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Thomas Swartz
Thomas Swartz, Lawyer
Category: Real Estate Law
Satisfied Customers: 3002
Experience:  Twenty one years experience as a lawyer in New York and New Jersey. Former Appellate Law Clerk.
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Hello, My husband and I recently relocated to Maryland,

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My husband and I recently relocated to Maryland, but have a condo that we own in New Jersey. We currently own $158K on the condo, and it is now worth $100-130K. We have never missed a payment. We refinanced in 2009 with through the HAMP program in November 2009 and as such we do not qualify for another HAMP refinance because the cut off date was June 2009.

We can afford to make the payments for the condo in NJ, as well as where we rent in MD, but we just recently found that we were expecting and would like to now buy a home in MD (rather than rent). With the new cost of a baby, our ability to pay the condo mortgage and a new mortgage for a home MD will seriously become strained.

After we buy our home in MD, we really do not care about a credit hit if we walk way from the condo property, but we want to know if there are any other options. Especially considering the that fact they in NJ, the bank can get a deficiency judgement for the difference between the mortgage and the amount the property sold for.

Please help.

You can offer the lender on the condo a deed in lieu of foreclosure. A deed in lieu of foreclosure is simply a deed in which a borrower (such as yourself) conveys all your interest in the property to the lender to satisfy a loan which is in default to avoid foreclosure. You are not in default yet as you are continuing to make payments. But you can approach the lender and indicate that you will shortly have trouble making the payments, and offer the deed in lieu of foreclosure

The advantage of this to you is that you immediately get released from the personal indebtedness of the loan and you avoid foreclosure proceedings. The lender will not be able to come after you for a deficiency judgment. It will also impact your credit less than a foreclosure would. The advantage to the lender is that they will not have to go through the time and expense of the foreclosure process.

Since you owe more than the market value of the property, the lender may not accept a deed in lieu of foreclosure. But the amount owed is not that much greater than the market value. So, the lender may consider it.

Another option that some lenders consider is to allow you to conduct a "short sale." This is where the lender agrees to allow you to sell the property for less than what is owed. You would sell the house to a normal buyer (you are not giving it to the lender), and the lender simply agrees to accept all the proceeds of the sale to pay off the loan. Here it is important that you have an agreement in place with the lender that if it allows the short sale it will not come after you for any deficiency.

Working with a local real estate attorney with either of these two options is important as you want to make sure you are completely released from any further obligations whether you do a deed in lieu of foreclosure or a short sale.

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