Investment Property Under Water - DIL is only option - Can I afford the credit hit?

[Anonymous]

Cliff Notes......I invested in a property in NC about 18 months ago with the intention of only holding it for 366 days.  Shortly after the purchase was completed the market crashed (of course).  Now I am upsidedown on it.  I owe 245k, FMV is 155.  In August of 2008 I voluntarily contacted the bank to let them know that I only had enough funding to make the payments through November.  I was told that there was nothing they could do to help me until I actually defaulted on the loan (WHAT!!!!)  So the very next month I didn't pay.  Hired a lawyer who contacted the bank to begin working out a deal.  They contacted him in early October to tell him they had a proposal, and we just recevied it 2 weeks ago.....Meanwhile they have been hitting my credit report for being delinquent (can they do that......drag their feet like that)??  Here is the current proposal they have on the table....

1.  $45,000

2.  Deed in Lieu

3.  A 1099 for the difference (@55,000)

I really don't know what to do......in my mind, why would I give them another 45K if they are taking the deed...... 

[louisamay]

This doesn't sound like a good deal for you at all. First, as an investment property, the 1099 will count as income and can't be forgiven under the Mortgage forgiveness act as it is not your primary residence. Also, if they are asking for $45K what would make them think you'll pay it rather than just do a regular foreclosure. Your best bet is to negotiate - does the bank know that you don't live in this property? If they believe you're living there, they are more likely to agree to a Deed in Lieu (at your request) rather than go through the expense of a foreclosure. Are you in a recourse state? Good luck.

[Anonymous]

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@Anonymous wrote:

Cliff Notes......I invested in a property in NC about 18 months ago with the intention of only holding it for 366 days.  Shortly after the purchase was completed the market crashed (of course).  Now I am upsidedown on it.  I owe 245k, FMV is 155.  In August of 2008 I voluntarily contacted the bank to let them know that I only had enough funding to make the payments through November.  I was told that there was nothing they could do to help me until I actually defaulted on the loan (WHAT!!!!)  So the very next month I didn't pay.  Hired a lawyer who contacted the bank to begin working out a deal.  They contacted him in early October to tell him they had a proposal, and we just recevied it 2 weeks ago.....Meanwhile they have been hitting my credit report for being delinquent (can they do that......drag their feet like that)??  Here is the current proposal they have on the table....

1.  $45,000

2.  Deed in Lieu

3.  A 1099 for the difference (@55,000)

I really don't know what to do......in my mind, why would I give them another 45K if they are taking the deed...... 

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Because otherwise they take the property, sell it for less than fair market value, tack on about $10k+ in legal fees and various other fees and then obtain a judgment against you.