Considering Walking Away

After much consideration we have decided to walk away from our home that hasnt sold in a year and move back home with family. We are currently paying mortgage on time but just cant sell no matter how we reduce price if we just back up and leave eventually the bank will contact us and we will inform them to go ahead and foreclose.

Are we liable for any $$cost?  Can the bank sieze our meager checking account / can they take my police pension? Our lender is the same as our checking account bank. Should I change banks first? We want to move so bad and go back home the bad credit just isnt as bad as staying here another winter. Can you just pack up and walk away?

We are in our 60″s and dont want to wait till this real estate market “picks back up ” in 2 or 3 years so we could sell the “right way.” Do I need to pay a lawyer so i wont be hounded with any foreclosure losses on the house by the lender? 

My kids say just pack up and come home. Dont make another payment on the house. Any advise or answers/I read your website alot its great.

Arlene

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Hi Arlene,

You’d have to investigate whether your loan is recourse or non-recourse and also interpret your state’s statutes to determine if a deficiency judgment is possible in your situation.  Foreclosure rules vary by state.  In California, the most popular method of foreclosure is by power of sale which is outside of the Court and a deficiency judgment is only permitted with judicial foreclosure.  An additional consideration is if the security for the loan is valueless as may be the case with a junior lien and in certain circumstances the lender may have the option to sue on the note.

I don’t want to provide anyone a roadmap for ‘walking away’.  In a judicial foreclosure state the lender may foreclose and obtain a deficiency judgment immediately or pursue a judgment years later under common law.  The lender may also assign the rights to the deficiency to a junk debt buyer for a nominal cost, like a few hundred dollars.  Then, as is common with repossessions and large credit card charge-offs, the junk debt buyer finds the debtor and brings a lawsuit to obtain a judgment for $50k, $100k, or whatever amount reflects the lender’s loss.  So, this is a real issue and there are real consequences to ‘walking away’, particularly in judicial foreclosure states such as Florida.

There have been nearly two-thousand articles written on this site and yet not one article has promoted ‘walking away’.  I’m certainly not suggesting that there are never any circumstances where ‘walking away’ would be the right strategy; I’m just saying it should be last on the list.

Your pension is probably out of reach of creditors, but once again you’d have to look to state law to be sure and along the same lines, I’ll answer ‘yes’ you should talk to an attorney and accountant about any legal or tax issues that may apply.

No one was willing to purchase your home as a short sale?  I know that’s not true because I’m purchasing short sales throughout the USA.  If you want me to purchase your property as a short sale, then let me know.  I’m sure I’m not the only one willing to purchase the property as a short sale; I’m just suggesting that foreclosure and particularly ‘foreclosure by walking away’ can be avoided.  

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.