If my rental property goes into foreclosure do I risk losing my primary 1 family residence?
Mar 26, 2009 in
Financial and Loan Tips
bluefire_07106
I purchased a 3 family home about 8 years ago. Since then I got married and started a family. About three years ago I purchased a single family home in a different state which I use as my primary residence. My original 3 family rental is in risk of going into foreclosure. Can I lose my 1 family primary residence if the 3 family rental does go into foreclosure?…Can the bank come after my primary residence or any other assests that I have?
I purchased a 3 family home about 8 years ago. Since then I got married and started a family. About three years ago I purchased a single family home in a different state which I use as my primary residence. My original 3 family rental is in risk of going into foreclosure. Can I lose my 1 family primary residence if the 3 family rental does go into foreclosure?…Can the bank come after my primary residence or any other assests that I have?
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2 comments
good guy on March 26, 2009 at 3:57 pm
they can certainly try, and will, if there is a big difference between your mortgage and the costs involved with the foreclosure. Example: you bought the three family home for $300,000 and have a $250,000 mortgage. If you get foreclosed upon and the lender takes $240,000 for the property (in a future sale) and has $10,000 in costs, they are “out” $20,000–they have a right to seek damages for this amount and will probably do so. However, if they sell the property for $250,000 plus costs, and are only out a few thousand, they may not deem it worth it to go after your new primary residence. However, it would be the lender’s decision.
A better approach may be to try to sell the property with a lease/option, which a GOOD realtor will explain to you (but beware, the realtor will have to wait for the sale to close maybe a year down the road and they won’t want to wait for their commission, so they will bad-mouth this action). But it’s a good way to sell in a down market. Real estate will make a comeback so if it at all possible, keep the property if you can. I understand this may not be possible, and good luck.
One Sailors Lady on March 28, 2009 at 9:49 pm
ABSOLUTELY they can!!
When you made your original property (the one you rent out now) a rental property, did you put it under the protection of an entity? An LLC? Land Trust? If NOT, and it is still in your name, that’s just about the most UNSAFE way to hold real estate EVER, and YES, they CAN go after any of your personal assets, because they are not protected. An LLC or land trust (some kind of entity) is the ONLY way to protect one property from another. You MAY still have time to do this, speak with a lawyer IMMEDITELY- it only takes a few days to file the paperwork to create an entity- HOWEVER, I don’t know the legalities of creating one so late in the game. SEE A LAWYER ASAP.