It was just last summer that Charlotte Perkins made the hardest decision of her life as she and her husband Jim were caught in the vise of the housing bust.

Wanting to downsize their lives as they headed toward retirement, they bought a new house in Mesa, Arizona, before they sold the old one, also in Mesa. Their previous home had been appraised at nearly $400,000 at the height of the market, but as the housing crisis ravaged Arizona, they were told they'd be lucky to get $200,000 for it.

They were carrying a loan of $260,000 on their original home alone, meaning they were well 'underwater,' owing much more than it was worth. Combined with the mortgage on the new house, their housing payments had become an "anchor around our necks," she says, threatening to gobble up all their retirement savings and leave them with nothing.

The couple made a difficult call: They would do a 'strategic default,' and simply stop paying the old mortgage. "We really had to wrestle with it," said Perkins, 60. "We had worked all of our lives to build good strong credit, and we're proud people. But it came down to, 'Can we keep doing this?' We had to say 'No.'"

As the housing bust drags on, many homeowners are thinking like Perkins. Almost 11 million homes are now underwater, says financial information provider CoreLogic. Around 3.5 million homeowners are behind in their payments and another 1.5 million homes are already in the foreclosure process, according to online marketplace RealtyTrac.

As banks start to work through their backlog of distressed properties, the New York Federal Reserve estimates that 3.6 million foreclosures will take place during the next couple of years.

So, the question is: Does it make sense to keep paying a massive mortgage, knowing that it might be decades before a home regains its prior value? Or is that akin to - as columnist James Surowiecki recently wrote in the New Yorker - "setting a pile of money on fire every month"?

"I constantly get the saddest e-mails from people saying, 'I've exhausted all my life savings, my retirement is gone, and now I have to default,'" said Jon Maddux, CEO of YouWalkAway.com,

a foreclosure agency that helps clients with strategic default (and charges a fee for it). "But if they had seen the writing on the wall a couple of years earlier, stopped paying the mortgage and stayed in the home throughout the whole process, they would be in a much better financial position."

Moral Quandary

There's a moral component to that decision, of course. People naturally feel embarrassed about breaking a contract and not paying their bills; no one wants to be branded a deadbeat. But remember that companies default on their obligations when it makes financial sense for them to do so, via the bankruptcy process. Even the Mortgage Bankers Association itself, in a flourish of irony, arranged for a short sale of its Washington headquarters.

It's not personal; it's business. So think of strategic default as a business decision, and do a cold-eyed cost-benefit analysis of whether it makes sense for you, advises Carl Archer, an attorney with Maselli Warren in Princeton, New Jersey.

"People think it reflects on their integrity, and say 'I wasn't raised this way,'" said Archer. "But the more businesslike attitude is to say that there's a contract, there are penalties for violating that contract, and sometimes it just makes financial sense to break it."

The penalties largely revolve around your credit record, which admittedly gets blown up in the near-term. For a few years you can likely forget about qualifying for a mortgage or a car loan. When lenders are ready to take a chance on you again, you'll have to pay for the privilege, with stiff interest rates due to your default history.

What Happens to Scores

Charlotte Perkins watched her credit score go from a pristine 800 to 685, dropping every time she missed a payment. Credit-scoring firm FICO estimates that someone with a 680 score would see that number sink between 85-100 points after a strategic default, and someone with 780 could crater 140-160 points.

Not desirable, of course, but not the end of the world either. For Perkins, for instance, she already had a loan on her Ford Escape, and the mortgage on her new house, before she even started the default process. She hasn't seen any changes on her credit cards since, in terms of limits or interest rates.

Now that the previous home was auctioned off in December, she can start slowly rebuilding her credit, a process that should take about seven years.

Strategic default isn't a decision to be taken lightly, of course. If everyone did it, the housing market -- and the banks -- would be in much worse shape than they already are.

