I own 3 homes that I am trying to short sell. They have not yet and it’s almost a year. What should I do?

UPDATED: Jun 11, 2009

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I own 3 homes that I am trying to short sell. They have not yet and it’s almost a year. What should I do?

During the real estate boom, I bought 3 homes for investment purposes. Since then, I lost my job and the market crashed to the point where I owe more than they are worth. I have them all listed with a realtor for short sale. I have traffic and people looking, but no offers. I am coming up on a year with this process. Should I hold tight, let them foreclose, or file bankruptcy?

Asked on June 11, 2009 under Real Estate Law, Florida


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 13 years ago | Contributor

Probably simply walking away from the homes (letting the lenders foreclose) is the worst choice. If the homes are indeed worth less than the loans on them, if you walk away from them, you will hurt your credit rating badly and *still* be legally obligated for the balance due on loans, over and above the homes' value. Plus if you walk away from the taxes on  the homes as well, you could up as a tax cheat.

Whether you hold tight or file for bankruptcy depends on your overall economics, how badly underwater the homes are, the real estate market in your area, etc. There are so many variables that it's impossible to give any sort of definitive answer. However, if realistically you either (a) will not be able to unload all or most of the properties before you run out of money, or (b) even if  you manage to unload them, between how little you might get and what it will cost you to hang on until then, you'll be losing substantially on the proposition, then probably should file for bankruptcy. Obviously, bankruptcy will itself have a significant impact on your credit rating and finances, but it will get you out from under multiple mortgages and protect you from other creditors.

Plus, if you're out of work and your underwater on all your mortgates, you have little in the way of income or assets a bankruptcy court could touch to pay off creditors, so you're probably in a "good" shape to declare bankruptcy; i.e. little to lose. And in this economy, there is little stigma or shame to bankruptcy.

If you think bankruptcy is a realistic option then, get a consultation from a good bankrutpcy attorney right away--waiting, and spending more of your money, then declaring bankruptcy is "worst of all worlds" sort of position. It means you'll still have the negatives of bankruptcy after having struggled to pay. If bankruptcy is the way to go, better to do it sooner rather than later, which will also start you on the road to financial recovery sooner.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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