Caita asked:


“What would you do in my situation?”

I bought a house in 2005 for 160K, fully financed.

I bought a car few months later for 20K (my fully paid one broke and I needed a new one which represented more monthly payments out of pocket). Additionally I paid for the landscape, gutters, electrical outlets and central air conditioning after I purchased the house, a total of 10K from my pocket that made me put more debt on the credit cards.

So, I started with a mortgage payment of 1K per month, then increased credit card payments while doing all the improvements in the house, and then got a car loan, so in mid 2007 I needed to refinance, and out of the refinancing I paid the credit cards and the car all on escrow without having a penny coming to my pocket . My house got appreciated for 270K at the time, and I took a loan for 190K (for what I pay $1,200 monthly).

In 2008 moved to another state, my house is vacant and for sale for some months now, if an appraiser comes will appraise it for 210K, although no buyer is ready for more than 195K and obviously I won’t be able to pay the realtor commissions if I sell at that price considering I owe 190K and that the commissions are of 6% on top of that. My contract anyways is about to expire. I am current in all the mortgage payments.

Since renting in one state and paying mortgage, gardener, insurance, services in the other is becoming quite a burden, I was looking into options, such as a Short Sale. I know that some debt relief was approved later but I don’t find anything on the IRS website, all I find is what was passed in 2007/ I would like to know which options I have. I really do not care about my empty/vacant house, I care about my credit. If I rent it I will get about $800 a month, so I need suggestions as of what could I do. For instance, is there any possible negotiation with the bank to stop the payments for 6 months? This way it will let me try to sell by owner with the help of some local friends.

Both states are non-recourse states. I do not think buying will be a good option at this time, I do not know how the taxes will affect my situation, I just need some ideas.

How do I short sale the house? and then am I responsible for paying for the taxes and how is that calculated (you have all my numbers there). Does the appraisal value at the time of sale play any role on the taxes or forgiveness of taxes?

Please advise,

Thank you!
An another thing, what happens if I rent the house in matter of taxes, how will that affect me? It is bad enough not being able to pay the mortgage with the rent to get some penalty in the taxes, thanks.

Pearl