Real estate - short sale information

[Texas Transplant]

Well, thought I would pass along news/tips on trying to do a short sale on your home. First, there is no real guide. Some of the various forums will list some information, but for the most part you are left to negotiate the 'short sale waters' by yourself.



1). You have to do all the legwork. Period.

2). Make sure you have a realtor that has at least 'some experience' in a short sale. Invaluable.

3). You are probably going to need to be agressive in lowering the price. I did - $10k downward every 3-4 weeks till we generated enough interest to get a contract.

4). You will have to provide the Mortgage company an inordiante amount of paperwork.

5). In general, you will talk to many different people at the mortgage company till you get an offer, and they assign someone to your 'case'.

6). Be patient.

7). Repeat step 6.

8). Emotionally remove yourself from the process. You are going to be giving away your 'house' - get over it or you will really get stressed out over the whole thing.

9). It isn't over, till its over. The 'process' will take awhile even after you get everything sumbitted. My realtor just closed a short sale (yesterday) that got an offer last September.



If you think that owning a lakefront home protects you or helps you maintain 'value' - think again. Here is what happened to me.



9/1/09 - listed home for the realtor recommended $349K (very few showings)

12/1/09 - dropped it to $325k (minor amount of new showings)

1/10/10 - dropped it to $299k (more showings, still no offer)

2/15/10 - dropped it to $285K (dead time - nothing much happening)

3/1/10 - dropped it to $275K (some interest, but mostly tire kickers)

3/25/10 - dropped it to $265K

4/15/10 - dropped it to $255k - got an offer of $250K - accepted by us, waiting on mortgage company. BTW, the offer is an 'all cash' deal.



In short, if you or others that you may know want or need to do a 'short sale', it's very much like fighting a war where you are trying to gain progress measured in small increments moving forward.



The other thing is that the 'market' is simply 'dead', and the usual 'spring upswing' never really happened. I put the link to the house/listing below, if you are interested in what $250K can get you on Lake Palestine in E. Texas.



If you have any specific questions, or want to know more about the details of the process, let me know and I'll see what I can do.



Tex
http://www.sisterssellingtyler.com/Tyler_listings/AA7CC778-C97D-4263-4CB0DA14913B2E05.shtml

 

[Scott Hammer TOXIC]

What about your deficiency balance? In a short sale you are selling at market and your mortgage holder is taking a hit. My concerns would be:



1. Credit Damage

2. Pursued by lender for "short" amount

3. Getting a 1099 at the end of the year for your "short" amount.



Just because the collateral for your loan has lost value and your lender agrees to release it for market value (the short sale price) you are not forgiven from the rest of the balance of the loan after the proceeds are applied....and if they do agree not to pursue, you will get a 1099 for the amount the "wrote off" your loan. We do it here at the FDIC all the time.



TOXIC

 

[Texas Transplant]

Yes, Tox you are quite correct. However, for those that know about it, the Congress passed a bill a few years ago that still has a few years left whereby you can do a one-time-only write off via the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act of 2007 (link below). BTW, it's IRS Form 982.



Yes, I will show a 'settled debt'on my credit report, but it's a hell of a lot better than a foreclosure - which in my case is looming in the rear view mirror and getting closer every day.



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

 

[Scott Hammer TOXIC]

Understood. It's not that much different than a Deed-in-Lieu in the long run but the lenders like the short sales better because they don't incur the costs of selling or maintaining the collateral. Individuals are more motivated to get the most $$ out of the Real Estate if it benefits them as well. Good for you on trying to maximize the recovery, most would just walk away. The pendulum has swung the other direction now and lenders have tightened up so much that any nick on your credit is a deal killer. Especially with Real Estate.



TOXIC

 

[Eric Aasen]

How many months did you have to be delinquent to be allowed to do a short sale?



NoCAL

 

[Texas Transplant]

I don't think that there is a rule, but the other factor that is 'big' with them is how long the house has been on the market. I would think that you likely need to be at least 3 months in arrears before they would even consider it. If you've 'just' listed the house, they are not going to be as adpt to do it either.



BTW - just found out today I have another 'to-do'. I have to call and get a 2nd Mortgage payoff for them. It's the same company, they have both the first and the second. Go figure.



Also to Toxic's other note regarding 'deed in lieu of trust', I got something from them on that also. I don't believe they will even consider that, until you are right on the verge of a foreclosure, and that's another one where they have to 'value' everything and accept it.



Tex

 

[Eric Aasen]

Thanks for the info.