There are a number of ways to handle disposal of unwanted real estate but one of them is not to abandon the property. The responsible thing to do would be to bring closure to a deal gone bad. That being said, If you need to move because of a job transfer, major illness, divorce, imminent foreclosure or other emergency, In a soft housing market, how would you do it? Perhaps you’d be fortunate enough to sell quickly at a small discount. But if that’s not feasible, I would recommend one of three options; a short sale or deed-in-lieu of foreclosure, a strategic default or consider giving away the house.
1. Short sale or deed-in-lieu
A short sale allows a homeowner to sell the home for less than the amount owed on the mortgage. The lender’s approval is required, however, and these transactions aren’t speedy.
A short sale can take a year or longer to close, sats Tony Marriott, a broker associate at Show Appeal Realty in Phoenix.
The home’s condition and the real-estate broker’s experience in home-sale negotiations are key factors. But price may be the most delicate issue in the long time frame.
“If you get too aggressive with price, you’ll get a contract,” Marriott says, “but you’ll get pushback from the seller’s lender.”
If you don’t want to put your house on the market or can’t get a short-sale approval, you can try to negotiate a deed-in-lieu directly with the lender.
The pace of this process, in which you sign over your ownership of the house to the lender to avoid foreclosure, depends on the specifics of the situation and the lender’s response. But again, it’s unlikely to happen quickly.
A short sale or deed-in-lieu will hurt your credit score, and you must disclose your financial information to the lender. The lender may demand a promissory note that would obligate you to repay a portion of the loan after the sale or loss of the property.
2. Strategic default
A strategic default occurs when a homeowner decides not to make a mortgage payment because the home’s value is now less than the loan balance. This approach can work, but it isn’t fast or easy,
If you want to get rid of a house in a hurry, a strategic default or walking away isn’t going to be the answer.
In fact, a strategic default can take a year or longer, depending on state laws and how quickly the lender can sell the repossessed home.
The delays in the foreclosure process, however, mean homeowners often can stay in the home for as long as two years before being evicted. In some cases, owners can save as much as $30,000 or $40,000, based on average monthly mortgage payment calculations
Some of these homeowners maintain the lawn and pay homeowners association dues or property taxes. Others live in the house essentially for free.
When it’s all said and done these people aren’t destitute, they have a little money to take care of their family.
On the other hand, a strategic default has many drawbacks that go beyond the questionable ethics of refusing to pay your mortgage. They include wrecked credit, tax consequences and difficulty getting a new mortgage for years after the default.
3. Giving the house away
The fastest way to unload a house is to give it away. That may sound like a joke, but some well-to-do people do give real estate as a gift. You can also seek out a real estate wholesaler who has lots of contacts and specializes in moving property quickly.
If you have a house that has lost significant value in a short period of time, get rid of it.
The most common scenario is the gift of a family vacation home from parents or grandparents to the younger generation. A gift may be preferable to a quick sale because if the property were sold, the owner would receive the cash, but the family no longer could use and enjoy the home.
A simple gift requires only some paperwork that an attorney or, in some states, a title company can prepare in a few hours. The work is more complicated if the home is owned by or given to a family trust. A property appraisal is recommended.