The past few weeks, I have not been keeping up on Key West real estate, other than Cayo Dave's Blog and some skimming of the MLS. I've been researching Costa Rica real estate for a buyer and, WOW. Talk about deja vú.
Costa Rica is enough behind the states that this feels like instant replay. Here, everyone is an agent, everything is for sale... EVERY conversation is rah-rah real estate, like Key West 2003-2005. Makin' me dizzy...
There is SO much enthusiasm here, even in the face of a declining market. I spoke to three brokers in two days last week and every one of them said, "Last year was gangbusters, this year is flat." That's an actual quote from one. Then they said, "It's a slow spot. It'll be back." Did I fall through a wormhole?
In the meantime, back in Key West realtime, I have friends in trouble, talking to bankruptcy lawyers. They called me for advice, but I don't have much to give. Yet.
Here are the options I know so far:
FOR PEOPLE WANTING TO HANG ON:
- Bridge Loans
- Hang in there with your cash as long as you can
- Interest only loans
- At least one KW bank is reducing interest rates on adjustables when the time comes
- Delaying payments and tacking them onto the rear of the loan, like lenders did after Wilma
- Refi to a 40 year loan (not a significant difference in payment)
FOR PEOPLE WANTING OUT:
- Foreclosure
- Short Sales (if the bank will participate)
- Bankruptcy
Bankruptcy is not the deal it used to be. Since they changed the rules in 2005, your primary residence is not necessarily safe. In Florida, homesteaded property is still protected. But that's it.
Here's the significant part that no one remembers - if you walk away from a mortgaged property and the bank sells it on the courthouse steps for less than what you owe, YOU ARE ON THE HOOK FOR THE REST. YOU borrowed the money, not your house. YOU owe the money back. You've put your house up as collateral, but if the house doesn't cover the note, YOU owe the difference. This becomes "unsecured" debt and the lender can get a judgment against you, take your assets and attach your paycheck... All is not necessarily forgiven.
If it IS forgiven, the IRS sees this as money you made (the bank gave you the money and you didn't pay it back so you "made" that money)... ergo YOU OWE TAXES ON IT. You don't have that money anymore, of course, but the IRS still wants it and THEY can grab your assets, if there are any left, get a judgment against you and attach your paycheck.
The real trouble is that, once your paycheck is attached and your other assets are gone, how will you pay the mortgage on your primary residence? How will you pay for your car? Get to work? Buy food? Etc., etc., etc.
All the more reason that good solid info would be VERY helpful for those in distress. Any ideas?
