A short sale will negatively affect your credit, but not nearly as much as a foreclosure or deed-in-lieu ~ read this entire article for details on each alternative.
A short sale simply means that the amount of the mortgage balance owed is greater than the current market value of your home. Homeowners who are in financial difficulties and facing foreclosure often opt for a short sale in order to escape the foreclosure process. This is precisely the situation now across the United States where the sub prime adjustable rate mortgage mess has caused mass foreclosures and significantly reduced the value of real estate.
A short sale takes place when the lender agrees to accept less than the amount you owe him on your mortgage because you don’t have enough equity to sell the home and pay all the costs of the sale. And make no mistake, the lender must agree or you’re out of luck.
the effect on your credit report
You will suffer much more damage to your credit report with a foreclosure than you will with a short sale. It will also take considerably longer to restore your credit rating once your financial difficulties are resolved. In general, here’s what happens:
For a Foreclosure or Deed-In-Lieu of Foreclosure
- Expect about the same things to take place. Quite often this means a loss of between 200-280 points on your FICO score. A pre-foreclosure FICO of 675 could drop to as low as 395, essentially eliminating you from future credit approvals. It may be as long as three years before you can qualify for another home loan.
For a Short Sale
- Expect to suffer some credit score damage, but nowhere near as much. Loss of FICO points will be around 75-125 and your report will show it listed as a ‘pre-foreclosure in redemption’ which is far less negative. You will most probably be able to secure a new home loan in about a year and a half.
In any case, it is a good idea to consult with a lawyer, tax accountant (CPA) or a good real estate agent who is experienced with short sales. These professional may charge you a bit for their services, but failing to have the right counsel could end up costing you a sizable bundle. So don’t consider going it alone. Get the help you need.
Know Where You’re At
NOTICE: Don’t get your credit score from anywhere else except myfico.com. They have real scores here, not the fako crap that many sites give you. These are the real deal.
You Need An Experienced Short Sale Agent!
From my blog here I’ve developed an extensive network of real estate agents that have short sale experience. If you’d like a referral, fill out the form below and I’ll have someone available in your area to help with your short sale ASAP.
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hi melissa and girlndebt, i am also in FL, tampa to be exact.
on monday i am going to call my mortgage companies and see if they can restructure my loan… maybe put us in a 30 yr mortgage and possibly lower the amount we owe, as i have read on some other sites that its possible they may do that for people to save themselves the lost money through forclosure or short sale. if they will do that i will consider renting the townhouse out, but will still lose about 700-1000 dollars a month.
otherwise i will still be looking on doing a shortsale. i just really dont want to ruin our credit… the whole point is that we want to buy a BIGGER and better home that suits our family. with damaged credit we couldnt do that.
i will be on here daily, reading all the stories, and will tell you guys what the mortgage company says.
Aurora does short sales. So will Citi but you have to definitely prove hardship it sounds like you have a good chance. Hurry and list your house though. You folks cannot get this done without listing your house. For those of you that have one mortgage… you are in a lot better situation.
Most lenders will NOT do anything unless you are late… sorry to be the one to tell you that. If any of you think that you are going to do this without your credit being dinged, marred or taking some kind of hit then you are kidding yourselves. But it is not the same as foreclosure or bankruptcy, there are a few good companies out there that are tenacious and can actually clean up your credit, after the short sale is done, but again do your homework.
This has to be a business decision for you and your family. If you purchased or refinanced in the last 4 years then you are in the same situation as the rest of us. (JennMS) If you can afford your home and are looking to upgrade but your value is just not there in the property you have, then yes you should restructure your loan and make that an investment property. But you are definitely not in the same situation as alot of people who can’t afford their homes at all.
For any of you that are using your charge cards to live off of to keep your homes…bad move. Do not trade CASH for your CREDIT.
Countrywide now has a program for Modifications it costs $499 to do them, but it has to be a Countrywide loan — they will give Interest Only for Five Years Low Interest Rate. If they are just the servicer of the loan you don’t qualify. You won’t know unless you call your lender and find out if they have anything available. If they don’t, then come back on here and tell us they don’t. Doing NOTHING will not make your situations any better. If you want a loan modification, when you call your bank — tell them you are looking to do a LOAN MODIFICATION…don’t stop until they get you to the right department.
If you list your property with an agent — DO NOT LIST FOR MORE THAN SIX MONTHS .. do not get locked in with an agent if you do not know if they are good or not. They all try to get you to list for one year. One thing I have learned in all this.. everything is negotiable.
There are other options out there — but they cost money.
I also live in Broward — where are you located?
Thank you girlndebt for your comments has anyone else fell a victim to the universal default clause. That kind of freaks me out. What if the mortgage company sues us is that common? How hard is it for them to take our pensions away? We cannot get the money until maturity can they take it when we can get it?
I am worried about ruining my credit. Who would be a good person to talk to about finding out if this is a good option for our situation? The tax preparer, a lawyer, my pastor at church, the church treasurer, listen to the mortgage broker. How high is gas going to go?
