SHORT SALE HELP!

[Jason Green]

Ok here is the rundown. I am a builder and I have one unsold property from the market tanking. I have a construction loan from 2007 that every 6 months the bank willingly renews at 6% interest. I have not been late or missed a payment in 4 years. I have payed a total of around 60k in interest to the bank. So here are the numbers below.

LOAN: 222,000
VALUE: 180K

It will be 10 years, if ever before the market recovers enough to even come close to the loan amount. I have a solid on time renter for the past year who covers all but $250 of the loan payment. It is pointless for me to keep booting in $250 a month plus taxes and insurance for a house that will never be worth what I owe. I am 29 so I can recover from the credit hit but at my age, there is really no sense in digging myself a huge hole.

The options I am willing to do:

1.) I will list it and whatever it brings is what you get a check for and I walk away with no obligation.

2.) Here are your keys and I will see you in court.

3.) Deed in lieu of foreclosure.

4.) I will take a mortgage for 180k in house for 6% interest and the bank makes interest every month and doesnt get another house in inventory.

Wanted opinions from bankers/investors/whomever about the options above. I really want option 4 because it seems to be the most painless. Thanks in advance for the advice. Local bank btw...3 branches total. Excellent history with this bank and they have owned the house next door to mine for 3 years so they are not strangers to reality.

[Jon Holdman]

Recourse or non-recourse debt?

Do you have assets and income?

You do have some other options.

5) Sell it for whatever it brings and bring a check for the shortage to closing.

6) Sell if for whatever if brings and accept a note from the lender for the shortage.

7) Refi for whatever amount they will accept and bring a check to closing to make up the difference.

If you have assets and income its unlikely they will just forgive the shortage.

There are tax consequences to the forgiven debt, too. Any forgiven amount is taxable income, as far as the IRS is concerned.