advice needed: buyer got denied

[ludawg23]

Hi all,

My parents are in a tough situation and I honestly have no idea what to do.

All the kids have left the house and have grown up so my parents wanted to downsize to keep costs low.

They THOUGHT they found a buyer and the bank told them via letter that they had to move out by 7/31, which is today.

Last night, my parents had finished moving everything out but got a call really late from the bank saying they would not approve the buyer since he had some tax liens.

I haven't been involved really in this process and thought things were fine.  My dad called me this morning freaking out.

They really cannot afford to pay on this mortgage if the sale goes through.  Sounds really messed up but what are his realistic options here?

I mean, my sister and I could help them financially for a few months but when does that end?

Is walking away from the mortgage a realistic option? FWIW - their credit is pretty shot from a prior bankruptcy.

Any suggestions are greatly appreicated.

Thanks.

[mynameainttracy]

When was the bankruptcy, was it a 7 or 13, and was the house included/reaffirmed in it? Also, were they expecting a large payout from the sale to live on going forward (did the home have equity)?

[ludawg23]

I honestly do not know the answer to that but I can find out.

The sale of the house would get them about even with the bank.  They were waiting for the buyer to settle with the bank so my parents can be off the hook with the mortgage.

They've had a tough 5-6 years...

[mynameainttracy]

If they filed BK and the house was included but NOT reaffirmed they can just walk away and let them foreclose. A foreclosure will not show up on their credit report and they wouldn't be responsible for any losses on the sale. Where this gets tricky is if they are planning on buying a house again in the future. They may have to let some time pass before buying again.

Where are they moving to? An apartment or rental?

[ludawg23]

I just spoke to my sister and she mentioned she had a conversation with my parents lawyer a few months back and they recommended that my parents do NOT reaffrim the loan so I'm pretty sure they are not on the hook for that.

I am keeping in contact with my parents throughout today to get updates once they hear from the bank.

They are renting and owning another home in the future is definitely out of the question.

Really appreciate the help.

[mynameainttracy]

We walked away from our house about a year and a half into our Ch13. Best decision we ever made. Don't let them worry about hurting the bank's feelings. They have to do what is best for them. Their credit won't take another hit.

[ezdriver]

Based on your posted information, here are options for your parents:

1) Get the house back on the market immediately ... with a Realtor who has short-sale experience.

2) Stay in the house and not pay anything to the mortgagor. Keep trying to sell the house.

3) Walk away from the house and let the mortgagor know that the house is now unoccupied.

[Revelate]

---

@mynameainttracy wrote:

If they filed BK and the house was included but NOT reaffirmed they can just walk away and let them foreclose. A foreclosure will not show up on their credit report and they wouldn't be responsible for any losses on the sale. Where this gets tricky is if they are planning on buying a house again in the future. They may have to let some time pass before buying again.

Where are they moving to? An apartment or rental?

---

Wait a second, that is highly dependent on whether you are a non-recourse state or not; and even in places where they are (California being one) if you take money out of the house even for something simple like to cover closing costs on a refinance, you smoke your protection on that one.