‘The Big Move’ is a MarketWatch column that looks at the ins and outs of real estate, from looking for a new home to lending to a lender.
Do you have a question about buying or selling a home? Want to know where your next move should be? Email Jacob Passy at TheBigMove@marketwatch.com.
Shortly before the pandemic, my husband accepted a job that required us to move out of the state; however, so far we have not had to because of telework. My husband and I have two young children. Because of our telework, my parents-in-law watched our children stay at home and they often stayed for days.
My husband and I asked his parents to move in with us when we moved. In theory, this is a great plan for everyone involved: free childcare for us, reduced spending for them and we all enjoy each other.
The dilemma is that my sister-in-law is $ 50K under water at her town hall. The house has water penetration and foundation problems that make it only about $ 100,000, at best. My father-in-law is a very disciplined man and does not think going is the right thing to do. He further believes paying off the mortgage is the best plan, even if they do not live at home.
A short sale, even if a buyer would be willing to accept the issues, would be devastating to no matter what saver they have. My husband feels that it goes away and they take the credit of the payout the best option. They would live with us and no longer hinder the mortgage payment.
In addition, my husband is the only child and the appointed executor of the stand. My husband realizes that whenever his father dies (he is 71), the house is his subject to handle. Should my father-in-law continue to pay or leave? Are there any other options we should consider?
Your letter is an important reminder that even at a time when house prices are rising at a record pace, many Americans continue to have more debt on their loans than their homes will be, also known as “under water” in a home.
Millions of Americans found themselves in this position in the wake of the subprime mortgage crisis that caused the Great Recession. But even though house prices have risen – and in many cases to new all-time highs – some 1.6 million homes are still in negative equity in the third quarter of 2020, according to the latest available data from CoreLogic
This represents about 3% of all affected homes nationwide.
Taking a walk from a home that is under water is bad advice, no matter how one cuts it. And virtually any financial expert would advise your family to avoid it at all costs.
For starters, foreclosures are absolutely devastating to a homeowner’s credit crunch, and they stay in a person’s credit file for seven years. You might be thinking, what difference does it make? Well, what if your new housing arrangement doesn’t work out? Your family and sister-in-law have only spent a short time together – this is very different from cohabiting permanently.
If your sister-in-law decides they need their own place, they may have trouble qualifying for a rent with the low loan amount they would have had on the premise. Are you and your husband ready to act as guarantors for them in such a situation?
Foreclosure is not an out of jail free card. You may have written off the possibility of pursuing a short sale because it would hurt the savings of your in-laws, but that’s just what can happen with a foresight.
“Depending on the laws in their state, the lender could cancel the loan, sell the property, and come after the parents for a deficit judgment – the difference between the sale price and what was owed on the loan plus taxes, insurance, fines and fees. , ”Said Rick Sharga, a veteran in the lending industry and executive vice president of real estate data firm RealtyTrac.
Do not miss: I plan to retire soon. Should we sell our home when prices are high – and rent for two years?
Federal law specifies that pension savings and corporate-sponsored pension accounts such as 401 (k) s are exempt from the appearance of creditors in the event of a default judgment. Some states extend the same leniency to self-employed retirement accounts.
There are also moral and ethical considerations. Your father-in-law has signed an agreement with the mortgage lender, so it is understandable that your father-in-law feels obligated to keep his end of the bargain. Plus, research shows that forced losses can lower the property values of neighboring homes.
What to do instead? Well, for starters this is a great way to find out if your homeowner is qualified for any type of home improvement or home improvement business. If one of your in-laws is a military veteran, they may be eligible for assistance through Operation Homefront. Other resources they can explore for financial aid include the National Association of Area Agencies on Aging and Habitat for Humanity.
I also think you should consider a short sale, and see if your mortgagee would agree to a reduced amount of their mortgage services to pay off the mortgage. Services can still go after your weight for the balance sheet on the post-sale loan – even if that depends on the state – but as said, this is also true of executions.
“Another option could be a ‘dot in lieu of payment’, whereby they hand over the house to the bank without going through the redundancy process, perhaps contrary to the bank’s promise to waive any deficit,” he said. said Eric Dunn, director of the procedure. at the National Housing Law Project.
A short sale or an act instead would be the credit of your heavyweights, but it would still be less bad than the hit they take from a premise. And with an option, you need the services to agree.