Author Topic: Desperately need advice (keeping my mother out of financial ruin)  (Read 3378 times)

tammyLav

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So a tiny bit of background, but my parents were always financial disasters, racking up debt, making stupid decisions with their money, etc etc. I'm sure my story isn't unique. My father passed away several years ago, and now my mother makes impulsive, stupid decisions on her own. She is a wonderful, loving lady and a survivor. She had a brain aneurysm 2 years ago, but is recovering well, though she can't completely take care of herself, as she can't drive, and is prone to bouts of getting confused/dizzy at times.

What I am trying to get at is, even though my mother is only 62, I am finding myself in that sticky situation many adult children find themselves in, where I am trying to take care of my own family, while needing to step up my involvement to make sure my mother is ok as well. She currently has a 2 acre property in FL that she can no longer care for. I live in NJ, and have secured a really nice beachfront apartment for her near me, in a low income complex for seniors, that is easily walkable to everything she will need, and all utilities, as well as busing service, are included. She's on board, which is a relief for me, but here is my problem:

Her 2 acres and house in Florida are badly underwater. She has refinanced her house several times to include credit card debts and car payments so she has not built up equity in the 12 years she's lived there. The housing market crash has hit her area hard, because she isn't really close to the beach, and the caliber of renter she would get there is terrible, though it is a popular spot for older people, so maybe that's an option.

She urgently needs to move, as she has had a falling out with her friend and roommate, who left abruptly, and she cannot afford to keep everything going on just her retirement and disability checks. She is planning on walking away from her mortgage. In looking at her situation, I think it actually may not be bad in her case as 1) She can't drive (no car loans in her future) 2) She has no plans to buy a house and 3)She has no credit cards and does not want any. She also needs to save up a cushion for herself, so her former mortgage payments can do that until she settles into her new apt. Do you think this is pretty much the only option we have? Should we try harder to find a renter for her house?

Also, I was thinking it might be nice to find a way to retain a portion of her 2 acres for when property values rise again. Would it be crazy to try and purchase an acre of land to hold on to for future use? From what I read online, it would seem that the bank would want a good chunk of money for us to do that, so my mom couldn't sell me the land for a super bargain or anything. Any experience or thoughts with this? Thanks for helping me sort out the tangled mess! I think things will ultimately be good for her, as I can be more closely involved moving forward, but this is all moving very quickly at the moment and my head is spinning!

tammyLav

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Re: Desperately need advice (keeping my mother out of financial ruin)
« Reply #1 on: July 30, 2015, 08:53:38 AM »
* just wanted to add a quick note that I talked to a property manager near my mom, to at least explore the option of renting. I think it's worth at least trying to salvage the situation by turning the property into a rental. As I said, the general caliber of renters in her area is low, but if we can get enough of a profit margin over the $850 mortgage, perhaps we could pay for the local service to manage the property?

I am still interested in separating the property into 1 acre of just land and 1 acre + the house. Her house has many improvements, and is in great shape. It seems that properties in her area rent for a good deal more than her mortgage. I'm just trying to move quickly to solve the dilemma and try to make this situation into a positive one of possible. Am I on the right track?

babysteps

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Re: Desperately need advice (keeping my mother out of financial ruin)
« Reply #2 on: July 30, 2015, 09:41:26 AM »
Am sure others will chime in, but 3 thoughts:

1-banks generally don't allow related-party short sales (which is what you seem to be describing).  Depending on the market and the bank, you might consider a short sale to an unrelated third party (instead of simply walking away).  Ask local lawyers and/or realtors, they would have an informed opinion as to whether a short sale is likely to be approved in your mother's specific situation, and whether it would have any advantage to simply walking away.

2-reach out for help from local agencies (gov't or non-profit) for advice.  There are a lot of resources to help you help your mother not get taken advantage of as her ability to care for herself and her finances deteriorates.  She may qualify for subsidized senior housing, for example.  In some areas, such housing is great (secure, onsite support services, etc.), in other areas not so much (not secure, no services...) - a little research could really help you get your mother into a living situation that is secure and stable for the long term.

