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"Short" Sale Information.

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  • HHM
    started a topic "Short" Sale Information.

    "Short" Sale Information.

    We frequently get questions regarding so called "short sales" of real estate. So I thought I would summarize some of the basic information.

    What is a short sale?

    A short sale occurs when a person with a mortgage attempts to sell their home, or any parcel of real estate, for less than what is owed on the property.

    Can you do a short sale without approval from the lien holders?

    NO. In order to complete a short sale, the lien holders (i.e. the mortgage finance companies) MUST agree to the short sale. You cannot, of your own accord, sell your real estate for less than what is owed. Why? Reason being, in order to pass clear title of the real estate to the buyer, ALL lien holders must agree to release their lien. The only time lien holders release their lien is if they have been paid in full, or if they AGREE to accept less than what is owed. In addition, I have been hearing that some lenders are requiring the debtor tp list their home on the market for a certain number of months before the lender will even entertain a short sale proposal (typically 90 days).

    How do short sales work?

    Typically, a debtor is approached by a real estate investor who offers to buy your home for less than what is owed. The investor will (should) also offer to negotiate the short sale with lender, directly (note, if the investor does not offer to negotiate, run away). The problem is, that negotiating short sales can take time...and the investor may want to lock you into some sort of contract...don't do it. But in essence, the bank will assign a person to evalaute the short sale and offers that come in. This process can take in excess of two months.

    Are there any benefits to a short sale?

    Generally NO, not to the seller. If the Bank is willing to accept a short sale, doing so can prevent a foreclosure, but for credit scoring a short sale and foreclosure are EQUALLY negative. A short sale is an adverse entry on your credit report; thus, unless the bank specifically agrees to not report (fat chance, I have never heard of a bank agreeing to do so, because they have other regulations and duties to make a report), there is little difference between a short sale and foreclosure for credit reporting purpose. So, generally speaking, short sales, yield little benefit to the seller.

    Is there any downside to a short sale?

    YES. For IRS purposes, a short sale represents a sale of an asset AND forgiveness of debt. As a result of a short sale, you will receive a 1099 and be expected to pay income tax on the amount of the forgiven debt. (i.e. the difference between what you owe and for how much you actually sold the property). In the alternative, the lender may keep the debt collectable and refer it to a collection agency. And no matter what any real estate agent tells you, if the lender decides to foregive the debt, they MUST issue a 1099, it is an IRS requirement. You should have the Short Sale agreement (which is seperate from the sale/purchase agreement) reviewed by an attorney. Real Estate Agents are not lawyers and cannot advise you about the content or implications of the short sale contract...remember, they are just looking for a commission.

    Is there a way to get out of paying that income tax?

    Yes. If you satisfy the IRS definition of insolvency, you do not have to pay income tax on "forgiven debt". The form you need is IRS form 982.

    What about short sales and 2nd mortgages?

    Short sales are an unlikely option when you have more than one mortgage and the 2nd mortgage is with a different lender than the 1st mortgage. The lien a 2nd mortgage has on your property is just as valid as the lien of the 1st mortgage; thus, you cannot simply sell your property for the amount of the first mortgage. Again, ALL lien holders must agree to release their liens in order to finalize the transfer of the property to the buyer.

    In the long run, is doing a short sale worth it?

    That is a difficult question to answer, but in general, since there is no benefit to the seller for doing a short sale, the anwwer is no. Also, for many people who consider a short sale, they have other debt problems and income short-falls such that a short sale does not solve their financial problems. As for credit reporting, a short sale is no different than a foreclosure, the same FHA/HUD and Frannie/Freddie guidelines apply for short sale as for foreclosure.

    What should I do if I am approached to do a short sale?

    Be leery. After all, the person approaching you to do a short sale is a real estate investor looking to pick-up your property below market value, or who does not want to face competition at the foreclosure auction. Avoid signing any contract with an investor that would require you to take your home off the market or otherwise force you to refuse any other offers while the investor attempts to negotiate the short sale with the lender.