Wonderful advice CG! What are the odds of many of us not just posting from the same state but from the same County? That is crazy. I live in NW Broward (Tamarac/Coral Springs area). I think some people here got caught up in the ARM mess but most including me got the shocker from the insurance and taxes that crept up on us! Yes, you budget for those things but you never expect them to triple so fast.
And the best advice was not to put this debt on your credit cards! That’s what we ended up doing and well, that is why I am “girlndebt”. 1 year ago, I had perfect credit and did not want to ruin it and did what I had to do to make sure everything got paid. I ended up putting most of it on credit cards. Including the home repairs to get the house sold. Once the house was sold, we were left with high debt and the minimums alone were too much. We wanted to do the right thing and get it paid off. The search was on for second jobs, more income-we sold nearly everything and couldn’t make a dent in the debt. Now with the economy the way it is and gas prices soaring, my credit seems to be the last thing on my mind now. For us it is about survival and we learned from all this really. We have consulted with an attorney and are in the process of filing BK. Gosh, just 1 year ago I was one of those people so worried about damaging my credit. It is amazing how things change so quickly!
Lisa-talk to anyone you can. Some people are going to have their comments and you are going to hear some things you don’t want to. What is important is that you feel comfortable with the decision you make.
Mellisa,
I also live in Tampa, let us know what the mortgage company says.
For those of you who have already gone through the short sale process…what does one say to the Mortg company when they start calling because you are behind. Our shortsale package just arrived to them and I doubt they have had time to assign it in the Mitigation dept yet. We are almost 2 months behind now. Is it ok to go ahead and tell the person on the phone or wait? I know it’s just the customerservice collection side calling to remind us…so I don’t want to give to much information until I know the right person has my detail.
Sounds like alot of FL people go caught up in the ARM as well.
THIS IS IMPORTANT! When the lender calls — it is the Debt Collection Department calling. They have NO CLUE what’s going on in Loss Mitigation Dept. The Debt Collection Dept is there to collect money. You need to tell them you are working on doing a short sale and are working with Loss Mitigation Dept. and that you are doing everything in your power to get out of this mess. They will still ask you — Can you make a payment? “No not at this time!”
Thanks cg this is exactly what I though,they should be calling tomorrow @9:00am like clock work….lol
Thanks cg for all the helpful info. once my husband gets in tomorrow hes going to call the mortgage company. yes we can afford the payment… for now, but for how long? last year our total payment was $1300 a month. No one mentioned it would hit $1700 this year. then when the ARM matures in 2.5 years where will it balloon to? as i said my best friend and neighbor has the same townhouse, same credit, etc but has a 30 yr mortgage and her payment is only $100 more than mine! my first step is to see if they will restructure the loan for us, maybe take some of the principal off…but i highly doubt that one. just an idea i got off someone from one of these sites.
JennMs,
You are starting exactly where you need to be… Get the loan restructured. Who is your lender?
Keep us informed no matter what direction it goes. We are all here to support you.
Good Luck!
Thanx for all the comments neighbors! I actually called Hope in regards to my mortgage and they did help me a little..meaning..they took all my information and was supposedly sending it to my lender, Option One. I called the loss mitigation department, but never received a call back from them. That’s why I’m looking into the short sale theory. I also asked a friend who is an accountant and he said that when a short sale does go through, whatever amount you owe to the bank turns to be an income that you need to report when you pay taxes the next year. I don’t know if that’s a good thing or a bad thing. My mom is actually trying to do a short sale also with a company. I’m gonna see what happens with her case before I even start the process. If it turns out good though..i will definitely put their names on here for all the south florida peoples!
I’m in Deerfield Beach by the way. I’m not behind on my payments at all right now and really don’t intend to either honestly… I just don’t want to fork out so much for my mortgage ($1400 not including maintenance or ANYTHING…no tax, no insurance ) which rounds up to be like $2000! And i only have a condo! Also..if i do make my home an investment home and try to buy another home…would lenders actually approve me? I’m like JennMS, i want to get a bigger home also, but just not sure how to go about it.
Mellissa
Tell your accountant to keep up with what is going on…..
Mortgage Forgiveness Debt Relief Act
http://www.irs.gov/individuals/article/0,,id=179414,00.html
No tax consequence for the next 2 years on homestead property.
cg, we have aurora for 138k and citi for another 20k.
cg and melissa,
so here is an update of what i got from my mortgage company Aurora today… remember, i owe them 138k and another 20k to Citi but i havent called them yet.
talked to a girl at aurora today and gave her the whole run down on my situation, exactly as i said it here to you guys online. i never even mentioned a shortsale, i was going on and on about restructuring my loan. she said i would have to send in all sorts of info to get the restructure approved. things that included a hardship letter, bank statements, taxes, bills, paychecks, etc. i was told that they would get me into a 30 yr fixed rate upon approval. they wouldnt take any off my principal balance though, which is my problem… we would then still own a townhome that is only worth half of what we are paying on it… no help.
