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If you've thought about short sale, or maybe even just walking away, this story might be of interest to you.
At the end of 2009, we tried to research carefully what might happen before we started the short sales on our primary and 2nd homes. Lots of mis-information out on the web. We couldn't even find an attorney who could confidently give us advice or guidance. So much of what is happening is uncharted waters.
We live in North Carolina, and had been told this was a non-recourse, non-deficiency state in regard to a person's primary residence. This turns out to not be true in many cases.
Bottom line - Primary residence,we owe $400,000 on the first mortgage, $50,000 on the 2nd. We found a buyer and the Sales contract price is $415,000. The first mortgage holder agreed to pay the 2nd lien holder $3,000. The first mortgage holder agreed to forgive any shortages on the payoff, and not charge us with a deficiency. Big relief on how this one has unfolded.
Though we don't owe anything more on the 1st mortgage, its a different story on the 2nd. The 2nd lien holder, BB&T, made us any offer. They agreed to take the $3,000 from the 1st lien holder. Then, they gave us two options for the $47,000 balance: We could pay half the balance, $23,500 at closing and they would forgive the other half. Or, we could bring nothing to closing, and take back a note for 75% of the amount owed, payable at 4% interest over 10 years. After some negotiating, the best deal we could get was to bring 25% of the balance due to closing, pay 25% over 10 years at 4% interest. With the other 50% of the balance forgiven.
We got the purchase offer/contract the first week of May, got approval from CitiMortgage (1st lien holder) by the 3rd week of July, and just got the deal worked out on the second lien the first week of August. Now the buyers will proceed with inspections, and getting their loan. We expect closing to occur by the end of September. Almost 5 months for the process by the time closing rolls around.
The payments were not behind when we started the process. After getting no where with the first lien holder, we stopped making payments. After the payments got 45 days behind, we finally started getting some action out of the lenders.
The second home saga continues. Wells Fargo holds the 1st on that one. They have been a nightmare to deal with. Round and round in circles with the paperwork. Literally faxing the same 40 pages of documents 6 different times. This process began the middle of June. We were almost to the end of the process, when Wells kicked us out of the short sale process due to one missing document. Wells asked for this piece of paper, which our buyer had to sign. He is now deployed with the Marine Corps, and it took about a week for him to be able to get the emailed document, print, sign, scan it, and send it back via email. Wells shut down the case file with in 4 days of asking for this document. So back to square one.
In the mean time, the second lien holder - BB&T - has made us the same deal for paying them off as they did on our primary mortgage 2nd.
The shortage to Wells Fargo is about $120,000 with the purchase agreement we have in place. At this point, we have no idea if Wells will pursue a deficiency judgement on the shortage. We hope to have an answer in the next 10 days.
We stopped paying on that morgage in February. Foreclosure was set for August 10. We attended the hearing at the end of July, and asked the Clerk of Court for an extension to see if we could get through the short sale process. She extended the foreclosure date to the end of September.
Though we have had to enter into this short sale nightmare due to documented hardship (our family income has dropped by over 50% since 2008), and despite the fact we have put over $150,000 out of our pockets into these properties ( and lost all of it due to the decrease in values), and despite the fact we can't sell these properties for even what we owe on them - it turns out to be just too bad for us! There isn't too much we can do to avoid still owing money on the second mortgages, and it looks like we may not be able to avoid a deficiency to Wells Fargo on our second home.
I would have at least considered letting both houses go to foreclosure and then looking at declaring bankrupcy. Not always an option, but probably worth considering.
I don't agree. Deciding to declare bankruptcy is very personal and must be advised by a local bk attorney.
If that was directed at my post, what exactly don't you agree with? I said I would have considered it. All options should be considered. And certainly talking with an expert (attorney/accountant) should be part of the process.
Thanks for the informative post on short sales. Had no idea is what such a slow process and I bet most buyers aren't aware either and need patience when purchasing short sales.
I would have at least considered letting both houses go to foreclosure and then looking at declaring bankrupcy. Not always an option, but probably worth considering.
I know in states where there is recourse that this is often considered as that is the only way to have the debt discharged.
I agree that it should be looked at, but I still think a short sale with full settlement language is a better option when at all possible.
Have you tried getting the buyers to bring some cash to the table to help pay off the second? If they are getting a good value they may just do so.
Do you have an attorney/negotiator handling any of this for you?
Have you tried getting the buyers to bring some cash to the table to help pay off the second? If they are getting a good value they may just do so.
Do you have an attorney/negotiator handling any of this for you?
That seems like it would never fly with the first mortgage holder.
That seems like it would never fly with the first mortgage holder.
It may work if the 1st is being paid off, and only the 2nd is short. Not clear from the OP. Otherwise, I agree the 1st will want any available cash to go towards their loss before the 2nd gets more money.
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