Stop! Wait! Don’t move!
Doug didn’t mean it literally when he said walk away from your house. Let me suggest he meant, camp there without illusions until the house is actually sold at foreclosure.
“Walking away” is shorthand for making no effort to keep the house. Often that is a fundamentally sound decision. The arrears are too great to cure or the debt dwarfs the property value.
But remember that every month you live there without making payments is a month you don’t pay rent, a month that you can save some money for the inevitable move.
In many markets, the interval between the last mortgage payment and an actual foreclosure sale is lengthening. Here in California, what used to be a four month process often drags on for 10-15-20 months. It differs depending on the foreclosure laws of your state and the willingness of the lenders to own one more piece of property.
I ask clients to consider the period they can live in the house before title actually changes hands at a foreclosure sale to be the “return” that they get on their investment in the house. Do the math and see: (mortgage payment + property tax) x (number of months til actual sale) = ????
Handing the lender the keys accomplishes nothing, since the lender needs to have the title to the property in its name before it can sell the property. So you do no favor to the mortgage company by abandoning the property. There’s certainly an argument that by occupying the property, it’s more likely to be maintained and not vandalized.
So, if you decide to “walk”, sit there, saving money, until the sale actually happens. You will have a chance to move out in an orderly fashion when the sale actually takes place. But that may be a long while after you stop paying.
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Exactly Cathy. I recently blogged about the same thing.
Here in Florida a foreclosure that used to take 90 days now takes 18 months to complete. Camp out in the home, stockpile cash like crazy, and move out on your terms! Move out with a nice safety net made out of the cash you saved by not paying the mortgage payment for 18 months.
[...] For an additional perspective on the pros and cons of “walking away” prior to a foreclosure sale, read this. [...]
[...] on the other hand, you live in the home for free while a foreclosure takes place (often as long as 6 to 10 months), you’ll have saved $9,000 to [...]