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Hi all, I posted this in the mortage section also but I figured I might reach a few more people posting in more then 1 area. I'll try to make this as short as possible....My father is in a situation where he's upside down on his house and recently took a pay cut at work making it impossible to pay his mortgage. The bank agreed to lower his pmt by about $1500/month for 6 months and then a balloon at the end for the difference. Long story short he probably wont be in any better of a position in 6 months, so he talked to a realtor who he knows and she said the best way out is to do a short sale, because the value of the house went down about 100k in the past 2 years so he owes about 50k more then it's worth. My problem is that the realtor told him to just call the bank and tell them that you won't be able to pay the balloon or the mortgage when it goes back to the normal 3k/month, and that mrs. so and so at century 21 or who ever it is, is handling the short sale, and to just stop paying the mortgage all together even if they call to hassel you, just give them the realtors #. So... is this a good idea or will this kill his credit even more then the short sale will already??? Please advise!! Should he pay the property taxes?? Does he have to stop paying in order for the bank to grant the short sale??
Most banks will not accept a short sale if the owner is still paying on the loan. If they're still paying, the bank will keep taking the money, as they should. A short sale will damage credit, but not as much as a foreclosure. If he's going to lose the house, start thinking about a short sale, as he might be able to salvage some of his savings. Better to have cash and bad credit.
Most banks will not accept a short sale if the owner is still paying on the loan. If they're still paying, the bank will keep taking the money, as they should. A short sale will damage credit, but not as much as a foreclosure. If he's going to lose the house, start thinking about a short sale, as he might be able to salvage some of his savings. Better to have cash and bad credit.
Now that is great advice from a real estate agent - stop paying your mortgage and hire an agent to sell your house. Keep your money so the bank won't take it, even though you are legally obligated to repay the loan. This advice is illegal and could get your father sued by the bank if he got caught hiding money from the bank.
A short sale will damage credit roughly the same as a short sale. You can do a search on the internet and you will read numerous articles about this. Every real estate agent (who do short sales) claims that short sales are better than foreclosures. They are - for the real estate agent.
I agree with the OP that the agent gave a bunch of misinformation. Your father has the best options right now when he is good on his loan. He loses options the further behind he gets.
The other issue you have here is that just because he wants to do a short sale it doesn't mean he will. Not all short sales are approved and many head to foreclosure anyway. Typically banks won't consider a short sale until sellers are three months behind. They are just inundated with short sales right now.
I do agree with BigTrees that his credit is going to be killed regardless if it is a foreclosure or short sale. They may also ask for a promissory note to be signed. I think Kev's point is, that is you know that there is no way to salvage the situation, then by all means start hoarding money for first and last month's deposits for rent, security deposits, and moving.
I would call them before having your dad stop making payments. You need someone who can really analyze your father's situation before taking cart blanche advice to stop paying his mortgage and property taxes.
His choice is to do a new loan modification, get a loan to make up the payment, give the property to the lender in a Deed in Lieu, short sale or let it go to foreclosure. Any of the last 3 will result in a real estate licensee getting paid for doing a job that the owner hired them to do.
FHA will lend money in 2 years on a short sale, 3 years for a foreclosure.
You father is an adult. I am positive we don't know the whole story. Just the part you are up in arms about.
He has more options. He can rent out a room, get another job (if he is already working), return to the workforce (if he is retired). His kids can send him money to makeup the rent payments. He can reduce his expenses to cover the cost of the mortgage.
The fact the house is worth 100k less than it was when he got the loan is irrelevant beyond the fact he can't sell. It doesn't change his ability to repay the loan one bit.
I'm a Realtor®. I would never suggest to anyone to stop paying their mortgage. First off, it's a legal issue, second it's an accounting issue neither of which I have a degree or license in. I don't know the bank your father has the loan with, or if he has one or two. There are some banks that are not doing short sales. They just aren't doing them. That's it. Whether you are late or not, they just are NOT doing them. Some will require you to take an unsecured loan. Some will say they won't do either and then oops, they change their minds. IMO, your father should speak with someone he trusts, be it his attorney and/or accountant and give them permission, in writing, to negotiate his loan. The Realtor®, without something in writing can not assist your father what so ever with the bank. No one can assist him with the bank without something in writing. They won't talk to them. They CAN'T talk to them without permission in writing. So, since she didn't even tell him that much, I'd find someone else who knows what they are doing.
Yes, his credit is going to affected. Whether it's as bad or worse than a full foreclosure or a deed in lieu entirely depends on how the bank reports it to the credit agencies. There is a lot of help out there for people in his situation. Reliable people. He should seek it out.
Now that is great advice from a real estate agent - stop paying your mortgage and hire an agent to sell your house. Keep your money so the bank won't take it, even though you are legally obligated to repay the loan. This advice is illegal and could get your father sued by the bank if he got caught hiding money from the bank.
A short sale will damage credit roughly the same as a short sale. You can do a search on the internet and you will read numerous articles about this. Every real estate agent (who do short sales) claims that short sales are better than foreclosures. They are - for the real estate agent.
I agree with the OP that the agent gave a bunch of misinformation. Your father has the best options right now when he is good on his loan. He loses options the further behind he gets.
I never recommend that someone stops paying their mortgage. However, the OP asked if the bank would do a short sale while still current on the mortgage. The answer is no. Why would they.
I think that the majority of people looking for a short sale are trying to take the easy way out and I hate that. However, I've also seen families hold on too long because they were really trying to do the right thing, that it ends up screwing their family by burning off every penny they have. For that I commend them, but I also pity them. They usually still lose the house and then have absolutely nothing to their name, making a bad situation worse.
I'm not saying keep your $100K in the bank and let the house go. That would be horribly unethical. But in most of these cases we're talking about a couple thousand that wouldn't make a dent in the house, but could mean eating for a few months.
THOSE are the only situations that I'm talking about.
But in most of these cases we're talking about a couple thousand that wouldn't make a dent in the house, but could mean eating for a few months.
I agree that the bank will not do a short sale if you are up to date with your mortgage.
However, the homeowner has signed an agreement to repay the bank in accordance with the terms of the agreement. Right or wrong, that signed piece of paper means they are legally obligated to repay the loan using whatever funds they have. There aren't exclusions to hold onto a few thousand bucks as chump change if you're at risk of getting foreclosed.
There is one option they have to legally preserve cash - and that is to file for bankruptcy. But unless the person has filed for bankruptcy, they are still fully obligated to repay the loan.
(I'm not saying it is financially wise to give the bank every penny to your name. But I wouldn't recommend real estate agents suggest keeping a little nest egg hidden from the bank since it's illegal and not proper advice from a real estate professional.)
But a fellow human being believes that you have to look out for your family first and foremost. There's nothing illegal about that.
The OP should definitely explore EVERY single option on the table first, but I've people fall into the trap of denial and ending up in HORRIBLE situations that involve being homeless and having to fight to feed their kids. It's rare, but it happens.
There are more and more options coming out these days and I'm hopeful that we'll soon look back on this time in our history and see that it was only a short blip on the radar.
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