then she ended up transfering me to the lady that would be the one who would authorize the loan restructure. she told me i should do a short sale! i told her we are not behind on payments, and tend to be 2 weeks ahead, etc but that we are concerned about our 5 yr ARM and the homes continuing decline in value, and our growing family issues. she said all options will hurt your credit… even restructuring the loan! so i said, if they will both hurt my credit then why would i force my family to stay in these cramped quarters and lose a ton of money at the same time? she said thats exactly why she recommends the shortsale.
she didnt know how many points would be taken off my credit exactly, which has always been my main question. she said she would send me the short sale packet out immediately but do not fill it out until the realestate agent has an offer from a buyer. we would then send it in and they guarantee your answer in 20-30 days. they even send a guy out to inspect the home and make sure the offer is fair and market value. so i said great, send it out now.
then she patched me through to the loss mitigation department who confirmed that i do not have to be delinquent on my payments to get a short sale. i then asked him how much it would affect my credit and he said he honestly didnt know but he thought maybe 150 points. i asked if that was on a person who was or was not delinquent. he said he didnt know but that i could call a credit reporting agency and ask them. he said aurora would report it as,”loan paid in full for less than owed”.
i then called experian who told me that they dont know how it would affect my credit as they are not a counseling service… whatever that means. but they did put me intouch with http://www.nfcc.org which is the national credit couseling service that will answer questions for free but they were closed when i called so i will try again tomorrow.
i also got ahold of a highly recommended real estate agent who only works with short sales and hes supposed to call me back tomorrow… we shall see.
so to recap- you do not have to be delinquent on payments to do a short sale… atleast with my mortgage company. how badly this is going to hurt my credit? i dont know yet. but i will find out!
JennMS,
Ok well doing a short sale entails both lenders. You need to get Citi to agree also. Citi will only end up with $1K to 3K depending on what Aurora allows to give them. Only owing $20,000 is a good thing. What do you think your house is worth?
JenMs-great they gave you that information, however maybe each mortgage company is different, when we talked to ours (Countrywide) they informed our agent that they would not consider a short sale if we were not behind in our payments, as why would they need to because we were paying. I have even spoke to real estate attorneys and previous mortgage lenders who have confirmed the same thing. I am not saying don’t pay I am just saying what I have been told.
As far as the credit reporting I am finding different answers.
1. It depends on when and how often your creditor reports your deliquent payments, once a month, every 6 months etc…
2. I do believe a short sale can lower your credit standing from 50-100 points where as a forecloser can be much higher.(200??)
I have been reading alot of information on the fico (credit scores) forums.
http://ficoforums.myfico.com/fico/board?board.id=generalcredit
I think it all depends on your lender etc???
My husband and I have great credit but as like others here we can’t afford 2 house payments when we move. Think gosh this loan is in my name only so he can still qualify for a mortgage.
Currently Countrywide has not even assigned my shortsale to a mitigation specialist…but the collection dept called again about my “no payment” and I informed them what was happening and they noted the acct and said they would not call every day but once a week and would look to see when it was assigned. They did not ask me for a payment at all…
This has been very helpful for everyone to post their responses.
Since we do not have a concise answer to ‘how will a short sale affect my credit’ I stumbled upon this blog in the hope of finding some ‘real life example cases’.
It will certainly depend on many factors but I certainly think for many a short sale is a much better option than a foreclosure. An attorney is the best person to ask. Everyone’s situation is different and just because one person had a good/bad experience doesn’t mean yours will be the same.
If you are in SW Florida we can help you sell your house. We can also give you names/#s of attorneys to consult with for answers in regards to other options – deed in lieu, bankruptcy, foreclosure.
The best advice I have is to research as much as possible then make a decision. Waiting months and months is not going to make things easier for you. It is a stressful time in your life and handling these things sooner than later will alleviate that stress much quicker.
Good luck. Feel free to visit my website(s) for more information. We are real estate professionals with experience in selling homes as short sales. We always advise everyone to consult with their attorney and tax accountant for their specific advise.
I decided to call my mortgage company on Friday because we decided a couple of months ago to do a short sale, called a Realtor she said that we have to be deficient on our payment to do a short sale to be in default so since I had already paid my house payment for the month of May we wouldn’t be in default until June 16th. So we put our house on the market and got three offers. Filled out the packet from the bank and it was like June 12th and we were going to do this, but I decided not to because my husband has a pension that would pay the differance for our house, but it dosen’t come due until 2010 and I am affraid that they can take this money if I do the shortsale and if we are deficient on our loan means we have to move now and if the shortsale dosen’t go through then we will be moved with a lease and facing foreclosure and then have to move back.
