Question: I have been an avid listener of Marketplace and Marketplace money for nearly a decade, though have fallen somewhat behind in the past months. You were an essential part of my mid-career change and I’ve always found your guidance to be well grounded and clearly explained. In some sense I feel like your part of my financial family. (I was thrilled recently to be one of the families featured on your website as part of your series on Kids and Money).
That’s why I thought to turn to you to get some common sense guidance on issues I never thought I’d have to be considering: default and short sale. We relocated to the Chicago area (Evanston IL) in fall of 2007 and purchased a home. (This was part of a new job which accompanied a career change from science research into educational leadership). I employment ended in June and I was fortunate enough to find a new position immediately in my chosen profession. The job required a relocation to San Francisco. We put our house on the market in June and moved in July into a rental in San Francisco. We have lowered the price twice, but have not had any offers on the house.
We financed the property at 80%-10%-10% (primary mortgage-credit line-downpayment) and invested in upgrades (another 10%). At this point if we were to get our current asking price the asking price there would be little equity left after commission. Given the market I think getting this price is quite unlikely and believe it more realistic that we will be short 10s of thousands of dollars. At the same time I am having to cover the cost of holding the house while paying rent in another market. I am trying to understand what my options are at this point….. Where do I get guidance from a professional who can help me navigate these issues? Do I want a credit counselor? A real estate attorney? A bankruptcy lawyer? Any suggestions as to the nature of the professional and how I can find a reputable person would be very helpful…
Thanks in advance for your help, and with much gratitude for your educating presence in my financial life over the years, David, San Francisco, CA
Answer: Thanks for your kind words and your thoughtful question. You’re story is probably familiar to many listeners. And there are no easy solutions. It’s tough.
However, I did cut your question down because I have one main recommendation to all your issues: I would hire an experienced real estate attorney to work with you. I know money is increasingly tight. But this is exactly the kind of situation where you need an advocate that can negotiate with financial institutions and can clearly lay out the trade-offs of a mortgage modification, short sale, and deed-in-lieu transaction. After all, banks remain reluctant to negotiate with financially stressed borrowers and they have a lot of knowledge to draw on. You need someone equally familiar with the process helping you out. And, of course, if the previous solutions I’ve mentioned aren’t viable or realistic for your circumstances there is always foreclosure and bankruptcy. Again, this is where the advice of a professional with experience can really pay off.
To get yourself up to speed on the issues you might want to spend time at Nolo.com, the self-help legal advice organization. Nolo has a number of products on foreclosure and bankruptcy, with some of the information free on its website and others for purchase. Nolo is reliable and they are in the consumers’ corner.
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