ismina73 wrote:Good chance we can buy underwater property fro
In Malaysia a bit tough to buy underwater property (Loan outstanding > market price) compared to how it was in the US during subprime.
In US, many Underwater home owners were given option by bank to short-sell their houses, meaning the bank allowed them to sell the property and the bank only take whatever net proceeds were left over after closing cost and agreed to writeoff the rest of the outstanding owed.
House value before crash = $500k
Bought at 90% financing, loan = $450k
House value after crash = $400k
So say the bank agrees to a short-sale, and the price they are able to get is $350k after closing cost (agent+legal fee), the bank only takes $350k and writes-off the rest of the loan.
In Malaysia, there is no such procedure, so if your house is underwater, and you sell for < the outstanding loan amount, then you have to top up the balance to pay the bank and also pay the agency fees and other related cost. Therefore when in this situation and the seller no money, property will go to Auction.
From my understanding, even if go for auction and the price they get is below the outstanding loan, you will still owe the bank the balance. They can still file bankrupcy against you.