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    #91
    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

    Comment


      #92
      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.

      Comment


        #93
        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.

        Comment


          #94
          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.

          Comment


            #95
            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.

            Comment


              #96
              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!
              Filed Chapter 7 7/14/2011, 341 meeting 8/16/2011, discharged 10/19/2011! Note that my posts are not legal advice, so please do not sue me, I have enough problems already.

              Comment


                #97
                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.

                Comment


                  #98
                  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.

                  Comment


                    #99
                    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!!
                    Retained the BEST bk atttorney in San Diego ~ 2/10/10 :cool:
                    341 hearing ~ 4/27/10
                    Ch 7 discharge ~ 6/28/10 :yahoo:

                    Comment


                      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.
                      There are two secrets for success in life:
                      1.) Never tell everything you know.

                      Comment


                        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!

                        Comment


                          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

                          Comment


                            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?
                            LadyInTheRed is in the black!
                            Filed Chap 13 April 2010. Discharged May 2015.
                            $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

                            Comment

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