Short Sale Help...

[dscurlock]

I called the morg company today, and she pretty much told
me the steps for a short sale...the morg company would
accept/reject the offer, and if it was accepted, then the
balance would be written off...

Has anyone actually did a short sale, and made arrangements
to make payments on the write off difference?

I would rather make small payments on a small difference
then full payments on the full loan.

after all, they are willing to write it off, and told me that
I would have to pay income tax on what was written off.

It just makes since, if make payments on the difference,
then all parties are happy, I would also think that would help
credit wise, as it would not look like we are defaulting on
$25,000 (balance) on a short sale if we can make payments
on the balance....


has anyone actually done this?

any thoughts on this?

Thank-You

[twuoo]

From what I understand, the process to accept/reject can take up to 3 months, maybe more. By then your prospective buyers are LONG GONE and you are no better off than you were before.

[dscurlock]

From what I understand, the process to accept/reject can take up to 3 months, maybe more. By then your prospective buyers are LONG GONE and you are no better off than you were before.

Well it surely would not be in banks best interest to wait that
long., and it sure is not in their best interest to forclose, but
its up to them on what they want to do...they can make
this as easy or as hard as they wish...but if they wish to
take the hard road, then there is nothing I can do about that.
its not like that I am not willing to work with them...

If they forclose, then they will have to sell the property anyway,
and maybe at a much more reduced rate, and over a longer period
of time, it would be better for everyone if they accpet the
offer, and I can work with them to make payments on the balance.

It is unlikely they will wait 3 months, if it actually took that long,
then no one would hang around, and there would be no such
thing as a short sale...now because of all this, I can see it taking
30-90 days before the sale closes, but I can not imagine it
would take 3 months for them to make a decision...

I suppose in theory, if it actually did take this long, it would be
one time, so if they took up to 3 months to accept a 90k offer,
then the next 90k offer would go through easily as they would
have already accepted an offer, and i suppose I could still make a
house payment here, and there, to keep forclosure at bay, but still
not caught up on payments...

that is an excellent question I can ask my agent...
she would know more about this..

Thanks

[twuoo]

It doesn't much matter the if it's logical or not. It's what's happening with what I see.

I bought a house in May of this year for $14,000. In 2006, the owners that lived there the last 14 years had refinanced, and the house was worth $120,000. In September 2008, they still owed $90,000 when the house went into foreclosure.

The house was very trashed as pipes had burst and flooded the house. But go figure, the bank is willing to sell a house for $14,000 when the balance was on the mortgage was $90,000.

They could have offered it to the original owners for that amount, but they didn't.

[Gerry]

It doesn't much matter the if it's logical or not. It's what's happening with what I see.

I bought a house in May of this year for $14,000. In 2006, the owners that lived there the last 14 years had refinanced, and the house was worth $120,000. In September 2008, they still owed $90,000 when the house went into foreclosure.

The house was very trashed as pipes had burst and flooded the house. But go figure, the bank is willing to sell a house for $14,000 when the balance was on the mortgage was $90,000.

They could have offered it to the original owners for that amount, but they didn't.

That makes absolutely no sense to me. Can someone explain, please, from a business standpoint, why it would be better financially to sell a house for a fraction of the original debt when they could have lowered the interest or principal and allowed the owners to stay in their home? I just don't get it.

[StartingOver08]

That makes absolutely no sense to me. Can someone explain, please, from a business standpoint, why it would be better financially to sell a house for a fraction of the original debt when they could have lowered the interest or principal and allowed the owners to stay in their home? I just don't get it.

I can explain. I work in real estate and we are flooded with short sale properties. Very, very, very few actually close. The mortgage servicer (Wells Fargo, EMC, Chase etc) makes more money when the loan is in default because they charge outrageous fees. The lender can collect on the mortgage insurance for the loan only if the servicer can proof the property was on the market for x days. X is a variable number, depending upon the actual mortgage insurance, but the servicer usually requires anywhere from 90to 120 days minimum for market time.

You say you don't have mortgage insurance? Well you might not be aware that the lenders put on BLANKET LENDER PAID mortgage insurance on loans origianted after 2000. They saw this correction coming loooonnnngggg before it was apparent that there was a need for a correction. So the lender gets paid the mortgage insurance only when the property is foreclosed upon and only if the lender can prove that the property was marketed for a short sale. The payout amount is 19% to 35% of the original mortgage, depending upon the policy selected. Plus the lender gets the asset (the property) to sell. It actually pays the lender to NOT accept the short sale offer and to go ahead and foreclose.

