short sale (foreclosed, second mortgage, credit report)

[LianeSells]

The Realtor does much of the negotiating with the bank so its important to find a Realtor with experience in short sales.

Yes its not always the easiest way out but sometimes it can help you avoid foreclosure. I have one short sale I am working now and they can take a long time to go through but they can be good for the seller and great for buyers who are looking for a good deal and don't have to be in a place right away.

I have a section on my website about Tampa Short Sales if you are interested. I don't think I can post the link here but if you go to my profile, and click on my website, you'll find it there under the Short Sale section.

[bentlebee]

Thanks I just went to your website, and learned more. If I need help I will contact you. I did an offer on a short sale property and wait for an answer from the lender.

[belloisec]

Once your lender agrees to a short sale they often require your listing agent to use certain forms to submit all offers. There's really no negotiation between the lender and the buyer. I've talked with lenders during short sales negotiation with buyers, but you must remember, the lender has no emotional attachment to the sale. You can talked to them about the decline market, strong buyer, etc. But they know all this and it just sounds like Charlie Brown parent talk to them. It's all bottomline to them and response can be slow, but I have worked with lenders which have good response times too.

In general, once your house is listed as a short sale, a Buyer can offer whatever they want for your home. That offer is written-up on a standard or custom contract and submitted to the lender by you or your listing agent. The lender will have likely already determine what their bottom number is based on their analysis and they will either accept, counter, or reject the buyer's offer.

Once an offer is accepted, it's basically standard closing procedures from there (inspections, survey, title search, etc.)

Good luck!

[MyForeclosureAttorney]

You are better off fighting the foreclosure action if you hope to close a short sale, as yes, they do take a long time. I also have a website posted in my public profile about Florid'a mortgage foreclosure process. Please feel free to visit.

[bentlebee]

I just looked at your website. Thanks. I do have another question. What about people who are having a mortgage lis pendens. Can they loose their home if they do nothing and how long can that take? I always heard about Florida being a state in which people cannot loose their primary home? Why can people go in foreclosure if this is true and live in their primary home? A lot of questions, maybe I should start a new thread....

[MyForeclosureAttorney]

MyForeclosureAttorney:
Your primary residence should be able to enjoy the homestead protection from most other creditors, except for your mortgage lender, so you will eventually lose your homestead if you do not keep the mortgage current. Thanks.

[citrushills]

Originally Posted by deckardc

Everyone is happy until you get your IRS bill. That $40k the bank magnanimously wrote off is considered income and you get stuck paying income taxes on it. Short sales have become very popular, unfortunately many people jumped at them without realizing that they would be on the hook for the taxes....

So what about the IRS. They won't put you in jail. You will get a tax lien against your already ruined credit so what does it really matter about the IRS. You owe them taxes on 40 grand. It's not like they will ever get it.

[gypsychic]

Originally Posted by citrushills

So what about the IRS. They won't put you in jail. You will get a tax lien against your already ruined credit so what does it really matter about the IRS. You owe them taxes on 40 grand. It's not like they will ever get it.

If one has lived and homesteaded the home for at least two years, they will not owe taxes on any gain up to $250,000, I believe. The the credit hit from a short sale vs. foreclosure is not really too bad. Definitely go for short sale vs. foreclosure.

[Cyndyjg]

Nearly all I do are short sales.
A short sale should only be considered if the goal is to get the borrower/seller a 'full satisfaction release' letter at escrow. Otherwise, there is no benefit to the seller of doing a short sale. You want to make sure that you are working with someone that is only representing your interests, not those of an investor. If you have someone do a short sale for you that is representing the buyer, there's a good chance you will get stuck holding the bag for the full balance of the remaining debt.
There has to be sufficient evidence that the borrower/seller can not afford to keep up with the payments at this time. If that is presented to the loan servicing company (Countrywide, Aurora, SLS, ASC/Wells Fargo, etc.), then there's a really good chance that the lender will be able to collect all or part of the 'losses' from the mortgage insurer.
A lot of people think that if they had two loans at the time of purchase, ie: an 80/20 that there is no mortgage insurance. Not true. Often, the first mortgage will be Freddie Mac or Fannie Mae backed/insured. Even the lender who funded the second mortgage may have placed mortgage insurance on the loan. Collecting on any insurance is key to getting the seller/borrower a full satisfaction release letter at escrow. The lender has to disclose to the borrower if there is, indeed, insurance on the loan.
The seller's credit report normally reads 'Paid, settled' on the mortgage line items. Unless they have fallen behind on payments, there should be no derogatory effect on their credit. They might have to do a letter of explanation if they apply for a smaller mortgage loan, etc. within the next 24 months. I encourage my clients to keep all their credit cards, car loans, etc. current. That way, they can show that the only reason that the sold the house short was that it was worth much less than they owed on it, and that when the adjustable rate mortgage reset, or they got divorced and lost part of their income, etc; they could no longer afford the house.


There are days when I think if I have one more agent or broker ask me this question, I will surely die right there and then... "Well, doesn't the bank know that if they don't approve this deal, they'll get nothing?"
It doesn't quite work like that, and I'm going to share a few details with you about how a short sale actually gets approved internally by the seller's banks.
Most loans have PMI insurance or MI insurance on them, even if the borrower/seller isn't aware of it.
So, let's say your 401K at work is invested for the employees in various stock programs, some of which are backed by Real Estate--- mortgage notes.
Your old investment vehicle might have earned you 5% return. Now, your fund manager decided to move some of your investment funds out of that vehicle, and into this higher interest earning fund that is backed by Real Estate--again, meaning mortgage notes. Now, you can maybe increase your yield by 3% or more, but it's a higher risk investment. The investor may elect to place insurance on that loan. Many borrowers were told that they have no insurance (PMI or MI) on their loans. In fact, many were told that the entire point of doing an institutional 80/20 was to avoid having to pay for that insurance. Yet, I often find that when I submit a short sale for approval, I suddenly am also working with an insurance underwriter for the PMI or MI carrier. Just more of the misleading information given to borrowers who got those loans, who are now being chastised by many for not being able to read and understand each line of that 122 page trust deed they signed while their moving truck sat in the parking lot of the title company when they bought the house.....
Frequently, I find that there is insurance on both the first and the second.
So, let me ask you to think like a mortgage servicing company's loss mitigation people for a moment:
"The insurance underwriter tells me that I must have a gross sales price of at least (X )amount to get reimbursed by the insurer for my losses at a rate of no less than (Maybe 70%) of my loss. The insurance carrier says that's within the margins of value required. OK, that's only $3,000 more than the buyer offered us. If I can't get the additional $3,000 from the buyer or ?, I get nothing from the insurance company. UNLESS the property forecloses in a foreclosure auction process."
Now, of course the negotiator might ask for more, trying to up the gross to the lender/investor. We all understand that. But, don't do the lender's thinking for them when it comes to what seems like a minor amount to you and I. It could be just the detail that prevents them from collecting on their losses. And, yes; a foreclosure might just be better for the lender in some instances.
All parties prepare to wipe that nonsensical question from your brain for all future short sale/real estate endeavours!!

[LewLew]

Originally Posted by gypsychic

Would it be better to just foreclose in that case, assuming one doesn't mind the bad credit from it?

Your credit score will dip by 50 points with a short sale. It's way better than a foreclosure....7 years.