Housing Short Sale (1 Viewer)

[Cjw_55106]

[SIZE=medium]My main question is, does it makes sense to do a short sale and move to a rental home for the foreseeable future?[/SIZE]

[SIZE=medium]Situation: I have a mortgage and a second that make my house upside down. Over the years, I’ve fallen behind on the payments and have taken out 401k withdrawals to prevent foreclosure. This just makes a bad situation worse IMO. Well, I’m in this position again and am thinking of just letting the two banks do a short sale and move on.[/SIZE]

[SIZE=medium]The pros: [/SIZE]

[SIZE=medium]Getting out from a bad situation and in theory, moving into a better neighborhood for a lesser payment, most likely in a nicer house [/SIZE]

[SIZE=medium]Just the thought of letting the house go provides me with stress relief.[/SIZE]

[SIZE=medium]Don’t have to do the many things my current house needs (roof, flooring, fixing water damage, etc)[/SIZE]

[SIZE=medium]The Cons: [/SIZE]

[SIZE=medium]another hit to my credit (which may not matter much right now)[/SIZE]

[SIZE=medium]No longer own my home[/SIZE]

[SIZE=medium]May have to move again if the lease is not renewed in a year (or whatever the terms are)[/SIZE]

[SIZE=medium]Don’t like the idea of not paying what I owe[/SIZE]

[SIZE=medium]May take a decade to be able to buy again[/SIZE]

[SIZE=medium]Anyone have experience or things I might want to consider?[/SIZE]

 

[saintfool]

your mortgage lender or bank will have to approve the short sale.

my ex-wife and i were in a bad situation with a developer a few years ago. we decided it was in our best interest to get out and short sale to the new developer was really the only course of action. it was a process but we got through it. i have been renting since and happy enough with that. it's not the end of the world.

 

[Cjw_55106]

Thanks Saint, I am 100% confident they will approve the sale....but thats another issue if they decided not to.

 

[McGarnicle]

I did a short sale 4 years ago and my credit score is almost back to what it was before. And I got a car loan 6 months after my score collapsed, with a great rate. They saw that I never missed any other payments and it was right after the housing crash when lots of people had the same sob story.

One thing to keep in mind -- the shortage will count as taxable income. There was a provision where it was exempted because so many people were affected, but that expired in 2012 I believe.

 

[Cjw_55106]

Good to know. Thanks McGarnicle.

 

[Juxtatarot]

One thing to keep in mind -- the shortage will count as taxable income. There was a provision where it was exempted because so many people were affected, but that expired in 2012 I believe.

Tax can be avoided if discharged in bankruptcy, I believe. OP states that he has/had other credit issues so that might be something to consider if the amount is enough. Obviously, we don't know a lot about his situation.

 

[saintfool]

Thanks Saint, I am 100% confident they will approve the sale....but thats another issue if they decided not to.

the conventional wisdom is that you're not really giving the bank/lender any choice in the matter. i mean, you can just walk away. they would be happy to get whatever they can for the property. the trick in my experience was getting the bank to accept the offer price submitted by the buyer. the developer who bought us out was really paying less than a quarter of the original purchase price from us. the bank wanted more - obviously - and it took them a long time to arrive at terms that were acceptable to both parties. in the meantime, we were stuck in the middle.

 

[avoiding injuries]

Why not foreclose? I bought a short sale and was shocked to learn that the seller had made all of their payments, got their credit ruined and still had to pay the difference back. Seems like they didn't get much out of it.

 

[Cjw_55106]

I guess I just assumed a foreclosure was even worse?

 

[nirad3]

[SIZE=medium]My main question is, does it makes sense to do a short sale and move to a rental home for the foreseeable future?[/SIZE]

[SIZE=medium]Situation: I have a mortgage and a second that make my house upside down. Over the years, I’ve fallen behind on the payments and have taken out 401k withdrawals to prevent foreclosure. This just makes a bad situation worse IMO. Well, I’m in this position again and am thinking of just letting the two banks do a short sale and move on.[/SIZE]

[SIZE=medium]The pros: [/SIZE]

[SIZE=medium]Getting out from a bad situation and in theory, moving into a better neighborhood for a lesser payment, most likely in a nicer house [/SIZE]

[SIZE=medium]Just the thought of letting the house go provides me with stress relief.[/SIZE]

[SIZE=medium]Don’t have to do the many things my current house needs (roof, flooring, fixing water damage, etc)[/SIZE]

[SIZE=medium]The Cons: [/SIZE]

[SIZE=medium]another hit to my credit (which may not matter much right now)[/SIZE]

[SIZE=medium]No longer own my home[/SIZE]

[SIZE=medium]May have to move again if the lease is not renewed in a year (or whatever the terms are)[/SIZE]

[SIZE=medium]Don’t like the idea of not paying what I owe[/SIZE]

[SIZE=medium]May take a decade to be able to buy again[/SIZE]

[SIZE=medium]Anyone have experience or things I might want to consider?[/SIZE]

We were forced to short-sell in Austin a few years ago. My thoughts on the cons:

1. You're right, it doesn't matter in the grand scheme of things.

2. Does that really matter? Not sure why this is a con. Renting has its advantages.

3. This would suck but it may afford you the opportunity to find something better for less. Knowing the TC market (just moved back to Cali from there), I know that's probably a pipe dream.

4. I suffered this thought as well but sometimes life throws a curveball and you have to deal with it. Not knowing your circumstances, it's hard for me to comment more... but maybe when you bought the lenders were being too lenient. I know they were when we bought. We should have never been approved. Bad decision on our part but that's life.

5. Totally not true. Short-sales (and even foreclosures, bankruptcies) are becoming more and more prevalent these days. The market is picking up and banks will start lending again. There will be a larger segment of the population with these dings on their credit. You may have to pay a bit more down the road but rest assured you will be given opportunities to start fresh.

That all said, a short sale is infinitely "better" than being foreclosed. A friend of mine who processed short sales likened short sales to a parking ticket, versus foreclosures being DUIs.

The process is long and arduous. You will deal with idiots that are making $10 an hour to be your "customer service rep". You will "need to talk to a supervisor" more than once. God forbid the loan gets transferred (in my case, it did and we basically had to start over).

Good luck.

 

[Cjw_55106]

Suppose all parties decide to short sale....how long is it reasonable to expect to be in the house without making a payment? Would I move out before the sale begins?

 

[nirad3]

Suppose all parties decide to short sale....how long is it reasonable to expect to be in the house without making a payment? Would I move out before the sale begins?

I think we were in our house for at least a year while this process was going on. You do not need to vacate while it's up for sale.

Edit - and that doesn't even count the several months it took of not making a payment before they started asking us what we wanted to do (get current, foreclose, short sale, etc.)

 

[Cjw_55106]

Suppose all parties decide to short sale....how long is it reasonable to expect to be in the house without making a payment? Would I move out before the sale begins?

I think we were in our house for at least a year while this process was going on. You do not need to vacate while it's up for sale.

Thanks.

 

[avoiding injuries]

Suppose all parties decide to short sale....how long is it reasonable to expect to be in the house without making a payment? Would I move out before the sale begins?

I only know the details from the other side of the transaction. It took 6 months from my accepted offer by the sellers until closing. The sellers continued to pay. If they didn't, the process was going to be in jeopardy. They moved out a few days before we moved in. It may be a parking ticket on your credit report, but it costs as much as a DUI.

 

[Mr.Pack]

Have you looked into a Loan Modification?

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