    General advice.

    DO NOT pin your financial future on your ability to complete a short sale on your home. Short sales are actually fairly rare and generally do not solve your underlying financial problems. In all honesty, from a seller's perspective, I am hard pressed to think of any benefit to doing a short sale.

    What about Short Sales and BK?

    Short sales in the BK context are a wash. I suppose in the long run, there is an argument that doing a short sale before a BK might "slightly" improve your credit coming out of BK. But a foreclosure that is done within the context of the BK is viewed as a "single" negative (i.e along with the BK); thus, any benefit of the short sale vs a foreclosure, when filing BK, is negligible. Moreover, if you do a short sale within a BK, there really is no benefit to the debtor because if a bank agrees to a short sale, there is NO deficiency balance, and thereby no lingering debt that gets discharged in the BK. Furthermore, the BK is of NO help regarding the income tax liability that would be owed on the forgiven debt. The tax liability would be too new to be discharged in BK, so you would still need to qualify under form 982 to attempt to get-out-of paying the income tax liability.

    What about short sales after BK on NON-reaffirmed mortgages

    Not reaffirming your mortgages has no affect on how short sales work. The lien a mortgage holder has on property is valid regardless of the BK, thus, the lender must still AGREE to a short sale. If you do not reaffirm your mortgage, all that means is you are no longer "personally" liable for the mortgage. Unfortunately, there is one question I am not sure about the answer...is whether, in the context of a non-reaffirmed mortgage, would you have any income tax liability for the difference...I honestly do not know the answer for certain.
    Last edited by HHM; 02-22-2009, 12:11 PM.

  • LadyInTheRed
    replied
    Originally posted by larryt View Post
    I just thought I was cleared with the bk against both situations.
    You are.

    The "forgiven" amount in a short sale would not be taxable income if the mortgage was discharged in BK prior to the short sale. If you receive a 1099C you would file a form with your income tax return stating that the debt was discharged in BK and therefore excluded from taxable income.

    You have no personal liability to pay a discharged mortgage. So, you would not have to pay the deficiency on a short sale.

    From all reports, a short sale is a huge hassle for the seller with no benefit. Why not just let the lender foreclose and live in the house for free until title to the house is transferred to whoever buys the home at auction?

    Leave a comment:


  • larryt
    replied
    HHM, thanks for al your help! this question just hit at the right time, hope not to sound crazy. If I do a ss on a mortgage already cleared in BK, would I have to pay taxes on the difference? or take out a loan to pay the difference to the bank? I've been told both ways and I just thought I was cleared with the bk against both situations. Thank you, Larryt

    Leave a comment:


  • danrwe
    replied
    I have an appt. Friday with my attorney to review C7 paperwork and assume we will file at that time. I plan to surrender my house (coming up on 5 months behind). I met with my realtor and decided to list the house as a short sale after labor day. Do lenders tend to "extend" the foreclosure process if the homeowner is attempting to sell the home on a short sale? I would suspect that it is less expensive for the bank to accept a short sale offer than to go through a foreclosure process.

    Thanks!

    Leave a comment:


  • debee
    replied
    There are other exclusions that you can use on form 593-C. Was this rental your principal residence at one time, like any 2 of the last 5 years? If yes, you're exempt from the 3 1/3% sales tax. There are other exclusions listed on the 593 - if you're an LLC, a partnership, etc. I would check that list.

    If you pay the tax after all, depending on your circumstances, you may be able to recover most of the money at year's end, but I guess you don't really have time to have your accountant run those numbers.

    They waive the tax for DIL and foreclosures.

    Since the loan was included in your bankruptcy, you don't have to worry about cancellation of debt income & that tax. So your only issue is going to be capital gains.

    If you lived in & owned this rental for 2 out of the last 5 years, you will be able exclude your gain up to 250K based on the principal residence exclusion. Perhaps this is why other short sellers indicate they will have no gain. (Just a guess)

    If this rental can't be considered a principal residence, then your tax situation will vary depending on whether or not the loan is recourse. In CA, purchase-money loans are generally not recourse whereas HELOC, refi's and cash-out loans are usually recourse. The gain is calculated differently depending on the nature of the loan.

