Chapter 7 - Even mess with a Short Sale or Let the bank foreclose? Need some tips!

[sammyt74dp]

I filed BK in July 09' and would hope to be discharged in Oct 09'. Have a mortgage thats in foreclosure process, attorney advised me NOT to reaffirm the Mortgage debt due to deficiency being discharged. But should I even mess with trying to do a short sale or just let the foreclosure process do it's thing and find a place to rent. Anyone know what difference it will have on credit reports with a Short Sale VS Foreclosure after BK discharge?

Just thinking as far as trying to buy a home in the future. I know FHA says 3 years for FC and 2 after BK, but doing a short sale with the bank is alot of wasted time and energy if it doesn't matter that much.

[AngelinaCatHub]

In this day and time, I doubt it would matter. There is a glut of foreclosures and short sales. We are living in a unique time and your one of many. I would not bother, just find a nice rental place. 'Hub

[tkharvey]

I agree. We were wondering the same thing as we are surrendering our house in BK. We aren't even going to bother trying to short sale. It will just benefit the banks as our house will show great vs. an empty house, but after they denied our loan mod, I'm going to stay here as long as we can. From what I understand, it's inclusive in your BK and doesn't matter if you short sale or foreclose.

[imoverit]

I think it depends on your individual situation. We included our house in CH 7, but we sold short sale because the house was vacant AND it would take at least a year for the fc to be completed. I wanted the house completely off my back and out of my name just to get the whole thing over quicker. Now if I was living in the house, not paying, then I would never have bothered with a short sale. So is it worth it or not? it depends!

[sammyt74dp]

I think I am going to give one more shot at a loan mod, But if they ask to reaffirm the debt then the deals off. I'm dealing with Wells Fargo and they are a friggin nightmare! They could very easily save this home, but are to clueless to figure it out. If any one else has input on how a short sale or FC shows up on your credit report after you file CH 7 I would love to know. One person said they had the bank foreclose but it just said IIB (included in bankruptcy) which would be nice.

[imoverit]

If it was included in CH 7 it is supposed to show up IIB... it would not double ding the credit report and the foreclosure shouldn't appear. If you plan on buying a home in the future...be aware the FHA has a waiting period and that starts at the time the house leaves your name or when the foreclosure is complete.

[sammyt74dp]

Thanks All for the input, I will keep a time line of whats to come in the near days. Good luck to all going through this mess.

[hereforinfo]

FHA considers a short sale the same as foreclosure when it comes to qualifying for a new loan - 3 years from when the title changes hands. If the short sale would get the house out of your name significantly sooner in order to start the 3 year clock, then it may be worth it. However, keep in mind that it's a hassle and something like 80% of short sales fail before closing.

For a conventional mortgage, the requirement is 5 years from the date of foreclosure or 4 years after a short sale. If there were extenuating circumstances beyond the borrower's control (loss of job, death of wage earner, severe medical crisis) the guideline is 3 years after foreclosure, 2 years after short sale.

Even though the foreclosure or short sale may not show up on the credit report with the bankruptcy, they still occur and are public record, and would have to be disclosed on any future mortgage application. So the criteria for a new mortgage is still based on the foreclosure and not the bankruptcy date.

[aljohnson007]

A short sale will show up on your credit report as a charge off with the amount being the difference between what you owe and the net proceeds to the bank. I did a short sale and regret it as I could have let the foreclosure proceed and have it IIB. Also, you may receive a 1099 for the charge off which the IRS considers as income.

[myhearts07]

What happens if I try to shortsale my house and the deal falls through. Does the lender resume the foreclosure on the property? Would I have to be out right away if the deal falls through?

[DeadManCrawling]

If the deal falls through, you are, on the day the deal is dead, at the exact same place you were the day before the lender entertained the deal.

So, if you were under a "sale date" deadline, it would re-enforce. Lender may need to readvertise but maybe not.

Either way, foreclosure would continue from the previous point. If you have not previously filed bk, you could do so and interrupt the process until the lender filed for "relief from stay". Then the foreclosure would proceed again.

[myhearts07]

Thanks for your response. We have not put the house on the market yet. Our loan got sold to Bk Of America and their bk dept. said they couldnt even discuss options with us until they rcvd a case closing letter from the courts, so we are waiting. 9/22/09 was our last day of redemption and I have been checking the sheriff's sale list but our home is not listed yet and they have sale dates thru december 11. I wonder if it would even be worth it to try and shortsale or try to save money and move?

Hearts

[DeadManCrawling]

If you have already filed BK, the short sale would only benefit the lender. There is nothing in it for you.

In fact, you probably have more time if you force the lender through foreclosure. That is, if you are hoping to spend more time in the home rent-free.

It could be a VERY long time. Lenders simply do not like having to take responsibility for homes these days. And when they DO take the home, they often hold it off the market as "shadow inventory" to artificially inflate the prices of their other properties.

This is a very gray area, and there is no telling what could happen. However, short sales, under these circumstances, are not in your favor. They only benefit the lender.

[StartingOver08]

Myhearts07 - both DeadManCrawling and hereforinfo have given you great advice.

When you have filed a BK and surrendered your home - you are in the best possible position you can be in during the foreclosure process. Don't mess it up with attempting a short sale - it is no benefit to you whatsoever. Take advantage of the time you get in the house to rebuild your savings after your discharge.

A short sale benefits the bank first and the borrower/owner that does not plan to file BK or can not file BK due to other assets. Once the property is iib and zero balance....what more do you need?

[sammyt74dp]

This was my exact guess as well. Short sale only benefits the lender and they would LOVE for you to sell it for them. I'm gonna ride it out as long as I can unless I find a rental I cna't pass up then I'll move on. Hopefully Discharged in BK any day, just waiting. Last day for creditor objections was 10-23-09