So as I said I called my mortgage company today and they said that I don’t have to have a late payment to qualify for a short sale. I can qualify based on my income vs. my expenses. She said that I didn’t qualify in April because my deficit was too high. I found out that through my company your monthly expenses have to fit into their formula. Your deficit cannot be too big (which is the differance between your income and expenses). So when I submitted income in April I made 2,500 and my expenses were 3,900 then you don’t qualify. So, I redid my expenses over the phone and lowered them like for gas I said that I pay 200 a month but really I pay about 900 because we drive over a thousand miles a week (which is a good reason why we want to move). So I got it in the range they wanted it and now my application is in review. I can choose to lower my monthly payment or do a short sale based off the same qualification packet.
Help.. We cannot afford the second home we purchased in 05 any more because our financial situation has changed and renting it at half our monthly pmt is not an option. We have an approved short sale from the bank for 140 k with a buyer. Our purchase price was 360 K in 2005. ( the hardships and all docs have been completed) I was told by an attorney that we will be taxed on the difference of $ 220 K from the IRS which equates to $ 90 K in taxes because it shows as income from the IRS. That also sounds like financial suicide. We cannot afford to pay that in taxes. He said that it is better to let the bank take the home by a DIL or foreclosing on it because the bank will not send a 1099 on a DIL. He said that the banks have so many DIL’s and foreclosures that they rarely go after you in less than 1 % of these cases. I am very confused and I need your help. What is the best option for us? How bad will our credit score be damaged?
First, you all have been so helpful! Thank you for taking the time to make these comments and to share your experiences.
I am going through a similar situation as a few of you. Here are my facts…
- Bought my place (primary residence) in Northern CA for $655k in 2005
- Could probably sell it for $525 – $550k today
- I am 100% financed with 2 loans: 1st is with ING for $500k; 2nd is with Chase for $155k
- I can currently afford the monthly payments and have kept current on both mortgages, but my wife and I will be moving out of state soon (most likely in January). Once we move, I am sure that we will no longer be able to afford the NorCal home in addition to our new home after the move.
- I have enough money saved up in my retirement and other accounts to cover the difference, but I obviously do not want to give up that big of a chunk of my life savings.
Based on your experiences, it sounds like the following is the best course of action:
1) Find an experienced realtor who has dealt with short sales
2) Have them contact both ING and Chase to begin short sale discussions
3) List my property immediately at a market-competitive price but with the goal of getting an offer as soon as possible (through aggressive price reductions if necessary)
4) Continue following up with ING and Chase while the house is on the market and after we have an offer. If we get no response, begin defaulting on our monthly payments (for whichever lender is not responding) to get their attention. Since our credit will be affected either way, the goal is to avoid a foreclosure; a few extra late payments will only be icing on the short-sale-credit-reducing cake.
5) It is highly possible that one or both lenders will not currently agree to the short sale since my income still exceeds my expenses by a decent margin (especially Chase – the second lender – since they will stand to lose the most money by selling the house short). It is worth noting here that even though the sale price would satisty all of ING’s loan, if we can’t get Chase to agree the entire deal will fall apart.
6) If I cannot get both lenders to agree, my only option would be to demonstrate a hardship by quitting my job and moving (and therefore move the income to expense ratio to a point that the lenders deem sufficient for a short sale).
So my questions are…
1) Did I miss anything above?
2) Assuming I cannot get both lenders to agree to a short sale, how likely will it be that both lenders STILL do not agree to a short sale after I quit my job and move?
3) If they still do not agree, would my only options be to proceed with a foreclosure, pull money from my life savings or file for bankruptcy (and could I even file for bankrupcy given my savings? should I in that situation?).
4) Assuming I can sell my home for $550k (remember, my first mortgage with ING is for $500k and my second with Chase is for $155k for a total of $655k), is it possible to sell my home and use the money to completely pay off ING and partially pay off Chase WITHOUT negotiating a short sale? If so, could Chase come after me for the difference now or in the future? What would they have access to (tax favored accounts like 401k and IRA?)?
Thanks for reading, and please let me know your thoughts!
Hi everyone, DebtKid here. Just a quick note that if you need to find an agent with short sale experience, please fill out the short form located:
http://www.debtkid.com/short-sale-agents
I’ve been referring people for the last 6 months, and all have been very pleased with their real estate agent. Experience with short sales is very important, you don’t want just some random agent.
Thanks, and good luck,
DebtKid
I would like someone to notify me regarding a possible short sale in the state of arizona.
i took out 38,000. from my residence for a down payment on a secound house. the other home debt is 144,000. its been around three years now and up till now i havent missed a payment. the problem is the monthly payment of 1,300.00 minus 750.00 from (hope they stay) renters along with all my other bills are more than i make monthly. i have made the payments because of yearly help of income tax refund. this year its going faster than before. my question is , Will i lose my own residence that i have only 10 years left to pay for if i stop all payments of the secound residence in order to try and save myself and my family of five . i owe gmac mort. 111,000. and golden 1 bank 33,000.
hello you guys…
i have a new issue to discuss and wanted to know if anybody can give me some input….
i was thinking about a short sale on my home, but before i do that while i’m still current, should i try and buy a second home first and then short sale my first one? since i already will have a home i won’t be as worried about my credit score since i already have credit cards…what do you guys think? is that fraud?
