My husband and I are trying to find a way to get into a home in Seattle, WA… Here’s the situation…
We have recently switched careers and are set to make $150k combined in 2012. We currently have terrible credit, but have talked with an attorney about cleaning it up w/in the next 6months to a year. We are two payments behind in our current mortgage, if we don’t make a payment by January 3rd, we will be forced into negotiating a short sale. I’ve heard that traditional lending won’t approve us for a new loan for 2 years following the closing date of the short sale. We could struggle and try to keep our house, but we have about $100k negative equity and we are 90+ miles one way from our new jobs.
Now we found a great deal in Seattle that meets all of our needs. It is listed for $329k, assessed at $278k, and I believe it’s fair market value to be about $300k (I am a licensed real estate agent). The owner is willing to carry a short term lease option, with the following conditions: 1 yr lease, $15k consideration, $340k future purchase price, $2,500 monthly rental payments. We also plan to rent the mother-in-law apartment for $750/mo (we have a secured/ gauranteed tenant). The owner also told us that they only owe $80k and would like to net $150k.
Problem… The owner would really prefer to sell or receive a much larger amount of consideration and isn’t firm on the lease purchase option. However, we know that we won’t be worthy of traditional financing for 2 years and the owner seems pretty firm on no longer than a 1 yr lease.
We have about $10k to try to put something together. We were hoping to find an investor that wanted to come in and negotiate buying it for $280k, then we do a lease purchase with the new investor owner for with the same terms as above, except for a 2 yr lease.
Wow, you are still trying to spend money you don’t have! How has that worked out so far for you? Incidentally, I find it appalling that someone who can’t make their mortgage payments is trying to skim $20k in equity from someone who does.
Hopefully, you won’t get a Form 1099 from the bank for the difference between the SS price and what you owe. That difference in price is considered income by the IRS. I think $150K puts you in the 28% bracket. But wait, adding $100K to your income puts you in the 33% bracket. You could owe $33K to the IRS if $100k of debt is forgiven. There’s not much your attorney can do about that!
Seriously, I think at this point you are probably better off renting until you get your finances in order. Look at this as a second chance. I would take this opportunity to reassess your needs vs. wants and scale back expenses to a bare minimum. It won’t be the lifestyle you think you deserve but it will be one you can afford. Live below your means. You could try living on one income and saving the other.