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“Walking away from my property” is a phrase often used by struggling homeowners who are considering allowing their homes to fall into foreclosure. However, the phrase does not accurately depict what negative effects a foreclosure actually has on a borrower’s situation yet many believe that it is as simple as letting your home fall into foreclosure and walking away. That is certainly an understatement and I will tell you why.

Think about the basic situation. You borrowed money from X (lender one) and Y (lender two assuming you have 2 liens) and later you tell both X & Y you are unable to repay your debt. So you “walk away” from the situation. Would X & Y just accept the loss and wave their hands while you leave the situation? No. Here is what they will do.

Recourse & Non Recourse State
There are different foreclosure laws in every state. This determines what the lender can legally do in the event a borrower doesn’t pay the owed amount. In a recourse state, both X & Y are able to pursue you for the remaining balance even after your home is foreclosed on. In a non-recourse state, X is not able to pursue you legally BUT Y can and probably will come after you for the remaining balance. In other words, if you have a second mortgage (2nd lienholder) on your property, they can still get their money back.

Credit Reporting
If you “walk away” from your home and debt owed to X & Y, don’t you think they will tell A,B,C, and all other future lenders of what you did? However you handle your debt owed now will put on your credit report for future lenders to see. You will have either a “foreclosure” stamped on your report which means you really did just walk away from a bad situation or you can have a “paid for less than original amount” aka a short sale on your report which shows to A,B,C that you put effort in settling your remaining debt with X & Y rather than walking away from them.

What you decide to do now will be put on paper either way. If you “walk away,” it may be easier now but harder later in various ways such as not being able to obtain another mortgage and/or a possible lawsuit.

Keep in mind that lenders WANT you to do a short sale. You may be wondering, “well I can’t afford to do a short sale…” This is a myth my friends. If you work with the right short sale agent, you shouldn’t be paying a penny. In fact, lenders typically pay YOU for doing a short sale and it can be up to $30,000 if you do.

In this 2012 year with all of the laws and lender practices now supporting homeowners who take the time to short sell their home, simply walking away from your home will make a strong statement to all who take a look at your credit report (future lenders, bosses, apartments for rent and etc.)

If you live in Washington state, our short sale experts will show you how you can settle with your lenders and walk away with little to no liability. Connect with us HERE and we will contact you within 24-48 hours.

Hope this helps

Peter