Short Sales can be an answer, although they admittedly take quite a long time to process and are not guaranteed for buyers.
hey everyone, i have an update on my situation for ya! but first…
Melissa- if you can afford a second home and can get a loan then yes, id do that. my realtor actually told me that would be an option, however with our incomes that didnt work out for us. plus, you might have a hard time convincing the banks that you cant afford the first home if you just had to jump thru loops to prove you could afford both with the second loan.
ok so for me… we listed our place and got an offer within 2 weeks which is fabulous. we submitted the paperwork to the first and second lenders and one of them processed fast and sent out an appraisal company to be sure our offer was fair and have agreed to the price already. however, citi mortgage, the one we only owe about 20k to is taking longer. they say its taking so long because so many people are losing their homes. its been about 4 weeks since we submitted everything and they assure us that they will assign someone to our case in the next few days to a couple weeks. i wish they’d hurry up we want to get out of here!
we are still current and even a bit ahead on the payments so whenever we run our credit again i will let you all know the effect this had on it. we are going to rent a place for the next year or so and then try to buy again when the market hits rock bottom.
i will continue to update you all as new things happen. good luck everyone!!
I have some questions about short sales. I bought my home in Minneapolis a few years ago during the time in which the market was high. Unfortunately the market in that geographical location has taken a slide for the worst. It has depreciated so much that no one can get anything out of their home. I have had a medical condition where I have been released from my job. Now without an income I am no longer able to make any payments. I have a short sale pending. Will the banks make any effort to speed up the process knowing that I have lost my job due to medical reasons? My mortgage holder is a bank that is now in bankruptcy. I would think that they would want to get it off their shoulders. Any advice would be great.
Ok..so I tried to see if I can get approved for another mortgage, but nope..can’t…income doesn’t qualify. So i guess my only option is to see what the mortgage companies can offer in regards to modifying loans!
Just an update. I made an earlier post around June, we have had our home on the market for short sale since February. Just a little over a month ago we were approved–meaning we got an asking price and a negotiator who will look at any offers. Our other offers just kind of went away since it took so long. It is actually better, I think, for a potential buyer to go for the REO. There are so many, but they are not kept up. Anyhow, even with the negotiator it is still a waiting game and we have not heard a thing about our recent offer in the two weeks since it has been submitted. I have to say that this entire process is discouraging. I am even more discouraged because it looks like this government buy out thing may not benefit those who are attempting short sale. Well we will see. I am not to clear on what they are attempting to do other than buy a whole lot of distressed homes off of the sinking banks and try to sell them out to places that are going to have a hell of a time qualifying people for loans. Am I off? Well I do wish you all luck, and I did see a post here with somebody wondering if the bank would speed things up because of a medical condition and sadly, I do not think so, but hang in there because if you are already in distress who knows maybe the gov is going to try to keep us in our homes rather than have massive amounts of empty homes to try to fill. Most of us have earning power, just not enough to fulfill the jumbo loans that we probably should not have gotten. I sure have learned a lesson from all of this and feel quite foolish, I hate making a contribution to the chaos, but there really is nothing–short of–working like a slave for a home that may not reach the value I payed in my lifetime–else I can do. Take good care. Holly
I have an interesting situation… I am in the military with a security clearance. I am current on my payments, but I am not going to be able to stay current for long and both my checking accounts are at zero (or lower). I am interested in short selling (or just selling in general) my house in southern MN, but it is “worth” only 80k and I owe 98k. The biggest thing I have is I can’t have this causing negative affect on my security clearance for the military or I will loose my job! I haven’t been able to find anywhere that says if it will have a negative affect on my clearance. Does anyone know?!
BenY,
I am certain that there are special programs for military. I don’t know about clearance, hopefully somebody out there does. I know of one program for military where they cannot foreclose on a home for 10 months. I am almost done with a short sale. Communicate with your bank and try everything! I posted several times earlier on and it has not been fun. Long, drawn out, unorganized and finally the bank has looked at and accepted an offer, now we will go into escrow. Even the agents that think they know about Shortsale have never done so in such a crisis, nothing is ordinary. But, proof hear, almost, that it can be done. we bought our home for 480K it sold for 250K…..isnt that sad!
