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I just read the comments on the "ok to buy a short sell?" thread, but have questions from the seller's perspective...
I have questions about being the seller in a short sale (or if you can suggest some other approach)
I invite brutal honesty.
Where we are today:
>I am still current with my 1st and 2nds (today), which are both with the same originating lender.
>My outstanding mortgages are about what I could expect to sell the house for in this market.
>I can't afford to sell for that, as I do not have the money to pay for closing and commissions and a move out of state.
>I am not working and have used up almost all my savings keeping afloat.
>My Beacon Score is 664.
>I have over 30K credit card debt (used this year to keep up lifestyle and spruce up house), with approx $850 in monthly minimum debt service, but $20K in available credit yet
>I have about 15K in savings left at this time.
>We have about $2500/mo income right now (spouse), but about $8500/mo nut ($3k is mortgages)
What I want to achieve:
>preserve our credit with as little additional damage as possible so we can move and finance another home immediately
>preserve enough cash to move across country
>do not want to screw over the mortgage holder unnecessarily
Possibilities we've considered:
>Lease the house and carry the shortfall until we can sell at a later date (Houses like ours are leasing for $1600-$2000 and our mortgages are $3k+), take the lease contract with us to show that we have some rental income to offset the mortgage debts and get qualified for a house loan based on that, renting until we can sell and cover mtgs and closing costs
>call the lender and ask for forbearance on one or both mortgages and wait to sell
>call lender and ask for permission to short sell (can I do that if I am current???)
>pay off as much CC debt with remaining savings, leaving credit card cash available to fund the moving/living expenses
>get a job making $3-4K a month here (my experience is in retail commission-only sales) and wait it out until we sell at $0 or less profit on the house (this prospect still leaves us $3K short of our "nut" each month
How we very foolishly ended up in this place:
If I found a job in the same industry here, I could only to expect to make about 1/2 or 2/3 of what I was making, so I thought a little DIY fixing up and paint (rather than returning to a job and then hiring contractors) and tah-dah! - sell the house, satisfy my mortgages and move. I believed I had enough savings to cover our debt responsibilities for about a year....
Well, I did not anticipate the market being as crowded as it is, or the number of foreclosures and pre-foreclosures sales that would compromise our house value. I thought I was safe when I took a second out in 2006 that in combo with 1st only came to a total of 90% of the house's value.
WRONG. Yeah, I could get what the house is truly worth if I had time to wait, but now I am running out of savings to supplement our living expenses and I want to move out and move on with my life.
Any clever people people out there that can offer advice on how to legally and honorably achieve our goals?
I'd say you've got some major issues that need to be addressed, and your housing situation is only one of them:
- If your mortgages are $3k/month, why do you have an $8,500/month "nut"? It sounds like there's some major extravagances there that need to be eliminated.
- Why are you "not working"? Are you disabled? If not, you should be out there working two jobs, plus doing that "DIY" stuff for others to supplement your income. Maybe you feel it's beneath you to work for 1/2 of what you were previously making, but it's time to put your big-boy pants on and take responsibility for your actions.
My suggestion would be to contact the mortgage companies and explain the situation to them. Tell them that you're in danger of defaulting on the loans, and would like to short sell the house to allow you to repay as much as possible to them. If they're willing to do it, you're going to mess up your credit, but not as badly as if you just walk away or file for bankruptcy.
Once you get the house off your back, if you really need to move across country, sell everything you own, pack your clothes and your spouse in a car, and drive. When you get where you're going, rent a cheap apartment rather than buying (no mortgage company in their right mind should give you a loan based on your finances right now anyway), get two jobs, and live like a pauper until you can pay off the absurd amount of debt you've amassed.
Only once you've gotten rid of that debt and learned to live within your means should you consider buying another home.
OhNO-I just want to say I think it takes a lot of courage to lay it all out there. The position you are in sucks and hopefully you have learned a lesson. (Don't buy more than you can afford!) I wish you much luck. I am a little irritated in what "people like you" have done to this market, but a lot are NOT LIKE YOU in they take no responsibility for what they have done. I commend you.
