from forfeiture by creditors in the event of a default judgment. Some states extend this kindness to retirement accounts that direct the same.
There are also moral and ethical considerations. Your brother-in-law signed an agreement with the mortgage lender so it is understandable that your father-in-law would feel obligated to end the bargain. In addition, research shows that foreclosures can sink property values in nearby homes.
What to do instead? Well, for starters, you should all consider whether or not your son-in-law is eligible for this type of support to get you into the situation of making the necessary repairs to your home. If one of your sons-in-law is a military veteran, they may receive assistance through Operation Homefront. Other resources that can investigate financial support include the National Association of Agencies for Aging and Habitat for Humanity.
Also, I think you should reconsider the short sale, and see if your brother-in-law’s mortgage servers would agree to a reduced amount to pay the mortgage. Servers can go looking for your brothers-in-law to get the rest of the balance after the loan sale – that depends on the state, but as I said, so does executions.
“Another option could be a“ deed instead of a foreclosure, ”which would hand over the house to the bank without going through the foreclosure process, perhaps in exchange for an order to waive the bank’s default,” said litigation director Eric Dunn in the National Housing Bill.
Short sales or replacement deeds would have an impact on your son-in-law’s credits, but it would still be more serious than the success they would receive from public execution. With both options, the server must agree.