I am so glad that I found this website. I have been so stressed out about our current situation. We have started the short sale process, but what scares me is how long it might take ? and there isn’t any thing you can do except keep your fingers crossed and hope for the best. My husband and I purchased a home in 2005 and had to out bid 5 other couples for the home we had to cash out our 401k’s and drain our savings to get it. Looking back on that it seems rediculous now .. We ended up getting a horrble loan( our fault for not being able to see the future?) We were told that it would be a great investment home for a rental property? and of course we agreed! our plan was to rent it for 2yrs and then get out with a 20% profit… well you all know the rest . We were not able to sell and the mortgage doubled and the rent is only paying half. So I am paying the bank $1,000.00 a month for somebody else to live in my house and I owe 40k more than it’s worth. It really stinks, we have had our house in short sale for 2 months and we have’nt even had a showing yet, is that normal? Our renters are moving out this month, and we will now have to pay $2,300 a month(there’s no way) I don’t want to go into forclosure!!! I guess we just have to get a real estate lawyer? I called Hope Now,I had heard that they can help with these situations. They told me that they couldn’t help me because it wasn’t my primary home? I guess with this economy you just have to loose everthing you worked for and start over ??? Sorry to vent but I guess it’s better than the alternatives?
Don’t give up, just keep on trying to do the short-pay, ours lasted 10 months and we just went into escrow yesterday. We did have tons of showings which makes me wonder what kind of marketing your agent is doing or what area you are in–are other homes moving? We stopped paying and moved out as to have a better chance at selling the home. Also our Realtor had some prior experience with shortsale’s but nothing like trying to do one in this economy. There is a process to the whole thing and each bank is different which is why you can’t get clear answers from those not directly involved, but I do know that the banks are willing to work with people if you keep communication open.
It has been 1 year since my “nightmare short sale” and I can tell you that it was no walk in the park. I know things like this aren’t always easy but I believe the whole process can go smoother if everyone involved is on the same page with each other.
One word of advice: COMMUNICATION
If you have gone through a short sale then you probably know what I am talking about. If you are going through one now, I wish you the best of luck! It may be a “rough ride” but once it is over-it will be a relief.
How does a bank remodify your loan & how can you qualify????
Holy crap, there are other people out there like us!
We have a situation that isn’t as bad as some, but any advice would be welcomed! I read through what everyone had to say, and I don’t know where we fit into this all. My husband and I moved away from Grand Rapids, MI right after we got married for his job on the border of IN/MI. Thinking we were going to raise our family there, we bought a house at a great price in that area. It is in a very sloooowwww moving area, and presently anything over $50,000 isn’t selling. We decided a year and a half ago to move back home b/c we were due with our first baby any minute, and my husband was able to get a great job by our family (something we hadn’t been able to do 2 years before).
OK, so the situation: We have had our house on the market for almost 1 1/2 yrs, and have been living with my parents in GR for that time (GETTING REALLY OLD). There is very limited action on our house due to the ares, and presently none at all. Our house is beautiful, it is priced extremely aggressive with several price reductions, and it is still getting no bites. We can’t move back (no jobs there), and we are at a loss as to what to do because we can’t handle things the way they are anymore. We’re beyond depressed about this, and at this point are definently going to take a loss of our home. So do we attempt a short sale, so do we just hang in there? My husband has a great income, we have great credit, but we can’t take much more of this and are not confident that our home is going to sell in this market. There are literally no houses except foreclosures moving in our area.
Are there any other options out there? Would we be able to restructure our loan, or is that not even something for us? We currently owe $127,000ish and have the house priced at $130 (appraised much higher 3 years ago), so we are already going to be in the hole. My husband called the mortgage company a while back and they said that there is nothing that they could do for us except give us short sale papers. However, even with a short sale, you still need a buyer, and there are none unless I want to sell my home for under $50,000, which is not happeneing. With our car payments and such, we don’t dare do a second mortgage, and can’t really afford to take on an apartment on top of it all. What do we do?? We can’t afford mentally and physically to have our lives on hold forever!! We can’t stay in our current living situation and continue to keep our sanity. We don’t know what to do, and are literally falling apart over this all. Please help us!!! Thanks so much!
Wow, I wish I would have found this website sooner. We are done with the short sale but now I am dealing with the backlash of my credit being ruined. So, my question now is; Where do I go to make sure that my credit report states “pre-foreclosure in redemption’ or for it to read the number of late payments on mortgage and states ” paid in full for amount less then owed” or anything else on those lines.
Sandy-call your lender and go over your options. You will be surprised at what may be offered to you. They may not offer anything but it is worth a shot.
Sarah-you said exactly what I said when I found this site-holy crap! If I were you, I would also try to see what your lender can offer. Back before this mortgage mess, they weren’t so willing to work with people but now they are being a lot more helpful. They may be able to restructure your loan to make it more comfortable for you and your husband. Have you tried renting your house out? That may be an option for now until the market picks up…hopefully. I personally would try to hang on but not if it is too much on your family.
Stacy-when you pull your credit report-you will see your mortgage info on there. It should say it next to your mortgage info. It may not report right away though.
I just noticed-all your names started with an S-lol
Good luck everyone!
For those of you considering loan modification or short sales, have your real estate or mortgage broker contact Option Next. They expedite and facilitate the process and fully disclose all progress to the homeowners and agents. They really are working to revitalize the community and prevent foreclosures. Brokers still receive payment and the homeowner walks away with the absolute best possible outcome. for more information, http://www.optionnext.comor email bcw@optionnext.com.