    For short sales, you would use the actual sales price if the loan was recourse, but if the loan was non-recourse & forgiveness of debt was written in as part of the agreement with the lender, then the selling price is the outstanding loan amount. Your gain is the selling price less your adjusted basis.

    Would you be better off, tax-wise letting the property go into foreclosure?

    Generally speaking, in foreclosures the selling price is the Fair Market Value for recourse loans (This comes from 1099-c box 7 and is the gross bid price @ foreclosure).

    For non-recourse loans, the selling price is the loan balance. You subtract your adjusted basis in the property (purchase price + capital improvements - depreciation) from the "selling price" and the result is your capital gain/loss.

    In foreclosure/DIL, you don't have the FTB to worry about.

    Leave a comment:


  • catlady
    replied
    HELP needed in CA!! My no-assets Chapter 7 discharge in June, 2010, left me with a rental condo, which is now in short-sale escrow... due to close TOMORROW. The escrow company provided me with a CA 593-E "Real Estate Withholding - Computation of Estimate Gain or Loss" and a CA 593-C "Real Estate Withholding Certificate". My attorney had no idea how to fill them out. I couldn't find any advice here. I met with my accountant, who determined that I have an estimated $102k gain on the sale. CA requires the escrow company to withhold 3.3% of the proceeds, or $9,497. Great, this comes out of the bank's proceeds, right? I faxed the forms to escrow two weeks ago.

    Now, the day before closing, my realtor calls and yells at me, saying there has never been a short sale in which the seller has a gain; that the escrow company said "everyone" marks the "seller has a loss or zero gain" box on form 593-C, and if I don't do it too, the deal will fall through. Interestingly, form 593-E states "title and escrow persons and exchange accommodators are not authorized to provide legal or accounting advice for purposes of determining withholding amounts. Transferors are strongly encouraged to consult with a competent tax professional for this purpose." The form requires a signature under penalty of perjury. I told the realtor he could forge an "x" in the box if he wants to; that will be his choice. I asked the realtor, "if the withholding isn't taken from the sale proceeds, am I on the hook for $9300 worth of taxes when I file my 2011 taxes?" He said YES.

    What do I do? Perjure myself by falsifying the form? Seems this will bite me in the butt when I file my 2011 return. Do I allow the short sale to fail? Should I call the Franchise Tax Board for advice?

    PLEASE help... thank you!!

    Leave a comment:


  • dontburnthep
    replied
    Would a short sale benefit a chapter 13 debtor by removing the deficiency and therefore diverting that money to other creditors? In our case, our largest creditor is our student loan's, second largest would be the house deficiency, with the credit cards comprising the rest. If there is no deficiency, the student loan's will get more of a payment and perhaps at least break even against the interest that will continue to accrue through the life of the chapter 13 plan. It seems that in our case a short sale does have positive financial ramifications. Am I misunderstanding something? I'm not concerned about our credit or our future home buying ability, but the deficiency will be tens of thousands of dollars. Obviously it wouldn't matter in a chapter 7.

    Leave a comment:


  • SteveGreen
    replied
    The original information given in this original thread was SPOT on! And the author did mention IRS from 982. That is the from that you use for The Mortgage Forgiveness Act. Most people don't give real substantive advice on short sales because they have their own motives. Be careful! I had a guy call me a couple of days ago and ask me to forward him my bankruptcy clients to do a short sale and I can get paid $2500-$3000 plus title charges. My response, NO THANK YOU!!! I don't see how a short sale in most situations benefit my clients.

