What could happen if we walk away fromsome investment property that we own?
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What could happen if we walk away fromsome investment property that we own?
We own waterfront property. We bought it 4 years ago for $300K; we currently owe $180K.
Asked on August 1, 2011 Idaho
Answers:
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
Before you decide to walk away from your investment property and let it go into forelcosure, you need to ascertain what its value is presently. Even though you bought it for $300,000 four years ago, you owe $180,000 on it presently. Is it worth $180,000 or less? Can you make the monthly payments on it? Can you rent it our for cash flow purposes to help pay its debt load.
In most states if you buy a home for your own personal use the loan is "purchase money" and non-recourse by statute. Meaning, the loan on it if not refinanced and if defaulted upon cannot be the basis for a deficiency judgment against the borrower.
Also, some states distinguish between a judicial foreclosure and a non-judicial foreclosure. In most non-judicial foreclosures the laws are such that there is no recourse for a deficiency against the borrower even if the loan is not purchase money for a home.
Your investment property may not fall within the purchase money exception for a personal home.
You need to consult with a real estate attorney in your state as to the specifics of the loan for the investment property in conjunction with what is stated in the answer to your question.
Good luck.
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