I email this address and the email came back as un able to deliver.
If your inability to pay the mortgage while your short sale is in progress mess up your credit rating even if the lenders are paying the investors until the process is completed.
How long are you still allowed to stay in your house after the short sale is completed?
Hi Lanita, this reply is probably a little late but if you are doing a short sale be ready to move quick. Once it closes the new owner can take possession.
Has anyone conducted a "short sale" in Texas? What is the liklihood that a lendor will come after you for the balance of the loan?
Has anyone been though short sales on the property that was a secondary home? Will Lender do anything on my primary home? since my husband is the owner on the secondary home and my name is not on the secondary home?
Hi My, Just to be clear I think a lot of people on this blog seem to forget the purpose of a short sale. #1 You have to be behind on your mortgage and have some kind of hardship to justify why you are in your current situation. If you have equitable assets somwhere else then a short sale is no the answer because it will never be approved. This will come out in your financials. Talk to a Real Estate attorney but my profesional opinion is if your married these are still joint assets. It is all about complete disclosure. Good Luck…Dean
Hey DebtKid, thanks for all of your information! I was wondering about the remaining balance on the loan after the short sale goes through. I live in MN and Wells Fargo told me that it’s a “myth” that the bank can come after you for that amount. I know people who have had to pay it, so now I’m worried that I’ll have to take out a huge loan after the sale goes through and wonder if it would be better to just foreclose. Please let me know if you know anything about this. Thanks!!
Hi mplsgrl2004, ( I am not the Debt Kid) You are correct in that it is not a myth. The lender has the right to file a defeceincy judgment against you, not that it happens all to often because they know you just went through a short sale because you had no money. I personally require the lender to provide a letter stating they will waive any such recourse when we negotiate short sales. And no it is not better to just foreclose because they can still do the same thing on a foreclosure as well. Another thing they may do however is 1099 you for the deficeincy (this happened to me personally) The current tax code gives you one freebee for this on your personal property so it wil not be added as income. you do need to consult an accountant for tax implications however. Good luck….Dean.
We own a home in WI and it has been on the market for 15 months now. We started at $450,000 and now we are at $315,000 which is less than we owe the bank, plus we have a second mortgage for another $12,500, that we are just paying a minimum amount on. We moved to Alaska and are renting a home for the same amount as our mortgage. We have cashed in both of our IRA’s and now have nothing in savings. We owe doctors for medical bills and are paying $100 per month to each of them. We actually qualify for a $400,000 loan but we don’t have a down payment of 20%. We are also trying to sell our 35 acre lake property. I feel like we are between a rock and a hard place. We have made all of our payments. But now our 2nd half of our property payment is due and we either skip a mortgage payment to pay it or borrow from our revolving second mortgage loan. We have started talking about a short sale on our house in WI because now if we sell, we will owe $38,000 including closing costs and will have to take loans out on our care and an unsecured loan on my husbands salary. It just seems like a short sale makes more sense! If we do a short sale, do we still have to pay the closing costs? How does it all work?
Well first, most of the time the buyer is going to pay the closing cost he the one getting a good deal on the property right. Really about the only thing the sellers down here in Miami Florida pay for is the title company just because some title companies do not know how to work short sale closings, so we has the seller like to control the process. First you have to get a buyer before you start the short sale process. Second drop the price down fast 5K every week until you’re about 10K below market value. After you get a buyer you then have to summit a package that your lender will provide you. It best to seek a realtor that works shorts sales this can take a lot of time out of you.
Hi Susanna, first of all I specialize in Shortsales and Carlos is incorrect on a few counts. #1 The presumption in a short sale is that you have a proven hardship and are behind on your 1st mortgage. In this case the bank is approving a HUD 1 specifing the cost of the sale which comes out of the sale price approved. The seller niether pays closing costs nor receives any monies from the sale. #2 If you have equitable assets such as your 35 acer lake property then this will not get approved. The attitude of the bank would be liquidate your asset and pay us. Again there is not enough information listed here to determine whether or not you would qualify for a short sale or even if it is your best course of action. Should you have further questions feel free to e-mail me acdcbike@comcast.net see my post below to Nathan regarding short sales.
My question is: can the bank take our tax return away before our short sale is approved? My husband is having our tax account delay filing for 2008 until our sale is approved so they can’t take our return. Is that true they can do that? We could sure use the money now.
That is not true they can only ask you for what you have in bank in form of cash as deficiency payment. Right when the bank aprove the short sale they will tell you the terms on how much they want from you,make sure to always get an attorny to read the offer once it comes back from the bank.
