Here are some questions becoming more common in my business:
Q. I bought a home in 2005 for more than it is worth today, and I wanted to try and sell it as a short sale, is this possible? I am not going into foreclosure, and have never been late or missed a mortgage payment, but I am barely making ends meet with the mortgage. I've heard that lenders won't even consider a short sale unless the homeowner is close to foreclosure, is this true?
A. Smart lenders are working with sellers on short sales even if they are current on the payments.
Until six-months ago one needed to be at least 3-months behind to even have a short sale considered now they are starting to become the norm.
Check you lender or servicing company's website (hope they are not HomeEq) to download a short sale package.
You will need to draft a "hardship letter" explaining why you must sell the property 'short' of what is owed.
Many lenders require the property be listed at least 90-days prior to taking a short sale and you must include your listing agreement and agent marketing materials.
The bad part is most lenders will not consider a short sale until you have a contract in hand and will not review your contract until EVERY ITEM on that short sale list is in place... then they have 30-days to accept or reject the deal.
As auctioneers we are preparing short sale packages BEFORE the auction and submitting them to the bank so all they need is the contract (number) to make a decision.
The bad news is NOVA is a hyper-inflated area where values have dropped as much as 40% to 60% from the peak of the bubble and the lenders are only taking 5% to 10% hits.
Yes it will show on your credit but its not as bad as you think and yes they will 1099 you but if you can't afford to pay a capital gain tax the IRS has a remedy for that too.
With the nation in a mortgage meltdown I would not worry about a dip in your credit score over holding onto a property that will empty your retirement, 401k, and drain every penny then go to foreclosure and really ruin your credit.
If the house is empty and on the market not creating any income or use from paying for a place to live (we all have to live somewhere) then your holding costs are about 4% per month of the final selling price of the property.
Example:
Your house that you think is worth $500,000.00 sells in 14-months for $375,000.00 your holding cost is about $15,000.00 per month while you are trying to retain your credit.
I get calls from people all the time who in my opinion ripped off the bank borrowing $100,000 to $200,000 more than a property is worth who are now looking for a miracle to sell for what they owe because they don't want to ruin there credit.
It may sound harsh but I told a lady last week to keep the $125,000 she already stole from the bank and spent as the fee for ruining her credit.
Most of the people complaining about ruining their credit have already stolen over 6-figures from the bank which is way more that the average bank robber gets and a few points on your credit score being lowered is much better than the 15 to life a bank robber will get when convicted.
Don't be afraid of a short sale be afraid of losing your shirt listening to the 'Spring Bounce' crowd in the Fall of 2007!
Billy Burke, CAI - AARE
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Harsh but true. The hours and hours of fun on the phone to the bank trying to find the right person to talk to is just a peach!