Short sale or Foreclosure? PLEASE HELP!

[randyrjl]

What is the name of your state? Texas
We bought our home 2 yrs. ago and need to move now b/c of new job promotion. In the past two years the value of the home has fallen 25K. We spoke to a realtor and the proposed settlement sheet would have us come up with 35K+ via cashiers check. This was our 1st home FHA 2% down. We simply dont have 35K laying around. Thus we have a few options and if anyone can assist this would be helpful. Please note that our FICO scores are 70-750+ and we have excellent credit.
Should we:
Attempt a short sale and place the deficit on our 2005 taxes?
Do a deed in lieu of foreclosure? Is this even possible?
Foreclose?
Questions:
How much of an impact does a short sale have on credit as well as a deed in lieu of foreclosure? Anyone ever done a short sale and had success? Should I contact an attorney?

 

[seniorjudge]

"Should I contact an attorney?"

Yes.

 

[dogstooth]

Advice....stay away from attorneys, they're werewolves.

Get someone who can really help you. Get a financial advisor, he/she may be really creative. Can you rent the property till property values return to the previous level? You have an good income, so don't do anything stupid.

 

[HUD-1]

I agree that renting out until amortization and the real estate market allow you to sell is an option you should think about. Convert it to a rental property and there are some good tax advantages. Managing from a distance could be difficult. Are there agencies that would manage it for you for a fee in your area?

Regarding a short sale, you have to be at least 30 days delinquent. This by itself will hurt your credit. The lender would have to agree to and approve the Short Sale. (Do they agree that a job relocation and decrease in value is cause for approval of a Short Sale, rather than a decrease in income?) If the Short Sale falls through, they could then accept a Deed in Lieu. You would not be eligible for another FHA Mortgage for three years from the date HUD pays a claim to the lender. You MAY have taxable income in the amount of debt forgiven. My understanding is that if you are insolvent, none of it is considered income. The forgiven debt is considered income only to the level of your solvency. You could also simply walk away from it and let it go to foreclosure. All these options will affect your credit.