I have a friend in Corona, CA who is yet another statistic in the subprime home financnig fiasco. He purchased his home for 5,000 2 years ago, and it is now worth about 0,000 and still potentially falling. He plans to walk away.
I am looking to buy a home. I have about ,000 I can use. Is there any way I could use that and refi with him, and we both own the house? To kind of help bail him out and avoid foreclosure? A benefit to both the bank and us. Although that would also seem like a short sale to himself…Maybe only the bank can answer that but maybe an experienced banker is on here and knows the insides of current home financing situations.
Thanks
Thanks for the 1st five answers…let me add a couple of details.
His credit is not destroyed (yet) as he hasn’t walked away. He is trustworthy and has good credit, he just cant refi because the value of the house fell, like most in Cali. It seems like it would make sebse to the bank to do something, instead of outright deal with a foreclosure.
I also thought to myself about the short saleing to himself that would be, but banks are desperate right now and may want to work something out.
As far as the negative equity, that would dissappear if the bank agreed to a refi at a lower price i.e. a short sale. However, he would probably be liable for taxation of the 0,000 difference the bank agreed to write off. That is his problem.
March 8th, 2010 at 4:49 am
He can not short sale to himself. He also will no longer qualify for a mortgage as his credit is destroyed, he has proven that he does not honor contracts.
March 8th, 2010 at 4:49 am
You have alot of options but there are 2 methods I suggest.
1) Subject-To method: This method allows you to purchase the home ’subject-to’ the existing mortgage. This means you can buy the house with the existing mortgage that is in place.
2) Short Sale method: This method allows you to purchase the home at a discount of 10%-30%. Work with the home owner to have the lender send you a ’short sale’ package and they will tell you what they need from you and the home owner.
Remember, banks DO NOT want your property… they want your payments. I know that doesnt sound right but its true!
Good L.U.C.K.! (Learning Under Correct Knowledge)
March 8th, 2010 at 4:49 am
His credit is toast either way. If the bank even agrees to a short sale his credit will read that a settlement for less than owed occured. It’s better than an outright foreclosure…but still not going to make life easy.
I wouldn’t put my $ into something that I thought could continue to take a hit. Just my 2 cents
March 8th, 2010 at 4:49 am
That is probably undoable, but in any event would be an invitation to disaster. Never get involved in financial deals with friends.
March 8th, 2010 at 4:49 am
Ok, let’s assume for a moment that the bank agreed to the deal. Here is why it would NOT be a good financial decision and you need to just let your friend walk away from the house.
1. The house is in negative equity…you can’t refinance anyway…you would need much more than $20K, you would need $125K + to make up the difference. That is why your friend is stuck…b/c he can’t sell OR refinance.
2. Even if you had the money to make up the difference, your friend has already demonstrated that he cannot meet his financial obligations…so do you really want to risk having to foot the bill for the ENTIRE mortgage deal, and have him be legally entitled to 50% of the ownership?
Sometimes, you just have to let your friends sink or swim.
ADD ON: The bank is NOT going to agree to a "short-sale refinance"…there is no such thing. He can sell it if the bank will agree to a short-sale…which they may not considering the value loss….but they WILL NOT permit you to refinance to yourself and "write off" the loss.
If that were true, then everyone in the country who’s homes fell in value would run to the bank to refinance and have them "write off" the loss.
It’s an animal that just doesn’t exist in the lending world.
March 8th, 2010 at 4:49 am
That’s one way to avoid foreclosure. You may find more options here.
http://www.foreclosure2stop.com/Friendly-Foreclosures.php