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I had to relocate from North Jersey to South Jersey due to job issues. After 10 months (thank You Pompton Lakes PLUME!) we finally have an offer on the old house up north, but it's about $130k less than we owe on it... DEFINITELY a short sale! Was wondering if anyone had any experience with the process.
Paying 2 mortgages is kiilling us and I'd like to keep my credit as intact as possible but that's proving to be a losing proposition. I'm really considering stopping the payments on that house and putting that money to better use paying down other debt.
I am no expert but I believe a short sale will affect your credit pretty much the same as a forclosure. Any way you look at it your credit will take a major hit.
However, a bank will probably not work a short sale (I know most definitely will not) if you are current. Think about it, in their eyes, you are making payments so why would they forgive you 130K if you are current? You would have to stop paying for them to work a short sale with you.
I am no expert but I believe a short sale will affect your credit pretty much the same as a forclosure. Any way you look at it your credit will take a major hit.
However, a bank will probably not work a short sale (I know most definitely will not) if you are current. Think about it, in their eyes, you are making payments so why would they forgive you 130K if you are current? You would have to stop paying for them to work a short sale with you.
My understanding on short sales is if you stay current, your credit will take about a 50 point hit... and again, if you stay current, you can actually qualify for an FHA loan the month after a short sale. Short sales show as accounts closed for less than owed, far less harmful in both the short and long term than foreclosures.
As for the 2nd part, I had the same feeling but the only reason I'm current is my company is paying part of my living expenses until June as part of my relocation package. The bank is also getting the benefit of $17k of covered expenses by my company that will expire in June. My lawyer and realtor both said it could be done if I documented the move without having to go late on payments but we'll see.
In all honesty, I'm in a new house now. If they don't want to play ball I'll mail them the keys and tell them to enjoy trying to sell that house in what's now considered a toxic area.
Short sales are the worst kind of sales there are. When I was looking to buy a house, we saw several short sales and all of them were a nightmare to deal with. We had to deal with not only the home owner and the bank, but also a 3rd party vendor who either approved or disapproved the sale. Short sales can take forever to sell (if they do).
130K below what is owed sounds like the bank will not approve it. You need to ask your bank this question first and see.
Short sales are the worst kind of sales there are. When I was looking to buy a house, we saw several short sales and all of them were a nightmare to deal with. We had to deal with not only the home owner and the bank, but also a 3rd party vendor who either approved or disapproved the sale. Short sales can take forever to sell (if they do).
130K below what is owed sounds like the bank will not approve it. You need to ask your bank this question first and see.
Essentially, the banks won't even really talk to you until you have an offer... I did enough to atleast get a case manager assigned and they sent out their appraiser to value the home. Normally this would all be done after the offer comes in.
As for the $130k... banks "shouldn't" be concerned with sunk cost, i.e. how much they've loaned me and therefore stand to lose. At this point, a business should be looking at the best possible outcome. They can a) reject it because they feel I won't default, b) reject it because they feel a better short sale offer can be found, or c) accept it because the offer for the short sale, with the seller contribution ($17k my company is paying) is more than they'd get after legal fees, realtor fees, and maintenance fees after foreclosing and selling the property themselves. Any other option is rather unlogical, it doesn't make financial sense... you've got to believe a financial institution like a bank would operate in a way that makes finance sense.
Unfortunately from the bank standpoint you are a paying customer so they will continue to collect the payments until you really present them with a good explanation or reason for not paying. Like I said, you are still current. Also, banks are so overwhelmed that they are not making good financial decisions because they do not have the resources nor experience. They have already taken reserves against these declining values so they are in no rush.
I have experience having successfully bought a short sale 1 month ago with some of this mind boggling procedures that made no sense but yet this is how it works. To this day, none of this makes any financial reason but it happens.
how did you buy a house without selling the first? i assume you must've had either a large downpayment or your income is enough to sustain 2 mortgages.
i'd either rent out the first house and continue to pay, or sell both houses and fulfill my obligations.
how did you buy a house without selling the first? i assume you must've had either a large downpayment or your income is enough to sustain 2 mortgages.
i'd either rent out the first house and continue to pay, or sell both houses and fulfill my obligations.
I have no idea... the banks gave me financing, an FHA at their best rate... I wasn't going to complain... they appear to have a fairly substantial hole in their calculations where they forget to ask about daycare costs which are substantial for 3 kids three years old and younger. We put the 3.5% down and are moving forward.
We can't rent the first home for what it would take to cover the mortgage. With Pompton Lakes also being involved in the Plume and all the cancer stuff, my lawyer has strongly recommended against even considering the possibility due to the potential liability. I feel no obligation to "fulfill my obligations" as you put it... the banks helped cause the bubble by giving too many people too much money... the banks have caused the drop by not giving enough people enough money... they can share some of the burden of cleaning this mess up. Just my personal feelings on the matter, I won't lose any sleep at all that the banks are losing money in this.
I would be very careful and read up on deficiency judgements.
I've done some reading... even after selling the other house our finances won't be great... they'll have 3 months to file the judgement and if they go that route all they'll likely succeed in doing is driving me to bankruptcy... more wasted lawyer fees for them with no return. It's my understanding as part of the short sale I'll need to reveal my assets... both my month to month cash flow versus bills as well as my savings type assets... a thorough examination of those should show the bank it's not worth pursuing. From what I've read, they generally target those who have a positive net worth. All I've got is $250k in college loans and a $300k mortgage... they could try to come after the $15k or so I have in a 401(K) but I'm not sure they'd get far in that pursuit.
Last edited by nemmert; 04-19-2010 at 11:17 AM..
Reason: Grammar/Spelling
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