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Job Change Forcing Move, should we try to sell home with incentives, deed home back to bank, or foreclose?

My husband and I move to Ft Myers, Florida 2 years ago (the height of the realestate boom) as he had a government contract here. The contract will be completed in August 2008 and he is scheduled to start working with another group in another city. I'm afraid that we won't be able to sell our home due to all the short sales, foreclosures, and bankruptcies. We have no equity in our home as we moved at the height of the the realestate boom - and home of our current size are selling for $100,000 less than what we paid. My questions are as follows: Should we list the home and give incentives (like offer $20,000 in cash at signing)? or Should we try to deed the home back to the lender? (Is this actually possible?) or Should we foreclose on the home? My husbands new employers have offered numerious times to co-sign on any loans we may need - if our credit is adversely affected (and it most definetly will be affected) by this foreclosure. Thank you for your thoughts.

Public Comments

1. You're definitely thinking through the options the right way, and yes, you're right. Putting the house to the lender will absolutely impact your credit rating. I'm worried you would not be able to get a loan at any interest rate, even extraordinarily high, once you default on the current mortgage. That gives you 7 years of renting. Is it possible to keep current on the existing mortgage, buy the home in the new market, and then default on the existing mortgage? (still impacting your credit, but then you have the new loan) BTW, I would not offer incentives to buyers. You already are selling the home for far less than you owe on it; giving away more money will not sell the home for a higher price? (please, others, argue this if I"m wrong.)
2. There are no easy answers. If you foreclose on the home, the lender will surely come after you for the secured debt. They will especially sue you if you have assests excluding 401k or IRA accounts. Plus destroy your credit between 7 to 10 years. If you try to deed it back to the lender, or go for a short sale, you will have to pay off the difference between the mortage amount and the sale price. Another option is to find a property management company willing to rent out your home. Of course the rent amount, will be lower then the monthly mortage. However, this could buy you some time until the housing market rebounds, and save your credit rating. Lastly, do not give upfront cash as an incentive. You could be easy prey for a scam.
3. I would talk frankly with a good local real estate agent and ask them what you house could sell for now. Not a puffed up price, but a real price.. No buyer will pay more than the house is currently worth no matter what incentives you offer. If the house will net you a very large negative (after you pay any costs involved) then you need to see how large your bank account is. Most home mortgages have a clause that allows the mortgage company to come back against you for any shortfall they experience in a foreclosure. If you have no money then there is nothing for them to get, but if you have money in the bank then they have a right to expect you will sell the house and pay off the entire loan using your own cash to make up the shortfall. If you have a non-recourse loan then things are much better for you. I hope that is what you have but bet you don't.
4. You will obviously be best off if you can sell it. You could work with your bank on a possible short sale if needed. This is where they take less of a payoff than what is currently owed. You need to work this out with them prior to accepting a contract as you could get into a real mess requiring you to sell and having to come up with the difference at closing in order to pay off the lender if they didn't agree to a short payoff. Most Lenders would rather do that than go through a foreclosure process especially with the current market conditions. If that didn't pan out the next best option for your credit would be to offer the bank the deed in lieu of foreclosure. Good Luck!
5. Take foreclosure off the table, that should be your LAST RESORT, as the foreclosure will effect more than you suspect. Deed in lieu of foreclosure isn't much better. Have a discussion with a good Realtor in your area about what is selling and how it is selling. If you are anticipating receiving less than your mortgage balance, approach the lender about a short sale. Most lenders are receptive. How is the rental market in your area? Could you rent the home for enough to cover the mortgage and property management fees? Don't make any decisions until you have explored your options.