Walking away from a house with positive equity

[8bitmachinegun]

My situation is a bit weird. Several years ago I had to declare bankruptcy thanks to losing a job due to the Great Recession. As part of the Chapter 7 proceedings, my personal liability for my mortgage was discharged, but I opted to continue living in the house and paying the mortgage. However, I did not have enough income to maintain the house and perform repairs, so it's in awful shape. The central air and furnace no longer work, there are electrical and plumbing problems, the stove no longer works, the porch is starting to fall down and the vegetation in the back yard is completely out of control.

My income has markedly improved redcently, so it is theoretically possible I could repair the place. However, I have no savings to speak of, so I'd probably have to take out a large HELOC to fix the place up - assuming it has enough equity. My remaining mortgage balance is about $75K on an original debt of $97K. However, Zillow (not sure how reliable that is) places the market value at $148K. I know its nowhere near that, but it's still encouraging.

I guess my question is this - is there any way I can just hand this back to the bank without going through foreclosure? In my case, the foreclosure wouldn't show up on my credit report anyway, but there'd still be a court record. But I'd like to avoid all that if possible.

I also have other reasons for wanting to be rid of the place. Encroaching old age and medical problems have made maintenance and DIY repair difficult for me. Also, I lived here with my fiancee for years and she passed away a couple of years ago. Memories of her are everywhere...

[iv]

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@8bitmachinegun wrote:

I guess my question is this - is there any way I can just hand this back to the bank without going through foreclosure? In my case, the foreclosure wouldn't show up on my credit report anyway, but there'd still be a court record. But I'd like to avoid all that if possible.

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If the market value of the house (in its actual current condition) is at least 80-85k... why not just sell it normally?  That would be enough to cover normal agent/title/closing fees, and pay off the mortgage.  No need to go through foreclosure or short sale.

Get someone looking to buy a fixer-upper with a 203(k) loan.

[8bitmachinegun]

There's another facet to this issue. My fiancee had a hoarding problem. I've managed to clean some of the mess up, but the house is still a disaster.

A very rough guess is that it would cost $15K - $20K for the necessary flooring, cleaning, repairs, landscaping and staging to do a 'normal' real estate sale. And thanks to my health issues I just don't have the energy for all that, plus the hassle of showings. I'd like to make as quick and painless as possible, though I realize the convenience of a quick sale might cost me significantly.

Zillow apparently has something called 'Zillow Instant Offers' whereby you disclose the condition of the house, take some photos of the interior and exterior, and get connected with some large investors looking for wholesale properties. It's sounds convenient, but I'm not sure how badly they try to lowball sellers.

[iv]

With a house in that condition, don't think about the traditional staging/showing process.

You have basically two possible groups of prospective buyers here - the all-cash flippers, looking to buy, clear out, refurb, and quickly resell; and the individuals looking to get a 203(k) loan and put a lot of repairs and sweat equity into a new (to them) home.

Neither group is going to care much about staging.

Talk to a local agent. Fully document the outstanding issues.  Plan for buyers' inspectors to do a full structural inspection (weeds, flooring, HVAC, etc is one thing; but major structural issues would be harder to sell with).

Yes, doing an AS-IS sale will net less than if you were able (physically, mentally, or financially) to refurb it yourself.  But I think in your situation, you just need to call a local agent, ask them to estimate a market price for your house in AS-IS condition, and get it listed.

[CreditInspired]

OP

I agree with others that walking away shouldn’t be the solution; however, my major concern is the RE agent’s involvement. I’m an inactive Realtor and I’m more concerned with liability issues if the condition of the home is as you say it is. The home almost sounds as if it is encroaching on uninhabitable and that would be an extreme concern for anyone entering the home. 

So IMHO, I think it would be best to do a quick as-is sale, even if you have to break even/lose equity. It’s still better financially than walking away from the property. Because the possibility of anyone getting hurt while viewing your home could be possibly a catastrophic plight.