17 Sep 08 Buy and Bail: How to Avoid Any Negative Consequences!

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Buy and Bail: How to Avoid Any Negative Consequences!

So you own your home and your loan is upside down and the prices of homes are SO low that it’s hard not to consider moving into a bigger home for less than what you owe but you are concerned of what the repercussions may be.

Read through this email and response to see how things work and how you can apply it to your situation:

Hi Brent,

Read your article on your website and thought you might be the right person to answer some of my questions.

I have a property in M. CA, which I bought for $410k and now values $200k. I am thinking of the “buy and bail” option. I know it’s going to hit my credit which I am willing to take. What apart from the credit are other consequence should I look out for and can the bank come after my new house? Can they start taking income out of my paycheck? Can they put a lien on my new property? What are the tax consequences? Any help would be highly appreciated.

Thanks,

=Sabi=

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Here is my response!

Hi Sabi!

Thanks for the email and for reading my articles!

Just like most people in our area who bought in the past 24-36 months you are experiencing the impact of 50% decreases in the housing market!

Ok, so if I were in your shoes and wanted to avoid any and all consequences for “buying and bailing” I would first be sure I could buy before I even considered the “bail” side of things!  In this market banks have eliminated what you might consider normal by not allowing someone to buy unless they meet certain criteria.  Here are some points I wrote for another format but they apply here:

• To buy while owning and renting another property you simply need to qualify for both payments! This can be done by either having enough income or by adding a non-occupant co-borrower on an FHA loan to buy your new property.
• The other way is a bit more drastic and risky but you could sell your home and then qualify for the new one.  This would take timing and negotiation skills but it can be done.  Short-sale the current home and buy the new one before your credit reflects a settled account. (not perfect but possible)
• Both situations are not fraud, not illegal and pretty much moral!

Now on the consequence side of things, you really just need to be smart when “bailing” on your home.  What I mean is you need to go about it in a way that will limit your exposure to banks by actively looking for “win-win” solutions for you and the bank.  This would be in the form of a Short-sale or deed in lieu of foreclosure.  It’s very important to approach the “bail” aspect properly because if you do that you will have the highest level of success and all your concerns will go away!

Read my posts on Loss Mitigation Negotiations and I look forward to putting it all together with you moving forward!

Let me know your thoughts.

Brent Lane
The Lane Group
www.thelanegroup.blogspot.com
www.brentlane.wordpress.com

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I hope this information was useful. As always I am here to help so please let me know your situation and I will do my best to help you the best way I know how.

Tags: buy a new home, buy and bail, credit score, decreased land value, fha loan, foreclosure, housing market, lien on property, non-occupant co-borrower, own your home, short sale, tax consequences