I got a Buyer's lead from my Broker about a condo the other day. It was a women who was interested in downsizing from her house to a condo. She was asking some questions about the property which I promptly answered after looking up the listing on the MLS.
When I asked her if she wanted to see the condo, she told me that she wasn't sure yet, since she didn't really know what she would be doing with her current home. She informed me that she would consider selling it, if she could cover her mortgage. I asked her if she was behind in payments, she told me "no". She ended up asking me "What happens if the house is valued at 180k and I owe 200K Do I have to pay that back?"
I tole her that if that situation was true, then she would have to pay the mortgage company back the 20k at the time that the property conveys. If she was behind in her mortgage payments, then she would qualify for a short sale. We would then negotiate with the bank to get them to take less than what is owed. The downside of this option is that she would no be able to qualify for a mortgage for at least 3.5 years.
What to do in this situation is a popular discussion topic of today. According to Suze Orman and Clark Howard (amongst other financial Gurus of today), stay in your home and ride it out if you can. Don't create a bad credit situation unless you ultimately can't avoid it.
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