Helping Dad Out of the Mess

Michael lives with his disabled father. He has about $300,000. His dad owes $475,000 on his house, but it's only worth about $200,000. What should he do to help his father out of this mess?

QUESTION: Michael in New York lives with his disabled father. Michael owns a business and has no debt. He has about $300,000 total. His dad owes $475,000 on his house, but it’s only worth about $200,000. What should he do to help his father out of this mess?

ANSWER: It’s very unusual to find a property that dropped 70% and hasn’t recovered at all. It sounds like the house was never worth $475,000. He’s not going to like my decision.

I would suggest you go buy a home for cash and you guys move there, then put this home on short sale. I guess you could make an offer on this but you are going to be hard pressed as a family member doing a short sale to get them to accept it. The refinance they did for him, or at least portions of it, could really be questioned if you were to get really ugly about it.

I would stop paying the payments and make them a good short sale offer of anywhere from $160,000 to $200,000 in cash, then you buy the house. If they don’t want to do it because you are a relative or it’s some kind of conflict, I would live there until they take it, then I would take your cash and go buy something. But continue to try to buy it on a short sale for market value or less until they foreclose on it.

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