Short Sale with Attorney (foreclose, mortgage, mortgage, sales)

[Humboldt1]

I appreciate any insights regarding doing a short sale. Per my prior thread, I am in Illinois and looking to do a short-sale.

I have been informed by my attorney that there are attorneys who specialize in short-sales who allow borrowers to drag out the short-sale process, which allows borrowers to continue to collect rents while not making mortgage payments for 1-3 years.

What can other people tell me about this strategy? I have heard this has been highly effective for some people in FL and CA as well as LV. Thanks.

[bbronston]

I am not being "judgy" but I think owners who continue to collect rents while not paying their obligations to their lenders (or homeowners associations or condo associations) should not be treated by the banks in the same way as someone who, for reasons beyond their control, are out of work and unable to make payments but continue living in the home until they get a job. I don't know if they handle things differently but, frankly, it seems like they should foreclose faster in circumstances like yours. Are you unable to pay your mortgage payments?

[Humboldt1]

I am able to make payments and have done so like clockwork for the past 5 years. However, even with putting 20 percent down to buy my properties I am underwater. I would like to recoup my down payment and closing costs.

My engaging an attorney this should slow down the short sale process. One of my co-workers is just finishing up a short sale, which has lasted 18 months without an attorney in FL.

After closing costs are taken out (they put nothing down), he is netting around $10K (they have rented it since moving to Chicago) on a $100K property that his wife owes $200K on.

I am still weighing whether or not to go ahead with the short sale strategy as I do have 794 credit score (as of last week) and $100k in stocks ($200K additional in retirement accounts, which I am told they cannot touch).

I am also looking to change jobs before I start the process as I understand it may be difficult to find another job in financial services for a few years after the short sale.

I will be meeting with an attorney next week to discuss whether or not this strategy makes sense and if so, how to protect my liquid assets from creditors.

I have found an attorney who will do the work for $500/mth for both properties, which seems more reasonable. Basically, this will save me $3300/mth as long as the process drags out. This attorney will also negotitate loan modification if I choose to keep either of the properties where the attorney gets 10% of the principal reduction.

I am fully aware that my credit will take a hit, but this will allow me to save $79,200 (2 years of payments) to $118,800 (3 years of payments).

As far as tax implications, I have 5 years of rolling losses on both properties as well as primary residence for property that is the most underwater. I will not owe taxes on any principal reduction.