Hi Amber, wish I would have read this earlier. However this is not a Bankruptcy and no one is going to take money out of your account on a short sale for a deficeincy. The short sale package that went to the bank would have included all your financials, tax returns, bank statements and so on. The determination of the short sale is based on these items as well as a banks assesment of value..BPO. If there were a deficeincy the bank may come back and file a judgement for this at a later date. Besides the fact that they require your last 2 years returns anyway. It is also a good idea to have professional handle a short sale for you if you are not familiar with the requirements or the process. Either a realestate agent or an Investor like myself that specializes in these. Good luck to you…Dean
Hi All,
I have been reading a lot of the posts on here and it is actually scaring me from some of the outcomes however there seems to be some positive hope. I unfortunately had to file BK from robbing peter and paying paul with my credit cards. However, in doing so I was and still am trying to keep my house and the bank seems to be on board with this. It has by no means been an easy battle but I have so far managed to meet their requirements but things are getting more and more trying as time goes on. I am a two family, owner occupied home owner, and am contemplating a short sale because even after BK I find myself struggling to make ends meet. Looking back on everything I should not have been given a mortgage on this place and I am now in a really bad situation. The bank is supposedly in the process of modifying the loan but I don’t think they are going to come back with a figure that I can afford. Does anyone have any advice on what to do in the event they don’t? I am looking into short sale but don’t even know if that is an option at this point since the bank is working with me. Should I put it up for sale in the mean time while this is going on or just see where it goes? If anyone has any input please let me know. Greatfully yours, Frank.
Hi Frank, this is a tough one. Obviously if you are adament (I am not a good speller so excuse any mistakes)on keeping your home and the bank is working with you and most importantly you can afford it then continue doing what you have done. However should the bank not come back with a modification you can afford you will have to make some tough choices. If you have enough equity to sell the home in the currrent market to cover the mortgage then by all means this would be your next recourse. Loan modifications are generally a temporary fix to a long term issue. I understand 100% what you are dealing with, I had a BK and lost 5 properties, do not however blame yourself. Banks like to say in ther ads how they are making 4% loans to people now who have been responsible…what a load of garbage. They were not responsible when they and many unsrcupulous Mortgage brokers made bad sub prime loans to millions of people who could not afford them. Read my reply below to Nathan for some answers to short sales. Let me know if I can answer any further questions. Good luck…Dean
We are considering a short sale or even foreclosure. Currently we have rented out our house because we cannot afford the mortgage payments. We have both a first and second combined that come to around $410k. I recently got laid off and things are getting really tuff. We live in a much smaller house now that we are renting and would like to stay here. Our house is rented out on a lease until November and we are in a lease on the place we currently live in for another 10 months. What should we do? Can we do a short sale without living in the home?
Hi Nathan, Before I go any further just let me state that I am not an attorney and that you should consult with a professional to answer any legal questions. I am however a real estate investor that specializes in short sale and over leveraged properties with a team of seasoned loss mitigation and negotiating professionals. We locate sellers who require our expertise and then work with realtors as our buyers agents. We give immediate offers on the property then negotiate with the bank to get an accepted offer. I ironically got into this business because I was a hard property investor that lost everything between 2006 and 2007 when the market ate all my equity. At the time I had never heard of a short sale and as such it cost me a lot regarding my credit. I accidentally ran into a Broker that suggested this course of action and I was able to get this accomplished on one property I had. So I know your frstration first hand. As far as your current personal situation is concerned it all depends on a few main factors, #1 It is irrelevant wether you are living in the home or not, What is relevant is the current status on your payments. Are you current or deliquent (have you recieved a Notice of deliquency ?) Foreclosure procededings generally start at 90 days past due. #2 Are you over leveraged on the home (you owe more then it is worth) #3 Do you have a difinitive hardship (which we must prove to the bank). If you are laid off with no income that is a good reason. So Nathan these are a few criteria regarding short sale, many people who proceed with a short sale have already vacated with the assumption that they would just let the property go back to the bank. This is more common then some may think. As far as what you should do, this is completly dependent on the questions I posed above. Not all properties meet all criteria for a short sale. Obviously if you had equity of any kind it would benefit you to find a cash buyer. In the current market this is not that easy unless you have room to negotiate on price. Foreclosure is absolutley the worst option..I know, and it should be avoided at all cost. One thing we do when negotiating with the banks is that we insist that there be no recourse to the seller for any deficencies in the future and we get this in writing. Many lenders will still issue a 1099 to you for the deficency amount which you would turn in with your taxes, the current code allows you to do this once on your personal property and be exempt from the amount. Again I am not an accountant either and you should consult one regarding tax implications.
I am also so glad I found this website! I am in a situation where I need to move out of my townhouse but I owe more than it is worth. I have never been late with a payment and not behind, but am thinking of short selling just to get out of it. My main concern is what happens to the co-signer??
Hi Ashley, if you are not deliquent you will not be able to short sale. My suggestion would be keep your credit intact, find someone to lease the house to until a time when the market may recover to swing your equity situation in a positive direction. If you are not able to manage the property yourself and there is room in the lease amount hire a property management firm, they generally charge between 8-10% of the gross rent. On the second part of your question anything negative regarding the credit used to obtain the loan will affect your co-signer as well. Good Luck…Dean
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