    Leave a comment:


  • PushRestart
    replied
    As a realtor, I thought I would offer my perspective and describe how I help clients who ask me to list their home for a short sale. First things first, the folks who come to me with the desire to do a short sale typically tell me that they have already researched short sales and are simply ready to get started with the process, often because their lien holders are very hard to work with so they have lost all patience with trying loan mods or anything else. I talk with my clients at length to make sure I understand their true issues and I also refer my clients to a CPA to talk about tax issues and a lawyer to discuss legal issues (and often bankruptcy as another option). I do not provide legal advice because I am not a lawyer and I am not looking to get sued :o)

    My clients have every possible reason for the cash-flow interuption that makes keeping the home impossible: death in the family, unemployment, pay cuts, out of state transfers, divorce, you name it. They often come to me completely freaked out (one was even talking about ending it all but I got her back to a positive place) and I take a lot of pride in holding their hands and taking them through the process. Many folks simply do not want to do a BK nor do they want a foreclosure. They understand that by doing a short sale, they are attempting to help the lender reduce their loss and for many folks this is important.

    Some items I think are very noteworthy:

    - When a client gets the final offer from the lien holder as to how they will approve a short sale (at the end of a typically long period of time waiting), I tell my clients point blank if I think the offer is not good for them. This does happen now and then, typically if the client only has one mortgage and the lienholder wants to hold on to deficiency judgement rights. I tell my client if the deal is no good (IMO), get them to check with an attorney to make sure and then I make No Money. And I am fine with that because I do not need to make a paycheck by putting my clients into a bad deal of any kind. As a realtor, I need to help people and to look after their best interests. If a short sale deal turns out at the end to be no good, I tell them so and that is that. And again, I have my clients speak with CPAs and lawyers to make sure they know what they are doing.

    - Contrary to the popular myth that is mentioned on this site now and then, you Do Not have to have a hardship to get a short sale approved every time. I have helped clients with very big incomes negotiate a short sale that reduced their exposure to deficiency judgements and ending up closing just like any other short sale. The "real" key to getting a short sale done is to do what my team and I do; provide a compelling reason for the investor who holds the loan to accept the loss (or short) by giving them an offer that is reasonable and mitigates their losses. In my team I use myself for the strategy piece, one of two short sale negotiators to support me and lawyers to handle the legal stuff with the client. At the end of the day, the owner of the loan can choose to:

    - Foreclose on this property so it can go to auction where the minimum bid will most likely Not happen and now the unhappy investor gets to own the home/non-productive asset.
    OR
    - Look seriously at a legitimate short sale offer where the investor can take a loss of a known amount and get his/her money back right away.

    When we tell an investor that they can keep the non-performing asset or take the short sale, almost always they say let's do the short sale. My success rate at getting banks/investors to approve short sales is very good but it is based on a team structure and a focus on putting the client first, even before my own paycheck, as both the law and my own ethics dictate.

    So, with all that said, I'm still a soon-to-be member of the BK club. After taking in so much good info from this site and speaking with my own BK lawyer, I am now sending many of my potential clients to get a free BK consult Prior to starting the short sale process. I have also found that a BK can be done simultaneously with a short sale (per my BK lawyer) and have done some of those now. While I am not as astute as many of the very sharp legal minds on this site, I do know a bit about short sales and I do respect folks who want to do them but Not do the BK thing. Live and let live... Thanks again to the members of this site, you have all helped change my family's lives for the better!

    Leave a comment:


  • HHM
    replied
    Originally posted by calgirl67 View Post
    When you closed the short sale you must have signed a affidavit or form stating you are responsible for any deficiency from the loan.

    Ask your agent and ask the 2nd mortgage people for a copy of it. Otherwise tell them to shove it. You can also ask them to cease calling and put all of their requests into writing.

    Your agent should know if you signed such a form, and the title company also.
    That is not the case in every state. In CA, CA is a non-recourse state for purchase money mortgages. In other states, any deficiency may be collected regardless. Their need not be an affidavit of debt, the seller, in a short sale, owes the short amount.

