Need Advice For Rental Poperty

If she is going to end up doing a short sale, she should try to do a modification first. Both options will negatively effect her credit. Also both options may take several months to get done. If a short sale is inevitable than try to get a modification first and then move into doing the short sale if the modification is a no go.

It is the stand of most banks that they will not work on a short sale or modification until the home owner has gotten behind on their mortgage. This does not seem to make common sense but it is true.

The reason this happens currently is because the banks only have so many man hours to handle all the work of foreclosures they currently have. Their priorities are on keeping as much money from homes that are bad assets not on keeping good assets good.

This goes back to your daughter. The banks system is set not to work with your daughter. There are those that have common sense in the bank and that make the rules. People such as asset controllers, CFO, CEO have the ability and often the common sense to see the need of refinance, short sale or modification of a loan.

The difficulty becomes where did she get the loan? If the loan is with a huge bank it will be very difficult to get a conversation with those that can make decisions. Why? Because if all of the banks millions of clients tried to call the CEO it would overwhelm that person - which is why there is a system of accepting and rejecting who to do loan changes for in the first place.

However, if the loan is with a smaller bank the chances are much, much easier.

Truthfully either way I would try someone higher than your daughter has currently been speaking with to get better results. You can probably find who you are trying to contact by using a Google search.

if your daughter gets behind on payments she will not be able to refinance. Getting behind in payments will incur the bank to start foreclosure proceedings; banks aren't doing many short sales.

I would look for a tenant who would like to do a lease option with the intent to buy in a couple of years. She can offer the property for the balance owed, and the monthly rent for the full amount to cover mortgage, taxes, and hoa.

Valerie

I was in a similar situation in the early 90s; we lived in an 'underwater' house in Palmdale, CA, but needed to move closer to work (5 hours of daily commuting made for a very long work day). When we made the move to Northridge in '96, we were about $40,000 upside down on a VA loan. We ended up holding onto the property for 3 years, losing $300 per month, for a total loss of over $11,000. My last tenant told me to my face he wasn't paying the last month's rent, and that it would take me at least 30 days just to file an eviction notice. Apparently he knew this trick from past experience. Finally we sold the house at the break-even point.

Unfortunately, until I went to Dean's seminar this year, I let this experience sour me on real estate investment.

You didn't say which taxes were increasing; if they're property taxes, which in California are set by the county assessor, increases can be contested via letter and/or hearing. If so, your daughter should fight that increase.

Ultimately, I'd agree that a loan mod is probably the way to go. You don't want to take a hit on the credit rating that lasts 7 years if you have any desire to acquire investment properties. If it ends up a short sale, be sure your daughter checks with her accountant as to the hit she's going to take on income taxes. Good luck!