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Lady from Florida says her husband is taking job across the country.
Husband purchased home in 2005 and did interest only.
Woman says they can deplete their savings of 40k to avoid short sale.
Suze tells woman to just negotiate a short sale even with 40k in the bank?
I don't think this will work. The bank will want most of that 40k. And if u shift it quickly out they will know.
Why is Suze giving this type of advice. Obviously Suze dumbs down financial advice and tries not to confuse people. But this is poor advice telling people they can easily negotiate a short sale even with a large amount of savings (40k) that can be used to pay off the mortgage.
It depends on where their savings is. A regular savings is more up for grabs but as 2b said, 401's, et al are not considered accessible for a short sale.
We have friends who negotiated a short sale on their house in Atlanta and then bought a 1.5M house in Portland. Got to figure they had the ability to pay off the Atlanta house and managed to pull that one off anyway.
Like stated it depends were that 40k is located. If it is in a bank acct the bank or MI company is going to expect the homeowner to share the burden. If it is in a retirement plan the lender will never see it.
The caller didn't mention anything about retirement funds.
I know some people can prove the expenses outweigh their income to negotiate a short sale.
But this woman specifically said she had $40k to pay off the balance of she sold it short.
Obviously it would be idiotic to to use retirement funds to pay off a shorted amount.
To the other poster. Yes. I have known people who have high income who have successfully negotiate short sales. But these people spend like crazy. $1000 car payments , $20k a year for kids private schools etc.
How is the advice 'flat out wrong'? The question asked by the caller was whether depleting savings was preferable to taking a temporary hit on her FICO score from a short sale. Orman replied that taking the hit is preferable. I didn't hear anywhere in the advice that the bank will 100% agree to a short sale. The answer given was indeed valid - a temporary hit from a short sale is preferable to depleting your entire liquid savings.
Whether the lender agrees or not is something out of the control of Orman or even the homeowner. But, lenders are different everywhere. The caller was from Florida, a state with enormous amounts of foreclosures and abandoned homes. Lenders there might be very much more open and less stringent in granting short sales than other areas. We don't know.
But bottom line - the premise of this thread is quite flawed. You might think that a short sale is not possible for this owner, but that doesn't mean the advice given on the choice was 'flat out wrong'.
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