BTW, the servicer makes sure the short sale offer is not accepted by countering with a condition that the seller and/or buyer can not meet. They do this to make sure the deal falls apart. In our area, less than 10% of the short sale property transactions actually close. The rest die - either the buyer walks because it has been too long or once the bank responds the price offered is no longer valid because the appraisal won't work!

I am working on one now since Feb 2009 - cash buyer - the bank has give a verbal approval for the short sale but refuses to put it in writing. In real estate you have nothing if it is not in writing. So we are working on 6 months and the most we can get from the bank servicer (Chase) is 'Be patient'.

[killinstinct]

This makes a lot of sense to me. We initially began working on a short sale of our house in February 2009, our bank has had several offers but they drag their feet. We ended up filing Chapter 7 anyway last week as our financial situation continued to deteriorate. I'm willing to continue to work toward a short sale as we are surrendering the house anyway, but maybe it just doesn't matter. The whole experience has been a huge pain in the (*&^%!! Anyone have any knowledge/experience with this?

[cdommie]

I did a short sale and negociated that the difference would not be paid back and written off and the loan would be settled and paid as agreed

[sigferl]

Thanks for your post dscurlock. Sorry you might lose your house.

I think the short sale and paying back the difference is a good idea if you can no longer pay the mortgage.

God Bless America

I called the morg company today, and she pretty much told
me the steps for a short sale...the morg company would
accept/reject the offer, and if it was accepted, then the
balance would be written off...

Has anyone actually did a short sale, and made arrangements
to make payments on the write off difference?

I would rather make small payments on a small difference
then full payments on the full loan.

after all, they are willing to write it off, and told me that
I would have to pay income tax on what was written off.

It just makes since, if make payments on the difference,
then all parties are happy, I would also think that would help
credit wise, as it would not look like we are defaulting on
$25,000 (balance) on a short sale if we can make payments
on the balance....


has anyone actually done this?

any thoughts on this?

Thank-You

[tkharvey]

I don't get it either. Our lender originally said we qualified for a loan mod, sent in the paperwork, did the three month "trial" payments successfully, then after "underwriting" we were told that we don't qualify. We WANT to stay in our home, even though it's underwater by over 100K, but they have left us no choice but to walk away. We even asked them about a short sale. They said we'd have to go through the "appropriate channels" and that there is no guarantees. Whatever.....it's for the best anyway. We're going to walk away, file a 7 and be done with it. We will get through it and be smarter and wiser for it. They will be stuck with a beautiful home that they will have to sell for pennies on the dollar, when we were willing to stay despite the decrease in value. What a mess the housing market is in!

[BKch7]

I can explain. I work in real estate and we are flooded with short sale properties. Very, very, very few actually close. The mortgage servicer (Wells Fargo, EMC, Chase etc) makes more money when the loan is in default because they charge outrageous fees. The lender can collect on the mortgage insurance for the loan only if the servicer can proof the property was on the market for x days. X is a variable number, depending upon the actual mortgage insurance, but the servicer usually requires anywhere from 90to 120 days minimum for market time.

You say you don't have mortgage insurance? Well you might not be aware that the lenders put on BLANKET LENDER PAID mortgage insurance on loans origianted after 2000. They saw this correction coming loooonnnngggg before it was apparent that there was a need for a correction. So the lender gets paid the mortgage insurance only when the property is foreclosed upon and only if the lender can prove that the property was marketed for a short sale. The payout amount is 19% to 35% of the original mortgage, depending upon the policy selected. Plus the lender gets the asset (the property) to sell. It actually pays the lender to NOT accept the short sale offer and to go ahead and foreclose.

BTW, the servicer makes sure the short sale offer is not accepted by countering with a condition that the seller and/or buyer can not meet. They do this to make sure the deal falls apart. In our area, less than 10% of the short sale property transactions actually close. The rest die - either the buyer walks because it has been too long or once the bank responds the price offered is no longer valid because the appraisal won't work!

I am working on one now since Feb 2009 - cash buyer - the bank has give a verbal approval for the short sale but refuses to put it in writing. In real estate you have nothing if it is not in writing. So we are working on 6 months and the most we can get from the bank servicer (Chase) is 'Be patient'.

Is this also way I can not get a principle reduction so far for as a part of my loan mod? It seems to me that the bank (HSBC) should want me to reaffirm my loan since after discharge I will be able to make the payments.

[StartingOver08]

Yes, there are no principal reductions now that I know of because of the mortgage insurance. Most of the "loan modifications" are not really true loan mods but forebearance programs that add on the missing payments to the principal loan amount and stretch out the term a little. Many times the loan mod payment increases! So it is a mod only in that the payment changes.

HSBC is extreemly difficult to work with for any sort of program. They are the definition of uncooperative. Surrender your house in the BK - stay as long as you can (until the final judgment). Save your money to start a new life.