The following are some of the issues to keep in mind:

1. Look to it as a last resort, not a first option. Your financial troubles could be alleviated with a simple refinancing, especially since 30-year mortgage rates are near record lows of below 4 percent. If the banks are hesitant to rework your loan, look into the number of government programs designed to keep you in your home, which can be researched at MakingHomeAffordable.gov.

2. Location, location, location. Each state has its own rules and regulations regarding foreclosures, which affect both the length of the process and what you could be liable for in the end. In so-called 'non-recourse' states like Arizona, California and Texas, a lender cannot come after you for any deficiency (for instance, if your mortgage was $300,000 and they're only able to sell the property for $200,000). In other states they can pursue the difference, in theory - which is why some homeowners opt to file for bankruptcy, to free themselves from those potential obligations as well.

3. Use the interim to save like a demon. If you're in a state like New York or Florida, which require a judicial review of every foreclosure, it might be a couple of years before you actually have to pack up. In the meantime, be extremely disciplined about stockpiling cash. That will help you with a down payment for a rental, to pay for a car in cash if you need to, or to clear up other debts you might have. "Save money as if you were still paying the mortgage," says Archer. "If you don't, then you'll run out of both time and money, and then you'll be in a real tough spot."

4. Know the tax implications. Historically, if you have a debt that's forgiven, the canceled amount is considered taxable by the IRS. In the wake of the housing bust, though, the Mortgage Forgiveness Debt Relief Act was drafted to spare you those taxes. That legislation expires at the end of 2012, though - so if it's not extended, you could potentially face a tax bill for the difference.

5. Talk to a professional. A bankruptcy or real-estate attorney can help you through a very tricky process. The National Association of Consumer Bankruptcy Attorneys, for instance, has a searchable database of lawyers at www.nacba.org.

"Strategic default is not an easy decision, and there's a cost either way," said Gerri Detweiler, director of consumer education for Credit.com. "Would you rather be $200,000 underwater, or would you rather have seven years of damage to your credit report? It depends whether you're finally at the point where enough is enough."

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BoardWalk Premier Reatly INC

STEVE VENNEMANN

651-334-8312  ONLY CALL FOR MINNESOTA OR WISCONSIN  THANK YOU

Land contracts is very popular in today’s real estate markets IN THE 70-80S Some people call them installment sale contracts, sometimes called contracts for deed, land contracts-owner financing-seller financing there is a lot of different ways to call owner financed homes but they all boil down to the same thing. Sellers offering attractive financing terms-Contract for deeds are usually a little over market rates but more easier to qualify than standards of institutional lenders.

With tight mortgage standards this is one of the best way to sell a property. http://www.nationwidecontractfordeeds.com

What is an Installment Sale Land Contract?

•               Land contracts or contracts for deed are a security agreement between a seller, called a Vendor, and a buyer, called a Vendee.

•               The Vendor agrees to sell a property by financing the purchase for the Vendee.

•               The Vendor retains legal title and the Vendee receives equitable title.

•               The owner-carried financing can include an existing mortgage balance or the property can be free and clear.

•               Upon payment in full, the Vendor hands the Vendee a deed to the property.

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WHAT IS A WRAP AROUND MORTGAGE? OR WRAP AROUND CONTRACT FOR DEED?

•               Wrap-around contracts contain an existing mortgage.

•               The Vendee makes one payment to the Vendor.

•               Upon receipt of the payment, the Vendor pays the underlying lender's payment and keeps the rest.

•               If the existing mortgage has a lower interest rate than the rate on the contract, the Vendor earns extra interest on money that does not belong to the Vendor.

This is how it works.

1.            Say the sales price is $200,000.

2.            The Vendee puts down $20,000.

3.            The Vendee agrees to make payments on $180,000, bearing interest at 6.0%, payable $1079.19.

4.            The existing underlying loan is $90,000, payable at 5% interest with a payment of $322.09

5.            The Vendor earns 6.0% interest on $180,000 of equity, PLUS 1.% interest on the existing mortgage of $90,000 and pockets $ a month.751.10

Power of Sale

•               Some title companies draft and insure land contracts that contain a Vendor, a Vendee and a Trustee.

