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
15 Sep 08 Buy and Bail: Making The Rule Work For You. Part II
If you missed Part I of this post you should read it because this rant may not mean too much to you without it.
Sometimes the housing market can be a bit much for people and they get frustrated. Let’s see one persons opinion and let me know if you share her thoughts.
HI Brent
I find the whole situation just backward.
Banks loaned money to people they KNEW could not afford a 800,000 house….all hell breaks loose and now those of us who had and still have excellent credit will not be able to get a house unless we jump through hoops to get it….we still have credit scores in the 800’s….YES…I said 800’s……
we have bought and sold 5 houses in the last few years (we moved a lot) and ALWAYS came out great after each sell….but we have NEVER had 20% to put down…we always did around 10 to 15% then got an 80/20 for the remaining amount….
we made 60,000 on our last sell and then moved back to V. and paid 382,000 for our current townhouse…put 30,000 down, and then put 10,000 in remodeling, and we still have 20,000 in the bank….but now unless we come up with the full 20% a bank will not loan to us?????? i just don’t get it…..
we are just staying here for another year and scratching the money aside so that if we do find a REO Home we really like we can try to jump on it….there is no way we make enough money to cover two loans…..so that option is out for us….
i am just sick of this whole thing…..but thank you for getting back to me….
C.
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It’s interesting, I appreciate the email and I can see how frustrating this whole situation can be. You may not be the person who is committing fraud but there is no way for us to convince the bank otherwise!
Keep your head down and focus because there will come that moment when this all goes away and those paying the most attention will reap the biggest financial rewards.
Brent Lane
The Lane Group
www.thelanegroup.blogspot.com
Tags: bank loan, brent lane, buy and bail, credit crunch, credit score, down payment, fha, home loan information, housing market, mortgage loan, real estate owned, reo, the lane group
24 Sep 07 I’ll Buy From the Home Builder That Helped Me Rebuild My Credit!
It’s difficult to read an article or watch a news story about our Arizona real estate market and not stumble across a statement or two about rising interest rates, tougher subprime lending, or diminishing loan programs. It’s also becoming increasingly difficult for consumers to make any major purchase without good credit history. It’s unfortunate that the aggressive lending practices of the last few years are catching up with us, and most, if not all lenders. In recent years, low interest rates and creative lending tactics have helped many home buyers get into homes that they would not have been able to otherwise afford. These same aggressive tactics and low interest rates have also helped Arizona home builders sell more homes.
Today, it’s a new market and I think we might see the rise of more home builder programs or home builder sponsored programs that help consumers fix or improve their credit rating. Every builder might offer these programs already; if so, I think that these programs will get more attention and more use as we move toward more stringent lending practices. I’m positive that home builders could successfully secure more home sales by helping walk buyers through credit repair/improvement programs. I don’t necessarily think these programs have to be developed by builders, but I do think that builders can find companies that offer successful credit repair/improvement programs and help the potential home buyer take their first steps toward home ownership. Who knows, home builders could even start, or begin to sponsor credit repair/improvement classes that would leave graduates with a greater understanding of their credit, and the ability to purchase a new home.
Obviously, this approach would lengthen the sales cycle, but it could pay off big. With a little creativity (putting the fees into the cost of the loan, giving discounts to credit repair/improvement graduates?), home builders may be able to use incentive money to help home buyers strengthen their credit. In the end, new homeowners would have a lower mortgage payment, lower interest rates, better credit and the knowledge to maintain their good credit. This is just an idea of how Arizona home builders might get more sales as we near the end of the recent aggressive lending practices. Any other ideas?
Tags: arizona homebuilder, Arizona Real Estate, credit score, home builder, Homes for Sale, new homes, rebuilding credit
