I am so upside down in my investment property.

To set the scene, about one or two years ago 1,000s of investors found some really great deals on properties that they could buy, renovate, and resell. (Some bought to rent) They put 5% to 10% down or through hard money rehab loans and refinance, may have bought with no money down. Based on the economy of the day, the buy was a great deal.

Then the bubble started breaking at different times over the past 2 years. Some could not get the home sold, so took a back up plan of selling lease to own and hoping the tenant buyer would cash them out quickly, but they took a while to do it and today, the house does not appraise high enough, so they are faced with taking a loss, or in some cases cash out of pocket because they now owe more than what the house will appraise and sell.

Others had the rentals cash flowing, but the taxes increased over the years, the insurance increased over the years and the interest rates on the loans increased. Their original plan was to refinance into lower rate loans after one or two years, but again with the glut of foreclosures on the market, the houses will not appraise high enough to allow them to refinance, if they can even find a lender that will refinance investment property.

All in all, they really want to sell this non-owner occupied property, but it appraises for less than what they owe and they are stuck. Many times the rent coming is just covers or in some cases does not cover the mortgage. They call me as the Director of the local REIA Group and ask me for advice.

First let me say I am not an attorney, and I would recommend getting competent advicee from the right people. But I am going to share with you what I have observed. Secondly, this is for non-owner occupied houses, if you live in your house, many of the new foreclosure laws will force your lender to work with you on many of the options I am going to share, but if it is non-owner occupied, you are pretty much at the mercy of the lender.

I would start with a phone call to your lender or lenders and outline the situation with them. You owe more than the house will appraise, the rent is barley or not covering the expenses, and you have to make some tough choices with funds coming in and you may let the house go into foreclosure. Also be armed with data on the area, how many bank owned houses are currently for sale in the area, how many boarded up houses are in the subdivision, how long it is taking bank owned houses to sell, and the prices they bring.

Ask them for your options that they can give you.

We called on some of our properties and they were willing to modify the loan. Your lender may or may not do this. They might lower your interest rate. They might reduce the amount owed. They might re-amortize over a longer period. They might put back payments on the end of the loan. They might do any combination of the above. And they might not.

Remind them of the new law. Remind them that your tenants just signed a 1 year lease and if they foreclose, they are going to have to manage your tenants for that year plus 3 months. Banks are not property managers, so they might be more willing to work with you.

If that works great, if not ask them about a deed in lieu. Would they be willing to take the house back and declare the loan paid in full. Some will, but others may want you to sign a note for the deficiency and get on a payment plan. May be ok if the deficiency is only a small amount, but most people are seeing deficiencies of around $20,000, and most people do not want to agree to paying off that $20,000 in debt. But it might be an option for you. You sign it back over to the bank and they write off the loan either with or without the deficiency judgment.

The last option, would be to see if they will consider a short sale. Never mind if you are current or not. Talk to them and let them know you will be late soon and many of the banks will consider your short sale option. If you can sell close to the amount owned, but not quite, they will be more willing. But if you owe say $60,000 and you can only get offers in the $15,000 to $20,000 range, they might not want to play, and again they might bring up the deficiency again.

If you want to try the short sale approach, contact your local REIA with your situation, and ask them for one or two people that work short sales in the group and see if they might take on your project. You could even work one yourself if you can get a member of the group to make an offer. Also note that often times the offer made on the short sale, will set the price of the sale at the courthouse. So if you can't get the deal worked, at least you have a rough idea of what the opening bid might be, and your person making the offer might be able to buy it at the courthouse. That's the way it works many times, so do with that what you will.

If you have tried what you can as the person or company that owes the loan and you just can't get anything to work, all is not lost, there are still options. For another resort, you might want to get with a loan modification specialist, they might be able to renegotiate your loan for a fee - usually about $1500 is what I have seen. They often times have an attorney review all your paperwork and find some mistakes that could be used to sue the lender, and the lender might back down and renegotiate as they loan could be set aside completely if there are mistakes, and almost every loan made in the past few years is going to have one or two mistakes in the paperwork somewhere.

Another option would be to find the note buyers in your REIA group. In this case they collect all the same information on what the house would sell for should the bank foreclose, plus all the cost of dealing with your tenant or dealing with the vacant property should it be vacant. But instead of going to the loss mitigator that modifies the loan or approves a short sale, they go to a person that can negotiate the sale of your mortgage itself.

It seems that the sale of notes and mortgages do not have the rules of loan modification and short sales. The sale of notes at a discount are a lot easier and the lender may be very willing to let your note buyer buy your note at a substantial discount. The bank gets the potential bad debt off their books, they don't have a loan modification, a foreclosure, a short sale, or a delinquency on their books. Then the note buyer becomes your bank, they then may be able to: (1) work with you to reinstate the loan at better terms that work for the rent you have coming in, (2) sell the property at a current value and get you out of the house, (3) partner with you in the deal in some way. Again go to the REIA group and see who buys delinquent mortgages.

I hope this give you some ideas. If you have a Kansas City area investment property that you are upside down in, please call our office at 816-523-4447. Or email kcmoHomeBuyer@gmail.com with the details on the house: (1) address, (2) beds, baths, etc, (3) rent and lease terms, (4) mortgage owed, payments, late fees, (5) condition of property and cost of needed repairs. We may be able to work a short sale or buy the note. We can't help everyone as we don't buy in all areas, but if we can't we may know someone who can.

As a note of the deficiency judgment, we had a debt collection company visit and speak at our RIEA group and they said the best way to stop a deficiency judgment in its tracks would be to declare bankruptcy. Then it goes away, but there are other issues involved with bankruptcy, so talk to an attorney to explore your options.

Kim Tucker along with her partners Don Tucker and Joe Reece have been buying and selling homes in the Kansas City Market since 1999. They are cash buyer's and can close quickly. They are buying to make a profit and will remarket most properties for sale shortly after the purchase to their pool of cash buyers looking for good rental property opportunities in the Kansa s City market. They can be reached at 816-523-4447 or at www.kcmoHomeBuyer.com. They also have industry partners that they can refer properties to if they do not fit their model.

Stopping foreclosure and buying notes and buying through short sales in Kansas City Missouri, Raytown Missouri, Grandview Missouri, Independence Missouri, Prairie Village Kansas, Mission Kansas, Roeland Park Kansas, Overland Park Kansas. Call us to stop your foreclosure!