    Leave a comment:


  • calgirl67
    replied
    Originally posted by ooCHAOSoo View Post
    After trying to get a loan modification for almost 2 years with no luck, we decided to put our house on the market in April. We decided to go through a short sale in June after we kept lowering the price on our house and still not getting any offers. We had two mortgages with different banks. We didn't have to short the first mortgage, only the second. The second mortgage told us to continue to make my mortgage payments, which we did, even though we couldn't afford it. We charged our other bills and groceries. We were hoping to buy a house again 1 year after our a non-defaulted short sale. We hoped that one year would help us get back on our feet from all of the debt we had accrued trying to stay current on our mortgage. Two weeks after we "sold" the house, the second mortgage called us inquiring on our plans to repay the money we shorted them. We told them that we couldn't afford it and that's why we went through a short sale and are now renting. Now they are threatening to sue us so we have no choice than to file.
    When you closed the short sale you must have signed a affidavit or form stating you are responsible for any deficiency from the loan.

    Ask your agent and ask the 2nd mortgage people for a copy of it. Otherwise tell them to shove it. You can also ask them to cease calling and put all of their requests into writing.

    Your agent should know if you signed such a form, and the title company also.

    Leave a comment:


  • ooCHAOSoo
    replied
    After trying to get a loan modification for almost 2 years with no luck, we decided to put our house on the market in April. We decided to go through a short sale in June after we kept lowering the price on our house and still not getting any offers. We had two mortgages with different banks. We didn't have to short the first mortgage, only the second. The second mortgage told us to continue to make my mortgage payments, which we did, even though we couldn't afford it. We charged our other bills and groceries. We were hoping to buy a house again 1 year after our a non-defaulted short sale. We hoped that one year would help us get back on our feet from all of the debt we had accrued trying to stay current on our mortgage. Two weeks after we "sold" the house, the second mortgage called us inquiring on our plans to repay the money we shorted them. We told them that we couldn't afford it and that's why we went through a short sale and are now renting. Now they are threatening to sue us so we have no choice than to file.

    Leave a comment:


  • Sweetpea3829
    replied
    Thanks for the info Zania. You hit everything right on the head. Our case is complicated. We've spoken with umpteen mortgage brokers, loan specialists, senior loan specialists, supervisors, etc. Everybody says the same thing..."WOW, you've got quite the situation." The crux for them is that our bankruptcy wasn't necessarily a result of "our own" financial situation, but rather it was more a result of three different tenants. Nevertheless...a bankruptcy is a bankruptcy.

    As for pursuing legal ramifications of continuing to pay the mortgage...well that gets even better! When we found out in 2009 that this loan had not been reaffirmed (we hadn't even heard of the term reaffirmation up until that time), we were FURIOUS! I could not believe that for the life of the mortgage, plus ten more years, the mortgage would essentially be a derogatory mark on our credit file because it would ALWAYS report as discharged.

    I contacted the attorney's office that handled our BK and boy did they scramble to cover their rears. I was told things like, "We NEVER discuss reaffirmations with our clients because it's never in their best interest." In the end...they turned around and stated that the attorney that actually handled my bankruptcy was not a part of their firm any longer and in fact, he never had been a part of their firm, he was just renting space and apparently borrowing their secretary's help as well.

    We retained a second BK attorney to reaffirm the mortgage. After a year of going through that, we finally told him to forget about it. The loan was never officially reaffirmed. This was right around the time that we were denied the HAMP, denied the in-house, learned the property was so severely underwater, and lost one of the tenants. I think the kicker, the straw for me was when one of the supervisor's at Citi (the servicer at the time) rudely told me, "Well Ma'am, perhaps you should think about selling your property."

    I don't think I've ever lost it in quite the way I lost it with that woman. All of the stress, the uncertainty and the frustrations came flying out of me. I shouted quite loudly, "DON'T YOU THINK WE WOULD HAVE SOLD THIS PIT IF WE COULD HAVE?!?!" I mean really...we are living in a 700 sq ft apartment with four children that are 5 and under and a dog. If we could have gotten out...we would have. And where exactly would we go? Can't afford to rent in this state, nor would anybody actually rent to us because of RI's lead laws. Most landlords shy away from anybody with young children.