•               Like a trustor in a trust deed, the Vendor and Vendee assign right, title and interest to the trustee for the purpose of securing the Vendor's and Vendee's obligations.

•               In the event the Vendee stops making payments, the Trustee has the power to foreclose under the power of sale.

•               The process of filing a notice of default varies from state to state.

•               Title insurance is highly recommended when buying a house with owner financing.

Acceleration Clauses in Underlying Loans

All loans today could have acceleration clause Lenders have had a long history of calling loans immediately due and payable if buyers took title "subject to" to the existing loans. That's because lenders wanted the buyers to qualify, pay loan points and higher interest rates.

BUT IN TODAYS MARKET THEY ARE MORE INTERESTED IN JUST GETTING PAID. THEY HAVE THE RIGHT TO ACCELERATE THE LOAN BUT WILL THEY DO IT NOT LIKELY. Seek legal advice on this subject.

Vendee's Bundle of Rights

For all practical purposes, the Vendee owns the property and has the right of:

•               Possession.

•               Quiet enjoyment and use of the property.

•               Exclusion, forcing others to leave the premises.

•               Resale.

Benefits to the Vendee

•               No qualifying, although the Vendor could ask for a copy of the buyer's credit report.

•               Down payment flexibility. The sellers usually require around 10% down do the sale price to do a contract for deed.

•               Length of land contract term, interest rate and payments are negotiable.

•               Low closing costs. There are no lender fees to pay.

•               Fast closing. Transactions can close in 7 days or less.

•               No appraisals unless buyer wants to pay for one.

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Benefits to the Vendor

•               Typically sellers get market value on their property-home-condo-town homes whatever type of property they have.

•               If taxable, possibly can qualify for deferred gain.

•               Monthly income.

•               Often a better rate of return than money market accounts.

•               If property is non-conforming, it's an easy way to sell.

•               Quick closing if the property is vacant usually we can close on a property in 7 business days.

•               Usually higher rate than most stocks in today’s stock market

Buyer Tips

•               Get an appraisal.

•               Obtain title insurance.

•               Home inspection

•               A realtor that specializes in owner financing

•               Engage the services of a holding company to retain possession of an executed deed and the original documents.

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Seller Tips

•               Pull the buyer's credit report.

•               Include both Vendor and Vendee names on the existing insurance policy.

•               Hire a Real Estate Broker who specializes or very knowledgeable in contract for deed financing.

•               Below is a list of related sites where you can list your property at no cost. Great spot to offer contract for deed financing-rent to own-owner financing-seller financed homes for sale.

•               Buyers will have some sort of credit issues when buying a home with owner financing. The main thing to look for is a tax lien that can be attached to your home. Other things like credit scores shouldn’t be a big deal they will have time to work on their credit  for a few years while they are paying the contract. There are companies out there you can pay to have the buyers contract payments recorded at all 3 major credit bureaus which will help raise credit scores. Remember the quicker the scores go back up the quicker they may be able to refinance the home.

•               Put your home where 100os of potential buyers or sellers will see the property FREE OF CHARGE. http://www.nationwidecontractfordeeds.com/seller_register.html 

•               IF FOR SOME REASON YOU DON’T WANT TO SELL YOUR HOME ON A CD AND WANT TO OFFER RENT TO OWN-RENT TO BUY-LEASE ANY OF THESE OPTIONS YOU MAY ALSO PUT YOUR HOME FOR SALE ON THESE SITES. GOOD LUCK TO YOU—

•               OUR GOAL IS TO HAVE EVERY IN THE UNITED STATES OWN A HOME With land contracts-rent to own-owner financed terms these terms give most people a change at the American dream.

•               Bad credit-Foreclosures-Bankruptcy –repos don’t worry owner financing is the key for you to own a property with these past issues or current issues.