I have a friend in pre-foreclosure, what are her options

[Christopher Davis]

We have a close friend who has received notice of trustee sale.  They are under a bit of stress as one might imagine so the information I have right now is incomplete but it should still be enough to start exploring their options.  

- Litchfield Park, suburb of Phoenix, AZ

- The sale is due to take place in September

- Home value guestimate ~$170k

- No equity, they are a little under-water and owe 180-190

- They are currently paying on another plot of land and trying to get a house finished after it being botched by an unlicensed contractor.  So they want to maximize the time they can spend in the current house. 

- Conventional loan is with Washington Federal

I happened to have just heard podcast #19 which featured @Tracy Royce talking about this very issue.  I am not really looking to work this as a deal, I would like to be able to get them in touch with a person who knows the Phoenix, AZ market who can best explain the best options for their situation.  I will consider this a learning experience and perhaps an experience BP member can earn some money. 

I'm a bit puzzled regarding the math of having a conventional mortgage and being upside down by 10-20k, but she admits to not understanding the process well and might just be a little confused on the terminology.  Once I can go back to her with more information or someone to talk to, I think she'll be more open to getting her head around the specifics.  

[Colin Smith]

I think their best option may be a short sale. If the house is underwater, even a sub-to deal wouldn't be good for the buyer so that eliminates that option but at least with the short sale they can stay in the house longer. Or they try to rent out the home in order to keep it afloat and hope they can sell it when the value increases and the mortgage decreases, but that would mean they would have to get out of the house. All around, not a great situation. Sorry I couldn't come up with a better solution.