    After that...I didn't care anymore. I told the supervisor perhaps she might like to sell it for me and I hung up. Haven't paid a dime on the mortgage since.

    Now I know some will see this default as indicating our irresponsibility. Hey...I can understand why some would see it that way. Personally...I don't care anymore. We were forced into this situation by stuff beyond our control and as far as I'm concerned, we've "done our time." This property here...we would be fools to continue to dump money in to it. Should we continue to pay for the life of the loan...it will NEVER be worth what we would ultimately pay after interest, etc. It would have to triple in value and I just can't see it doing that in our lifetime.

    So...moving on...now we're moving to western NY and we would like to put the whole ugly mess behind us. The sooner we can get into a single family home, our forever home, the better. Right now, we're investigating whether we can quit-claim my husband off the deed to free him up to go buy a home under USDA. I'll report back when I hear if they'll accept that. It's an interesting venture...but they have to accept his name as being removed only on the county level as his name will still be on the deed-of-trust.

    I'll update when I can.

    Leave a comment:


  • zania22
    replied
    Dear Sweetpea3829,

    First let me say that I wish you the best. And our latter days will be better
    than our former days!!!!



    You gave a lot of information and I'm not sure I have it right but here is
    my understanding:

    1. You filed bankruptcy in 2007 because of debt related to an investment
    property and you thought that you were discharged of only the
    investment property and that you reaffirmed your primary residence.
    But the bankruptcy discharged your of your primary and investment properties.

    2. So you continued to make payments on your primary residence for
    almost 3 more years and tried to do a Loan Modification to keep
    the primary but it was denied the Loan Modification

    3. You want to relieve legal responsibility of your primary residence
    in a manner that doesn't jeopardize your possibility of getting
    another primary residence as soon as possible


    And here is some feedback/questions

    1. Is there no path to get a lawyer and fight your mortgage company
    that you wouldn't have
    paid mortgage for almost 3 years on a home that you knew was discharged?
    Can you talk to your 2007 bankruptcy law firm?

    2. This may or may not be related to why they declined your loan if they did
    not even run you through their waterfall analysis but if they did run you through their
    waterfall analysis then; Loan Modification is driven by a NPV analysis agreed upon by congress
    and the mortgage companies. They do an analysis that lets them decide the
    net present value of you staying vs letting it go into foreclosure.
    Essentially for you they concluded that they would make more money if your
    primary when into foreclosure than to let you keep it and "make it more affordable".
    And every mortgage company has their own ever changing
    formula and scales of the npv difference of which to make their decision.
    I know something about this because I worked in the Loan Modification
    related business.
    You should be able google more about this.

    3. As from my experience with my old home deed in lieu is a choice after the
    foreclosure process starts? I know it as a "deed in lieu of foreclosure".
    It's where you give them the deed quicker but from a credit perspective it does
    very similar affect to your home as a foreclosure. Banks do do it to get your deed quicker so they
    won't have to spend money to break your
    mortgage contract in court to get it aka foreclosure. Can you talk to your
    2007 Bankruptcy law firm about this?

    4. You can go ahead and start working on a short sale. Get a realtor,
    and set close to that 150K neighbor's price and see if you get a buyer.
    It's after you get an offer that you go to your bank with a good
    short sale real estate lawyer and begin the short sale process.
    The quicker you get a buyer the better and then it depends
    on how fast your mortgage company will accept or reject the short sale.
    I'm not sure how fast they will move to accept or reject because you are
    discharged of the debt but they do want the deed so they can sell it if you
    can't sell it someone else.
    So their interest is getting the deed off their hands and that's also your
    interest. A lawyer can answer this that has dealt with short sales where only
    the legal aspect of the mortgage is a factor and not the note aspect.