BEST of luck. (wish I had some answers on how you can get out of this. I might suggest a financial advisor...but they can be costly. I know there are agencies out there that do give free advice for those in your position, I just don't know the names.
I know I've gotten myself into a real muck. I would like to handle it as responsibly as possible.
As for the "Big Boy Pants" --- I'll have to resort to putting back on the "High Heeled Shoes" instead (LOL!)
As for $8500 "nut" - those are our total expenses, including hubby's work van and his other base business expenses we must upkeep even in the soft winter months for his business. Our household "nut" is about $6000, including food. We could probably just close up shop for him, but the car payment won't go away and we risk people who sub him losing touch if he is working for a company rather than for himself - come March, his income triples for the coming 6-8 months.
I did not (or refused to, I think) see this coming. As a commission-based person for the past 20 or so years, my optimism is what not only kept me afloat emotionally, but economically as well. I beat myself up very regularly now for not seeing what is plain math and for indulgently taking time away from working to "enjoy" being a housewife for a while. I liked the home renovations, too, with the freedom to do them on consecutive days rather than only on Sundays - and then having the pleasure of seeing the finished product of my labors!
I kept thinking the savings would cover us for a while. I guess I was really "wishing", as it appears now.
Actually, it kinda helped me get a realistic handle on it by just outlining it for others' review. For some reason, it is very hard to look at your own sitch without a lot of hoping and wishing, rather than cold, hard, decision-making objectivity.
I still need some clever ideas, though.
Today I resolved to go seek employment again to staunch the (financial) bleeding. I was going to do that about a month ago, but some of the stuff I read on getting relief from your mortgage-holder(s) inferred that if my story weren't sad and desperate enough, they'd thumb their noses at us, and we'd be just as stuck but more humiliated.
I dislike the prospect of seeking a job when I know my intentions are just to work until the house is sold. Our house is the only thing keeping us here, you see. I guess I shouldn't put that much concern in it - retail sales people tend to come and go in all industries. A lot of attrition from sales all the way up the management ladder, except for owners of the businesses.
I'm also scared. heh-heh <shuffles feet and looks at the ground>. That's a trait pretty far removed from what I'm used to. Explaining my absence from the work force before a move out of state is a little easier than staying in the same city and doing it. (I can see them now: "Why the "f" would any salesperson worth her salt take 8 months off from working??? What can she possibly bring to the table other than a lot of baggage?"
Back to clever solutions....
>Is going back to work going to compromise the mortgage-holders' consent to work with us on forbearance and/or short-selling? (perhaps not, considering the corner we are currently in, huh?)
>Am I better off using the remaining cash savings to pay down credit debt? (doing double duty of showing my efforts to reduce my expenses and freeing up additional credit to fall back on for stop-gap measures during a move or other dire straights) (I hate not having cash, though)
Unless there is something I'm missing, your finances are majorly scr*wed and you are going to have to make some serious lifestyle changes to set them straight. You are three quarters of the way to bankruptcy and the courthouse steps.
Bob and Anthony-- I was living within our means - before my little stupid hiatus and blind optimism scr*wed me over.
Like, twin said, I am at the point where I have finally accepted reality - aka: how foolish I was to take so long off and not seriously curb our expenses. Probably should have sold quickly and footed the loss way back in the spring - but I can't fix that now, can I.
I thought by being brutally honest about our circumstances, maybe someone in the RE field has come across something similar and could relate how someone managed to pull it off, rather than BK, foreclosure, etc.
It sure looks especially stupid now, but honestly, I kept thinking the sale of the house was right around the corner. Worse yet, I did not anticipate how hard the Tampa market had shifted, so my "plans" that the expenses for home improvement would be offset by equity - SHOT DOWN.
So, I took a double hit: the cost of improvements AND additionally dipping into the savings while I didn't work!
STUPID STUPID STUPID.
But here I am, wanting to preserve what I can without completely starting over at ground zero.
Please, ANYBODY???, offer something other than "Man, are you ever scr*wed!"? -- I need help with some realistic strategies to pull out of it still half alive and not "dead in the water"!
