‘The Big Move’ is a column in MarketWatch that looks at the shortcomings of real estate, from navigating in search of a new home to applying for a mortgage.
Do you have questions about buying or selling a home? Want to know where your next move should be? Email Jacob Passy to TheBigMove@marketwatch.com.
Just before the pandemic, my husband accepted a job that required him to leave the country; however, due to teleworking, we have not had it so far. I have two small children with my husband. Thanks to our telecommuting, my midwives have watched our children in our home and they often stay for days at a time.
My husband and I have asked his parents to move when we move. Theoretically, this is a great plan for all participants: free childcare for us, lower costs for them and we all enjoy each other’s company.
The dilemma is that my brothers have $ 50,000 under water in their townhouse. There are water distribution and foundation problems at home that make it only about $ 100,000 at best. My mother-in-law is a very disciplined man and does not consider walking away to be right. In his opinion, paying a mortgage is still the best plan, even if they do not live at home.
A short sale, even if the buyer were willing to take on these issues, would be devastating, if at all. My husband thinks the best option is to walk away and they will get compulsory insurance credit. They would live with us and the mortgage payment would no longer stop them.
In addition, my husband is the only child and the executor of that estate. My husband understands that when his father dies (he is 71 years old), home is his problem. Should my mother-in-law continue to pay or leave? Are there other options we should consider?
Your letter is an important reminder that even at a time when home values are rising at record speeds, many Americans continue to owe more on their mortgages than their home is worth, also known as being underwater.
Millions of Americans found themselves in this situation as a result of the mortgage crisis that caused the Great Recession. However, although home prices have risen – in many cases to all-time highs – according to the latest CoreLogic data, around 1.6 million homes are still in negative equity as of the third quarter of 2020.
It accounts for about 3% of all homes mortgaged nationwide.
Walking away from an underwater home is an ill-considered move, no matter how you cut it. And virtually every financial expert advises your family to avoid it at all costs.
For starters, closing a property on a homeowner’s credit score is completely devastating and will remain in a person’s credit file for seven years. Maybe you’re wondering what’s the difference? What if your new way of life fails? Your family and troops have only spent together for short periods of time – this is different from a lasting cohabitation.
If your brothers decide they need their place, they may have trouble renting out with the low credit score they would have after closing. Are you and your spouse willing to give them a guarantee in this situation?
Closure is not a card of release from prison. You’ve written off the short sale because it would hurt your assistants’ savings, but that’s exactly what could happen with foreclosure.
“Depending on their state’s laws, the lender could waive the loan, sell the property, and catch up with the parents about the shortcomings — the difference between the sale price and the loan debt, including taxes, insurance, fines, and fees,” said Rick Sharga, a mortgage veteran and CEO of RealtyTrac.
Don’t miss: I plan to retire soon. Should we sell our home when prices are high – and rent for two years?
Under federal law, company-sponsored pension accounts, such as 401 (k), are exempt from attachment of creditors in the event of a deficit. Some states extend this same courtesy to self-directed retirement accounts.
There are also moral and ethical considerations. Your spouse has a contract with a mortgage lender, so it is understandable that your father-in-law feels obligated to keep his transaction until the end. In addition, research shows that foreclosure can devalue property in nearby homes.
What to do instead? To get started, you should all find out if your helpers can get any help to make the necessary repairs to their home to get it sold. If either of your assistants is a military veteran, they may be eligible through Operation Homefront. Other resources they can explore for financial assistance include the National Association of Regional Agencies for Aging and Human Habitats.
I also think you should review the short sale and see if your assistant mortgage manager would accept a reduced amount to pay the mortgage. Service providers can still track your spouses for the remaining balance of the loan after the sale – although it depends on the country – but, as I said, this also applies to foreclosures.
“Another option could be an ‘act instead of closing’, whereby they would hand over the house to the bank without going through the closing process, perhaps in return for the bank’s promise to abandon the deficiencies,” said Eric Dunn, litigation director. in the draft National Housing Act.
A short sale or replacement would affect your assistants’ credit, but would still be less serious than what they would take from closing. In either case, you must agree to a service provider.