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We Can't Afford Our Vacation Home Anymore

We decided to sell our vacation home because of financial problems but it still hasn't sold. What should we do?

We own two homes; one we live in and the other is a vacation home. My wife lost her job, and I worked for GM and lost wages overtime, so I retired. After that my wife was fired. We decided to sell our vacation home considering our financial situation, but have not had any luck selling it for over a year. The vacation home was originally an investment for us to sell, so that we could pay off the home we live in. Now we can't even sell it for what we paid for it 7 years ago. We have also put a lot of money into it. We will not be able to continue making payments on both homes and are considering returning the vacation home to the bank for cash. What is our best option?

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Bill's Answer
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Generally speaking, allowing a home to go into foreclosure is not a good idea for consumers, as you will lose any equity that you have built in the home and take a terrible credit impact. In some cases, though, consumers have no choice but to allow a foreclosure to proceed. You need to rid yourself of the vacation home, as you cannot afford the mortgage payments, but unless you plan the sale or foreclosure carefully, you could be left with a large deficiency balance, which could result in a judgment against you.

The easiest way that you can free yourself of this obligation without owing a deficiency balance is through a "short sale," in which the mortgage holder agrees to accept less than the balance owed on the mortgage at sale to prevent foreclosure. The lender would much rather see you sell the property than be forced to take the property through foreclosure, as foreclosure is a costly and time-consuming process. You should contact your mortgage lender to discuss what it can do to assist you in selling the property through a short sale, and what are its procedures and requirements. Explain to the lender that you cannot afford your mortgage payments, and that you need to sell the property through a short sale to prevent foreclosure.

Given the information you have provided, I think a short sale may be the best solution available, if your lender will allow it.

If the lender will not allow you to sell the home for less than you owe, you may have no choice but to allow the home to go into foreclosure, although foreclosure presents major problems. Foreclosure auctions tend to bring significantly less money than a normal sale would bring. If the sale brings less than the amount owed on the loan, the remaining balance of the loan may be considered a deficiency balance. If you have no choice but to allow foreclosure, you may be able to mitigate the negative impact of a deficiency balance by filing bankruptcy. Generally speaking, deficiency balances are treated like any other unsecured debt in bankruptcy, meaning that they can be wiped clear by Chapter 7, and repaid over time through a Chapter 13. If your lender will not allow a short sale, you should consult with an attorney to discuss the legal implications of foreclosure and bankruptcy before you decide how to proceed. You can also visit the Bills.com Bankruptcy information page to learn more. No one wants to file bankruptcy, but you may find that bankruptcy is the best solution to your problem if the mortgage lender will not allow you to sell the home through a short sale.

Also, to read more about foreclosure, I invite you to visit the Bills.com Foreclosure information page.

I hope that you are able to find a workable solution to your problem, and that the information I have provided helps you Find. Learn. Save.

Best,

Bill

www.bills.com/

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