3-even if it is a good idea for you to invest in real estate, this particular property is likely more an emotional item than an investment from your perspective - that would put it in the 'more trouble than it's worth' bucket for me.

Best wishes as you assist your mom!  I personally would focus on both her and your sanity and contentment, more than on "saving" the (sounds like a bit of an albatross) house :)

Mirwen

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Re: Desperately need advice (keeping my mother out of financial ruin)
« Reply #3 on: July 30, 2015, 09:47:23 AM »
You don't need this albatross around your neck.  You have enough issues to deal with without having to manage a huge property in another state.  Let it foreclose or short sale it and move on.

I can't even understand how you are trying to fix the problem by buying more property in FL.  That sounds ludicrous to me.  Don't try to come up with some crazy scheme to make money and make it all better.  She has a bad debt, but that's not your issue.  She has a great place to live near you and your job is to keep her healthy.  That's a big job. Move on and simplify your life as much as possible.

tammyLav

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Re: Desperately need advice (keeping my mother out of financial ruin)
« Reply #4 on: July 30, 2015, 09:54:14 AM »
Great advice! I should add that I'm not trying to make money. I don't do crazy schemes, lol. I prefer careful investments and planning. We keep our lives simple and expenses down, absolutely! I have been following MMM for a couple of years now. I was trying to come up with a way that is the least burdensome to her (and ultimately me) financially, and hoping that there might be a way to turn it into a small positive (for her). I have already secured subsidized senior housing for her, with all utilities and busing service included. It is near me, so that I can help her as health deteriorates eventually. She has a pension, disability and social security that can cover her expenses. It's fine with me if she just walks away... I just want to make sure I'm moving forward deliberately.

She owes 132, and in looking at comps in the area, I see houses selling for 120-140. Not a great market, but it seems possible that she could sell it. She pays 820/month in mortgage. Perhaps renting is an option until she could sell the house? I saw comparable rental properties in her area for 1200/month. There is a booming population of seniors in her area... but I don't know if it's worth the headache or not. In theory, I was wondering if renting the property and paying for a management service would be crazy until the market improves. The issue with that is... emergency fund (or lack thereof)! She doesn't have any extra money if there is a major problem, which would mean I could be heaping cash on this place that I don't want to be on the line for. That would be the main reason I would say renting her place seems like a really bad idea. I will look more into shortsale as an option, but given that she has no emergency fund, I'm not sure that this seems better than just walking away (since the place I have arranged for her is not dependent on credit score, but simply income and age). Anything that's going to cost money (i.e. paying for a lawyer) I will have to pay for, and would really rather not!
« Last Edit: July 30, 2015, 10:31:35 AM by tammyLav »


tammyLav

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Re: Desperately need advice (keeping my mother out of financial ruin)
« Reply #6 on: July 30, 2015, 10:36:08 AM »
I knew I could count on this forum for good advice. All of this crazy shit is hitting the fan at once, and all of a sudden things are in an emergency state. I am reeling, while trying to put out the fire, and not getting sucked into the emergency myself. I appreciate the straight forward advice. It is a difficult situation though. Will we need to get an attorney? I don't think my mother can afford that, and I'm really hoping to avoid problems. If you were me, what is the least messy & problematic way to get out of this?

Tomorrow is the first mortgage payment my mom will be missing. Should I have her put her house on the market immediately and try to sell it right away... all while not making payments?  I wish I didn't have to move so fast, but she has no money, and i don't want to have to start paying for her expenses. I need her out of this mortgage asap. Thanks again
« Last Edit: July 30, 2015, 11:00:38 AM by tammyLav »

Krolik

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Re: Desperately need advice (keeping my mother out of financial ruin)
« Reply #7 on: July 30, 2015, 11:48:08 AM »
I won't be able to give you advice what to do but wanted to let you know what you can expect if you decide to do short sale. We did a short sale in 2011 in Florida (Tampa bay). For us personally it was a good decision but it was a long process. Over 6 months. Today the timeframe may be different.

