Legal Question in Real Estate Law in California

Re: Real Estate

If a house appraises for $92,000 and the total due on it is $79,000, you are $13,000 "above water" and even with commission and some seller closing costs, you'll theoretically come out ahead by listing and selling the property. On the other hand, if you allow a foreclosure, you'll damage your credit rating.

Technically, you don't "give the house back" to the lender by foreclosure, a "deed in lieu" of foreclosure, or a short sale, since the lender didn't own it in the first place. At a foreclosure, you don't know who the buyer will be; often, it is the lender, but it can be an investor or just someone who wants to live there.

Finally, it's fair to point out that a foreclosure sale might bring a higher-than-minimum bid; if the lender is owed $79K and the fair market value is $92K, there could be more than one bid and the high bid could approach or possibly exceed $92K, in which case you would receive the excess over $79K plus costs of sale. Nevertheless, a foreclosure is a foreclosure with the same negative effect on your credit rating.

Re: Real Estate

You are in the happy situation of the house being worth more than the mortgage. If I were you I would try to contact the mortgage company and ask if they would be agreeable to your signing the house over to them. By cooperating with them you can protect your credit rating.

If you just quit making payments, I believe that it unlikely that under California law the mortgage company will sue you. But your credit rating may be damaged.