Anybody know the requirements to doing a short sale? (Orlando: real estate market, 2009)

[FloridaMD]

Originally Posted by aneftp

The key word is "going through a divorce"

A divorce meets one of the "financial hardships" Sure the OP can get a divorce and meet one of those requirements. I'm not sure if the OP is going through a divorce or has medical hardships.

Examples of hardship are:
Unemployment
Divorce
Medical emergency / sudden illness
Bankruptcy
Death

But judging from the tone of the OP, he/she looks like they have some assets, have a stable job, and had the ability to put down a sizeable downpayment.

The OP looks like they are just frustrated with Florida and wants to move out. They have not lost their job. The OP's title is "FloridaMD" I assume the MD stands for medical doctor or from he/she is from the state of Maryland. MD could stand for "macdaddy". Don't know. But the banks will want to look at his tax statements and bank assets. It's not easy for people who are higher earners to walk away.

Yeah, you are right. I am a medical doctor. Don't really have anything in terms of assets (other than my car), as most of my money goes to student loans and this large mortgage I am paying each month that basically I am just pissing away as the housing values go down (still pretty young out of training, so haven't really accumulated much of anything).
At this point, I just want out of Florida for various reasons. I am wondering if it would be to my advantage just to quit my job and stay "unemployed" so that I would qualify for a short sale, then once that is done move out of state and then get another job. I feel like that would be gaming the system, but hey, seems to be what everybody else has done.

[annerk]

Yes, it was in Florida. My point is that the IRS should be treating the shortage as capital gains and taxing them (and everyone else with a short sale) on it. And Florida homestead laws do NOT protect you from IRS seizures.

[aneftp]

Originally Posted by annerk

Yes, it was in Florida. My point is that the IRS should be treating the shortage as capital gains and taxing them (and everyone else with a short sale) on it. And Florida homestead laws do NOT protect you from IRS seizures.

Yes, I know all about IRS laws. You are correct that the IRS can seize your property if the IRS has a lien against it.

But we are talking about Banks putting a lien on a property (the primary property on a homestead in Florida). The banks are not the IRS. To the best of my knowledge and I've talked to my cousin who is a bankruptcy lawyer in Florida, the bank can't put a lien on your primary property to try to settle a deficiency judgement against your secondary property. That's what the homestead law in Florida was intended for. Unfortunately, so many take advantage of this provision.

Yeah, up until 2007, the banks would send the IRS a copy of a 1099 form. Say you short sold your home for 100K less than your mortgage. That would mean the bank would send a copy of a 1099 form to the IRS. That 100K short sale would become a taxable event.

Please read this link (The Mortgage Debt Relief Act of 2007). This explains why short sales are not longer taxable events for primary homeowners.

The Mortgage Forgiveness Debt Relief Act and Debt Cancellation

Morally I do not agree with the law. But it's the law that was signed approved/passed by congress and signed by then President Bush.

[aneftp]

Originally Posted by FloridaMD

Yeah, you are right. I am a medical doctor. Don't really have anything in terms of assets (other than my car), as most of my money goes to student loans and this large mortgage I am paying each month that basically I am just pissing away as the housing values go down (still pretty young out of training, so haven't really accumulated much of anything).
At this point, I just want out of Florida for various reasons. I am wondering if it would be to my advantage just to quit my job and stay "unemployed" so that I would qualify for a short sale, then once that is done move out of state and then get another job. I feel like that would be gaming the system, but hey, seems to be what everybody else has done.

I figured you were in the medical profession. I am too so I can relate to what you are going through.

It would depend on how far underwater you are. If it's just 50K-100K, than you may just have to bite the bullet and eat the cost yourself. If you are underwater 200-300K, than you should highly consider consulting with both a tax lawyer (not just an accountant) and a bankruptcy lawyer.

It may be in your best case to do some research. The bankruptcy lawyer has advised one of my friends who is 300K underwater to quit his job (he is younger too (32). Take a long vacation (hey we doctors need a really long vacation). He moved in with his parents. He took a part time job in the ER doing per diem work. It's been almost 6 months. The bank is finally approving his short sale work. He has shown them he "can't afford" the mortgage through his "part time" work. Yeah, his credit is wrecked. But the Bank is going to "forgive him at least 250K on the short sale. He will try to pay off the 50K over a 5 year period.

