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Old 03-29-2010, 10:17 PM
 
Location: Suburban Chicago
163 posts, read 425,913 times
Reputation: 146

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I've been reading about short sales where the sellers sign a promissory note to the lender for all or part of the sale/principal difference. Is that something that can be done by anyone?

Basically, we don't have a hardship that qualifies us for a short sale but we really need to move for several reasons that a bank wouldn't care about. We make more than enough money to qualify for a mortgage twice the amount of what we currently have but just can't seem to save up enough to catch up with the falling market.

Would the bank (Fannie Mae backed serviced by Wells Fargo) consider allowing us to do a short sale for $10k less than we owe if we signed a promissory note to pay the difference? Has anyone done it or had experience with this type of situation? We want to pay off our obligation and will stay here if we absolutely must, but if there's a way out without trashing our credit I'd like to explore it.
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Old 03-30-2010, 06:21 AM
 
3,584 posts, read 6,446,179 times
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Quote:
Originally Posted by thndrcloud View Post
I've been reading about short sales where the sellers sign a promissory note to the lender for all or part of the sale/principal difference. Is that something that can be done by anyone?

Basically, we don't have a hardship that qualifies us for a short sale but we really need to move for several reasons that a bank wouldn't care about. We make more than enough money to qualify for a mortgage twice the amount of what we currently have but just can't seem to save up enough to catch up with the falling market.

Would the bank (Fannie Mae backed serviced by Wells Fargo) consider allowing us to do a short sale for $10k less than we owe if we signed a promissory note to pay the difference? Has anyone done it or had experience with this type of situation? We want to pay off our obligation and will stay here if we absolutely must, but if there's a way out without trashing our credit I'd like to explore it.
Yes, that's what the Banks want. For people to repaid their debt. My friend was "short" $60K on his home when he sold it.

BOA gave him a $60K note, zero percent interest (I think for about 10 years). He's almost got it all paid off in less than 2 years. And best of all, his credit has not taken a hit.

Signing a promissory note is the first step banks would prefer in any sale the nets less than the original note owed.
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Old 03-30-2010, 10:06 AM
 
Location: Baltimore
45 posts, read 207,077 times
Reputation: 24
Default Have you seen us?, we are in the same boat!!

How would this work? Do you literally go to closing with an offer amount less than the value of the mortgage and then the loan officer gets you to sign a promissory note? This would be much preferable to our current plan of becoming landlords in Baltimore.
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Old 03-30-2010, 10:33 AM
 
28,461 posts, read 78,568,953 times
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It is not going to be just the "loan officer". The lender will want to have their legal department draw up a the agreement / promissory note and you would be wise to try to negotiate the amount and terms that are most favorable to you. The bank may not be willing to accept anything less than the terms of the existing mortgage and they can block any transfer that does not fully satisfy the mortgage...
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Old 03-30-2010, 10:42 AM
 
9,734 posts, read 8,946,209 times
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That is what I am planning too! I want to get out of my house and honor my obligation to the bank, but not make it difficult for a buyer to purchase my home.
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Old 03-30-2010, 10:43 AM
 
Location: Baltimore
45 posts, read 207,077 times
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Thank you for your comments.

Will anything that involves the lender's legal department cause our credit report to take a hit? We understand that if you do a short sale, you will be unable to obtain a mortgage for 4 years. Does that only include instances where the balance is written off?
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Old 03-30-2010, 11:26 AM
 
Location: State of Superior
8,730 posts, read 14,923,476 times
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It would seem to me that anyone willing to sell their home for less than the mortage....and sign a note for 60-100,000 example , might be better off just keeping the home as an " investment". Making monthly payments on somthing you no longer own for 10-20 years has got to effect your credit. You do not have an assett on your net worth. You can not deduct anything on taxes , you could it seems find more creative ways . Try renting , owner held paper sale, auctions , etc. That promissory loan will always be on your credit report , with nothing to back it , like income.
At some point during the time of the loan , the value of the home could go up , you could eventually sell for what you owe , maybe even make a profit. being a landlord is not the worst thing in the world, and could provide income that might make buying another house easier.....I wonder how many people who enter into such deals with the Bank , go in with great expections of keeping up the big extra payments...then end up defaulting due to job loss , health problems , and just more debt in general. If I were a Banker , I would rather deal with folks who have little debt , not more.
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Old 03-30-2010, 12:09 PM
 
Location: Baltimore
45 posts, read 207,077 times
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It is not that I do not ever want to be a landlord, I just do not want to be a landlord in Baltimore.
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Old 03-30-2010, 12:29 PM
 
Location: Suburban Chicago
163 posts, read 425,913 times
Reputation: 146
Lenders are currently requiring that buyers show proof of being able to afford to pay both mortgages in the case of renting the current home while buying a new one. In our case that would mean having to purchase a new home that is $100k less than what we had been planning to spend. Unfortunately, for the area we're looking to move into, that means not being able to afford anything that is actually livable.

If we're willing to sign the note for the difference up front will it still take a long time for the bank to process the sale? Would we need to list as a short sale? Also, how does the sale get reported to the credit agencies? Would we end up paying tax on the "forgiven" amount as well as interest on the unsecured balance?

I'm just trying to figure out if this is a possibility for us and if it looks promising we'll discuss specifics with our realtor and lawyer then the lender.
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Old 03-30-2010, 12:55 PM
 
Location: State of Superior
8,730 posts, read 14,923,476 times
Reputation: 2859
Quote:
Originally Posted by rgk1500 View Post
It is not that I do not ever want to be a landlord, I just do not want to be a landlord in Baltimore.
Depending on the neighborhood...I can see why you or anyone would not....This poses another problem around the country, areas where property values have tanked , to less than half their previous worth. There are areas where the values will never return to the inflated " buy it now before it goes up" scenario. For some folks , the best way to " get out" , is to just go, leave the mess behind.
For many who have been caught in impossible situations , the best answer maybe filing for Bankruptcy....start anew and spend the next 5 years recovering and building your credit , than the alternative of getting deeper in debt, and suffering a long drawn out recovery that may take 10 years or more to correct itself....depending on how long the real estate market remains down big time , there is the possibility of debt forgiveness help from the Federal Government. I see not other relief for some places that are so upside down , like Las Vegas , and other places. Some States already have programs addressing this. Some States also do have non recourse on home defaults.
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