If you decide to do short sale don't waste time negotiating with bank directly. They will give you hard time and cause you more stress. Bank is not your friend and don't fool yourself that they want to help you in any way.
We hired an attorney/negotiator who was on top of our case and pushing the file in the system. I don't know where you are in FL but in Tampa Bay we hired Yesner & Boss law firm and it cost us $750 (4 years ago). We listed with real estate agency specializing in short sales. Don't worry about covering the difference. Deficiency waiver is part of negotiations with a bank. Our bank waived our 100K deficiency, it was included in the settlement. At closing we had to pay 2K to the bank.

If you want to take that route list the house asap with an agent specializing in short sales. Banks won't even consider short sale if your mom is still paying mortgage. After we accepted the offer the bank countered and buyer accepted. From that point it took ~ 4 months to do closing.

I think the main point of doing short sale is to salvage credit and not to have foreclosure on the record.
Our credit took a small hit but it wasn't too bad. 4 years later we have great credit rating again. If your mom is not planning any big purchases / loans where she may need good credit rating I don't know if it makes sense to bother even with short sale. It can be done but it is still hassle and not stress free process.
In this situation I think I would just walk and let it go into foreclosure.


kendallf

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Re: Desperately need advice (keeping my mother out of financial ruin)
« Reply #8 on: July 30, 2015, 12:26:52 PM »
In this situation I think I would just walk and let it go into foreclosure.

+1

If you go the short sale route, you will still need to try and maintain it while it's listed.  If she has moved up near you, there will be no-one local to deal with the maintenance, the real estate agent, or all of the closing paperwork.

It sounds like she doesn't need to worry about credit, and she has no other assets for the bank to come after, correct?  Get her to move on and simplify your life.

tammyLav

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Re: Desperately need advice (keeping my mother out of financial ruin)
« Reply #9 on: July 30, 2015, 03:42:51 PM »
She has no assets. She is not planning on buying a car or house in the future, and has no credit cards. Still, I feel like she is panicking and reacting rather than deciding from a rational place. I am going to advise her to think things over for a few more weeks, and weigh options. I'm happy with her coming up by me, but I want to make sure she gets in to a simplified situation that she can ultimately be happy with.

jooles

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Re: Desperately need advice (keeping my mother out of financial ruin)
« Reply #10 on: July 30, 2015, 04:52:28 PM »
It will likely take the bank quite a while to foreclose. 

I have never done this, but I have seen it done many times -- You can rent the property and take advantage of the income even though she is not servicing the loan. 

Cassie

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Re: Desperately need advice (keeping my mother out of financial ruin)
« Reply #11 on: July 30, 2015, 05:20:27 PM »
If you short sale now your Mom will owe the IRS taxes on the amount of $ that was forgiven. IE: the difference between what she owes & what the bank is paid.  I do not know if this is true if you let it foreclose but you should definitely check because she could end up owing a large amount for taxes. The IRS will let her get on a 5 year payment plan. Good luck.

Mirwen

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Re: Desperately need advice (keeping my mother out of financial ruin)
« Reply #12 on: July 30, 2015, 09:09:48 PM »
Please read about cancellation of debt.   She will only owe taxes to the amount that she is solvent before the debt is forgiven.  If she doesn't have any assets, there's no tax to worry about.  Also, there's an exception for principle residence, but this may be going away.  Just fill out form 982 and check box 1b or 1e.

Seeking the Brass Ring

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Re: Desperately need advice (keeping my mother out of financial ruin)
« Reply #13 on: July 31, 2015, 06:09:52 AM »
You need to find out what the costs would be for a management company to rent it.  Even if your Mom is only breaking even until the market rebounds she'll be in a better position to sell it then.  If the mortgage is $820 and the possible rent is in the $1200 range then it might be workable.  It's not a good rental investment but it would prevent foreclosure etc.

In the mean time I'd keep it on the market listed at the price you need.  It does not cost anything to list a house, only to sell it.