And you can repair your credit within 2-3 years to a reasonable level (at least in the 600 range). And banks such as Sun Trust have physician loans so don't worry about not being able to buy a home within the next 5 years. The housing market isn't going anywhere but flat. Anyways, you don't need to be buying another home within 3 years after this housing crisis. So you can rent and start saving again.

[annerk]

Originally Posted by aneftp

Morally I do not agree with the law. But it's the law that was signed approved/passed by congress and signed by then President Bush.

So ridiculous--rewards poor behavior and bad judgement.

[aneftp]

Originally Posted by annerk

So ridiculous--rewards poor behavior and bad judgement.

I completely agree.

But these days, it's everyman (or woman) for themselves.

Honestly, one of my friends has owed almost 200K on student loans (from med school). It's taken him almost 10 years since graduation to pay off this 200K in loans.

But someone who's 200K underwater on their mortgage, gets that debt forgiven with a hit on their credit. I'm sure my friend who has paid off nearly 200K on his student loan, would surely trade a bad credit hit rather than having to payoff his student loans.

So what should the OP do?

As I told them, if it's only around 50K-100K they should pay up because they are making real money now.

However, if they are 200-300K "underwater" they need to take advantage of the provision in the tax laws.

Yeah, I know I am playing devils advocate. One one hand I think it's morally wrong to walk away from your debt obligation.

But on the other hand, you need to take care of yourself first. If you have 100K plus in med school loans (that can never be discharged) and than are underwater another 200K in your mortgage (that can be forgiven in a short sale). I'd advise that person to go the short sale route.

They'll be 50-60 years old before they are out of debt if they want to fulfill those mortgage obligations.

So yeah it sounds wrong, but you have to take advantage of the tax code in this situation and move on with your life.

[FloridaMD]

Originally Posted by aneftp

I figured you were in the medical profession. I am too so I can relate to what you are going through.

It would depend on how far underwater you are. If it's just 50K-100K, than you may just have to bite the bullet and eat the cost yourself. If you are underwater 200-300K, than you should highly consider consulting with both a tax lawyer (not just an accountant) and a bankruptcy lawyer.

It may be in your best case to do some research. The bankruptcy lawyer has advised one of my friends who is 300K underwater to quit his job (he is younger too (32). Take a long vacation (hey we doctors need a really long vacation). He moved in with his parents. He took a part time job in the ER doing per diem work. It's been almost 6 months. The bank is finally approving his short sale work. He has shown them he "can't afford" the mortgage through his "part time" work. Yeah, his credit is wrecked. But the Bank is going to "forgive him at least 250K on the short sale. He will try to pay off the 50K over a 5 year period.

And you can repair your credit within 2-3 years to a reasonable level (at least in the 600 range). And banks such as Sun Trust have physician loans so don't worry about not being able to buy a home within the next 5 years. The housing market isn't going anywhere but flat. Anyways, you don't need to be buying another home within 3 years after this housing crisis. So you can rent and start saving again.

I owe about 320K on the 420K house I bought. Looked on Zillow for other houses on the street that I would say are pretty comparable to mine, and they are showing those for around 220K. I guess I'm right on that cusp then. Btw, I still owe about 140K in student loans that you are right, I can never discharge. Just not sure what route to go based on these numbers.

[Silent1900]

The requirements? A complete lack of integrity and the ability to pass off your debt to a bunch of people who don't deserve it without losing sleep over it.


Stand up and pay your ****ing debts.

[ybother]

Originally Posted by Silent1900

The requirements? A complete lack of integrity and the ability to pass off your debt to a bunch of people who don't deserve it without losing sleep over it.


Stand up and pay your ****ing debts.

Yes, and let's not forget that you are in a profession that affords you to make a ton of money in the future! Why should society have to pay for your education let alone your bad debt????

[Dee2e]

FloridaMD, if you are living in the home, have a documented hardship (see other posts), have no money or means of paying the loan, the lender may short sale. However, this will still hurt your credit. If you have means of paying, they may short sale but ask you to take back a note. Talk to a Realtor or Attorney who has a documented history of closing short sales and get the scoop so you know your rights and responsibilities geared towards your specific situation. All short sales are different and how lenders handle them vary greatly.

PS I read some of the other suggestions. Some of them may be considered fraud, which will get you no where. Get professional advice.