Short Sale

[jade73]

We have had our house on the market for over a year and are asking 99,900, we owe 92k or so. We had potential buyers today that came in with an offer of 79,900...I'm in the process of getting in touch with my mortgage company about the offer. Has anyone done this and do mortgage companies do this often?

[newbie2]

We have had our house on the market for over a year and are asking 99,900, we owe 92k or so. We had potential buyers today that came in with an offer of 79,900...I'm in the process of getting in touch with my mortgage company about the offer. Has anyone done this and do mortgage companies do this often?

It's called a short sale and it is more common in this real estate market with each passing day. Your real estate agent should be able to help you through this process.

I see that you are in a Chapter 13. If you haven't already, please talk to your attorney about selling your home.

[SMinGA]

Or perhaps talk to your atty about amending the plan, to let the house go. Why bother with the hassle and stress of the short sale?

[espo1357]

Or perhaps talk to your atty about amending the plan, to let the house go. Why bother with the hassle and stress of the short sale?

Exactly right. You are protected by the BK.

Credit score should get messed up all the same, right?

[catleg]

Lenders are preferring short sales over foreclosures, for obvious reasons.
If you want to get rid of the house, it might be in your interests to work with them on this. Of course, if you're in a chapter 13 it seems stupid to keep making mortgage payments, without which you're out of compliance with the plan. Should probably amend the plan accordingly and/or convert to a chapter 7 to light a fire under the bank to approve the short sale, otherwise as long as you're making timely mortgage payments they have no motivation to get it done.

[1aliasfan]

We are in a similiar situation and had our house on the market. Pay off is $142K and we got an offer for $110. First, the bank won't respond and keeps asking and sending for the same crap. Then I talk to our attorney. He says a foreclosure won't make much difference at this point, not to mention the bank still has the option to 1099 you at the end of the year for the deficiency, which could create a tax liability of $2500 per $10,000 deficiency, that you then have to pay.

We could not afford the maintenance anymore and something in the basement was making my son ill. We moved to a house that rents for $100 more a month, but I just adjusted my budget to accommodate (no more YMCA, etc). Our attorney said that probably won't make much difference. Then it doesnt help that my husband is off on work comp right now and making only 2/3 of his salary, so any attempt at finding what was wrong in the house was pointless.

I was told that there is no guaranty that a lender will or wont 1099. Its just a chance you have to take.

[sarac]

1aliasfan, I think even if you do get a 1099 you can use the "The Mortgage Forgiveness Debt Relief Act and Debt Cancellation" and not have to pay on it:

http://www.irs.gov/individuals/article/0,,id=179414,00.html

[Billssuck]

Need to do further research on this. The article referenced above may only talk about forgiveness of debt with a foreclosure not a short sale. I have dial up internet (all I can afford at this time) and it is slow for me to research things. If someone finds out about forgiveness of debt under the Mortgage Debt Relief Act of 2007 being excluded from income with a "short sale" please let me know. My bank hasn't approached me with the option of short sale yet but I am expecting it to come up and may be offered. I definitely don't want any tax consequences from a short sale...I'll stay with a foreclosure in that case.

BTW we have already modified our ch13 (and it's been approved by the trustee) to surrender our house due to my husband loosing his job last October.

[jade73]

It's called a short sale and it is more common in this real estate market with each passing day. Your real estate agent should be able to help you through this process.

I see that you are in a Chapter 13. If you haven't already, please talk to your attorney about selling your home.

We had our house on the market 6 months before we filed and our attorney knows. At this point our credit scores are screwed up so what difference does it make if we short sale or foreclose? I just figured that since someone finally wanted to buy this money pit that we would short sale it just to get the BIG payment off our hands.

[jade73]

Just an FYI. The Judge for the Northern District in GA will NOT approve a short sale because it only benefits the real estate agent (their commission) that sold the home. Plus you will get a 1099 form for the remainder of the debt making it look like you made the difference (in our case, $23,000) as income. So the only choice you have is to walk away and everyone keeps telling me that so one day I'll swallow my pride but until then I guess I'll just struggle to pay. I have a feeling it will be sooner than later ...

[usmccop]

Or perhaps talk to your atty about amending the plan, to let the house go. Why bother with the hassle and stress of the short sale?

That may be true, but a short sale is much better than a forclosure. I'd try and do the short sale (I did this on one of my properties), but if it doesn't go thru just dump it.

[jade73]

That may be true, but a short sale is much better than a forclosure. I'd try and do the short sale (I did this on one of my properties), but if it doesn't go thru just dump it.

The Judge for our district will NOT approve a short sale.

[despritfreya]

The Bk Judge is partially correct. If you filed bk the short sale benefits one person and one person only, the reator who makes a commission. The Judge is incorrect as it relates to the 1099 because the balance of the note is subject to your Disharge and there is no "forgiveness of debt income" for a debt discharged in bk. Bottom line, the short sale is a waste of time and that is the real reason the Judge does not want to deal with it and neither should you, IMHO.