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I'm trying to get a clear perspective on the ramifications of short sale vs. foreclosure. My husband and I moved all the way across country a few years ago leaving a family member renting out our house in Washington state. (I know, FIRST huge mistake.) We immediately purchased a home in our new state, but soon after my brother stopped paying rent or responding to calls or emails. We continued making the payments while trying to evict him. Right before the eviction was to take place he "rented" out the place to someone else, and took off with the rent and security. For us, it was a new legal battle to evict this new tenant.
The upshot is, after months of paying the mortgage for two homes, we were broke, and stopped making the WA house payments. (Did I mention that I also lost my job during this process, so we went from two incomes to one?)
We've been in the process of getting approval for a short sale, and yesterday we got a conditional approval. The condition is that we have to come up with 5k cash to cover the utilities that were all left unpaid, plus $2500 closing that Chase is requiring come from us. We are behind in many other bills right now, and couldn't pay $500 right now let alone 5k. The only way to come up with that money is to skip a few house payments on our current property, which obviously terrifies me. The WA house mortgage was a refinanced loan, and we owe 300k. The bank has accepted an offer of 175k, so the charge off will be significant.
I have searched the web, and some web sites say there is little difference between a short sale and a foreclosure, and others make the difference and impact seem huge.
Should I just walk away from this short sale, or take the risk and come up with the money any way I can. The house has not been inspected yet, so even if I spend this money the sale may not go through. Apparently the tenants made some significant and unprofessional changes to the electrical system to support an illegal greenhouse in my basement. Gotta love family!
If the worst case scenario happened and the house foreclosed and we got hit with the full 125k judgement or tax bill is that something that can be discharged in a bankruptcy later?
Advice?
Apparently the tenants made some significant and unprofessional changes to the electrical system to support an illegal greenhouse in my basement. Gotta love family!
If the worst case scenario happened and the house foreclosed and we got hit with the full 125k judgement or tax bill is that something that can be discharged in a bankruptcy later?
Advice?
hmmm, wonder what that was for.
You need to contact a real estate attorney is Washington State and have them advise you as well as an CPA/Tax attorney as Ultra mentioned to get you the most current information for your state. I have information I get sent from lenders on what the impact is for a short sale versus foreclsoure, but to me it is too big of an issue to make broad generalities about. You need specialized consultation from a local real estate attorney/tax professionals. It will be money well spent. Good luck!
Last edited by RickTucsonHomes; 09-18-2012 at 07:17 PM..
Thanks for the advice. We have until Friday to decide or the short sale file is closed, so I don't know if we have the time or financial resources to contact an attorney. I'll look into it though and see if we can talk to someone.
Chase has thrown a lot of roadblocks our way during this process, which makes me think they would rather sit on the property and wait for the market to upswing. The 300k that we owe is about 100 less than the house reached at peak, so maybe they are gambling on more money down the line.
As far as going after my brother, my husband and I have discussed that and decided against it. He doesn't really have anything, and I don't really even know where he is. The healthiest thing for me personally 9emotionally) is just to write it all off and move on. The whole thing has made family gatherings pretty tense, because no one wants to talk about the elephant in the room. In that regard I would prefer to go forward with the short sale just to completely close that chapter, but the idea of going even one day late on my current home's mortgage is terrifying.
First, it's all about money to the bank, and they don't really care where it comes from, so go back to your buyer and say the bank will only accept the short sale with $X sales price.
Second, HUGE difference between short sale and foreclosure. In a short sale, your credit can be turned around in under 2 years. Some attorneys are good and get the short sale to never appear on a buyers credit as being that bad and credit is cleared in months. A foreclosure will be on there for a minimum of 7 years and if you needed to move and buy a different house, you can't.
A short sale gives you a quicker turn around to rebuild yourself. A foreclosure doesn't give you that.
Thanks for the advice. We have until Friday to decide or the short sale file is closed, so I don't know if we have the time or financial resources to contact an attorney. I'll look into it though and see if we can talk to someone.
.
Some RE Attorneys will do an initial consultation for free. FYI
I really don't buy into the short-sale is worse than foreclosure theory. Quite often, the person giving up the house gets a year of late payment history on their record, which will murder their credit score anyway. The whole "being out of the market for two years instead of seven" is bs too. Very very few people who go through a short-sale are ever going to be in a position to buy again in two years, and after 3-5 years, even with a foreclosure there are ways to buy again. Fannie & Freddie's guidelines for purchasing again range from 3-5 years, not 7, and a job loss or relocating for work are both acceptable circumstances for the low end of that range.
As for the contribution the bank is asking for, that's common and it's negotiable, even if they say it isn't. Your agent should be dealing with that part of it, and hitting chase up for relocation bucks. There are stories of investors getting $35k from chase for doing a short-sale, so asking to walk away isn't that much of a stretch.
Geesh, now we're against home farming and entrepreneurship?
Well depending on the buyer, it may be a selling point........
4 Bedroom/2.5 Bath 3-side brick home. Kitchen boasts granite countertops, stainless steel appliances, and maple cabinets. Updated electrical system in basement for a large amount of grow lights. Basement gardening at its finest. home also features and escape tunnel. Black painted windows for extra privacy.
Hey it could be worse, look at this house modification. Pot Farm
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hmmm, wonder what that was for. 