But here I am, wanting to preserve what I can without completely starting over at ground zero.
Please, ANYBODY???, offer something other than "Man, are you ever scr*wed!"? -- I need help with some realistic strategies to pull out of it still half alive and not "dead in the water"!
I'm not trying to be mean. But I am trying to scare you into action a little.
The solution, as Bob pointed out, is quite simple, and at the same time quite difficult - increase income as much as possible and curb spending in every area you can. There really is no easy answer. Short sales are hard to get, and I believe, WILL affect your credit as the mortgage company won't really give you a free pass.
From what you said, your husbands business expenses are around $2500 a month, is that correct? You also described his income as $2500 - is that OFF season income? During the other 6-8 months you can anticipate his income closer to $12,000 a month - did I understand that accurately? That does at least paint a slightly better picture. It would make his average salary around $8,000 a month minus $2500 operating expenses, for $5500 gross a month. Self employed taxes are high but I assume you write off whatever you can. Presumably you need to cover the half of your lifestyle expenses that his income doesn't cover. Firstly, what exactly does your husband do, is he in building or a housing related business that might be affected by the slowdown? Also, what options does he have for an additional job, part time or otherwise, during this time which could boost his income.
I know it is scary to return to work, but you don't know what happens until you try. That is first and foremost what you need to do, especially as in retail during the holiday season there is lots of temporary work available which would get you back in the door. And you certainly shouldn't feel guilty about taking a temp job.
As to the move - what would happen to your husbands business? Is it transferrable? What prospects do you have in the place you plan to move to? Mortgage companies aren't handing out loans without provable income and down payments in the way they were a year or so again. I think the advice to hold off on buying another home is sound. Get to where you are going, rent, save and get your ducks in a row to ensure you don't end up in trouble.
Addition:
Tough as it is to be without savings, I would pay off as much CC debt as possible. That $850 a month is mostly interest - money that is thrown away every month rather than doing something usefull for you. I seriously doubt your cash reserves garner nearly as much interest, so pay off whatever you can and dump those credit cards immediately. It is all too easy to use them.
If you want help budgeting, I can suggest you post a more detailed breakdown of your monthly expenses, see if anyone can pick up an area you can save in that might not have crossed your mind.
Last edited by AnthonyB; 11-15-2007 at 09:31 AM..
Reason: Addition.
I know you are scared, but you do have hope. I am not a financial counselor, but I sympathise with your situation, but unfortunately it seems you have been living out of your means, atleast for the last 8 months. I can recommend you a wonderful spirtually guided financial advisor. His name is Dave Ramsey. Read his books, and check out his website, also listen to some of the show archives. He talks to lots of people everyday in your shoes, and worse. Everyday someone brings up foreclosure or short sales.
I've never been in your situation but my sister is/was. Unfortunately they were unable to find a buyer willing to enter into a short sale. They had a buyer interested but they pulled out because my sister wanted a short sale and the buyer got cold feet with the thought of a short sale. Unfortunatley they lost their home and are now renting. My sister didn't work while they lived in their home (3 children) and my bro-i-law never discussed their financial situation with my sister (who shops WAY too much). My sister continued to spend like they had a forest of money trees. The forest burned down and when the two of realized the situation they were in it was too late.
I give you credit for taking charge before it spins out of control. Call your mortgage lender and talk with them. Then go out and get some kind of sale work. So what if you took 8 months off. You needed the time to re-energize yourself. No one needs to know you're moving out of state. Sadly the projects need to stop immediately. If you are planning on moving out of state then maybe you should close up your hubby's shop now and he can get work at a company. you're planning on moving so the clients may not follow. I don't know what kind of work he does (maybe they will follow). Stop focusing on hubby's income tripling in March (you still have dec, jan and feb to get through). If his income does triple put it away, don't spend it on projects. The only thing I can say is really, really look at your expenses. Can you cut out cable? Can you trim your food bill? Do you buy coffee in the morning, stop. Do you have any help (landscaping, housekeeper) get rid of them. Do you (or hubby) have any toys? Jet ski, boat, etc. sell it.
Good luck to you.
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