    5. If you do do a short sale then there shouldn't be a
    deficiency judgement since the notes tied to both properties were
    discharged of any responsibility of yours. I discharged of bankruptcy first
    and then two weeks later closed on a short sale. I did it in that order
    because bankruptcy relieved me of the note aspect of the mortgage and then
    the short sale had been in the works and would relieve me of the
    legal aspect of the mortgage. Until the the deed was moved over via sale,
    deed in lieu or foreclosure then if something happened to my house legally I
    would've been responsible for it.


    Best to you and your family

    Leave a comment:


  • Sweetpea3829
    replied
    Wondering if anybody can answer a few things for me.

    We were discharged Chapt 7 in April of 2007. IIB was the mortgage for the property that we are currently living in. We *thought* we were still on the hook for the mortgage as the bankruptcy was to relieve us of the debt from a second property (a multifamily) that we owned at the time and that had caused serious financial issues when we had multiple tenant evictions.

    So from 2007 on, we continued to pay on the mortgage for this property that we still live in. We found out in 2009 that it had been IIB and not reaffirmed and what this meant for us. That it would never report as a positive on our credit report, despite our on-time payments, that the bank could come and repossess the property any time, and that we had no legal liability for the loan.

    We continued to pay the mortgage, on time, through 2009 and most of 2010. Property taxes went up causing a $400/month increase in the mortgage payment, I lost my job and we still struggled along, staying current, but really struggling to do so.

    We filed for a modification in April of 2010 and were dragged along by Citi for FOUR months. For weeks, they promised repeatedly that we would begin our trial payments within another week or so. The trial payments would have dropped our payment by about $700/month. August rolled around and we received official word that we were denied the modification on two grounds...1) We'd never been late and therefore were not at risk of default and 2) we had too much in liquid assets. The kicker was that much of the money they were counting as liquid assets isn't actually ours. We had right around 6k overall in the bank...$2k of that was a mortgage payment that had yet to clear, $1500 of the 6k was comprised of tenant security deposits (the house is a multifamily) and almost 1k belongs to our 5 yr old daughter, but because her account is titled in our names, it was counted as part of our liquid assets.

    So we were denied both HAMP and an in house modification.

    So we stopped paying. The house is 100k underwater and at this point, to continue to dump money into it would be a poor use of financial funds. It's a toxic asset, essentially.

    We had thought perhaps they would modify the loan, but they have not even contacted us at all...and last check, foreclosure proceedings haven't even begun.

    In the meantime, my husband has been offered a job that requires us to relocate almost 8 hours away. We were hoping to purchase a single family home as houses out there are VERY inexpensive. The bottom line is that we cannot obtain financing (FHA, conventional, etc.) until our names are off of the deed for this property.

    We are specifically pursuing a USDA Rural Development loan. I've spoken with some of the senior loan people (all of whom are fascinated by our situation) and they are pretty positive about our ability to be APPROVED for a USDA loan. But...and this is a big but...we cannot close on a USDA mortgage if our name is on the deed for another property.

    We have to get rid of this house we own, and fast.

    I contacted the servicing lender to see if we could do a deed in lieu. They stated we need to list the property for three months in order to qualify for a deed in lieu.

    As I mentioned, the property is severely underwater...so listing the property means it'll have to be a short sale.

    Any thoughts on this? Should we push and market aggressively and try to get the short sale done? Or should we just let it sit on the market for three months and then push for the deed in lieu?

    If the property short sells, all of our ties to the property are completely severed, correct? We will have no deficiency judgements, no tax issues, right?

    What are the costs to us, involved with selling the property at short sale?

    Any ideas how long a deed in lieu will take?

    The lender is Fannie Mae...the loan servicer is Lender Business Process Solutions (transferred from Citi). Can I contact Fannie directly and angle for a deed in lieu now?

    Any suggestions to get the property out of our names more quickly? We absolutely cannot let it foreclose or we will not be able to obtain USDA financing for three years.

    We owe 260Kish, the property is valuing on zillow for 150kish and a house up for short sale across the street is listing for 150k. Their house is similar to ours but in tougher shape. It does have more rental units though.

    Thoughts?

    Leave a comment:

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