Hello,

  My fiance and I both own a home.  We can afford both mortgages right now, but would like to sell her condo so we can consolidate bills, start a family, etc.   We met with a real estate agent yesterday who said that our situation was not a valid reason for a short sale.  We still have all our money separate, so it would just be her financials they look at (I assume)

 

The biggest issue we have is if we have to come up with say $10K that might be doable, but if the shortfall ends up being more than that, not sure we could swing that kind of money

 

I could have sworn I read were our situation was a valid one, but the agent seemed to say unless we could prove that we couldn't make the payments, there was no way we would even be considered for a short sale.

 

FYI- the mortgage is through Mass Housing if that makes any difference

 

Thank you everyone in advance!

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I agree absolutely. If you have to rent for a loss greater than $100 monthly, it sounds like the property is underwater. That is a hardship, since I would ASSUME one of the parties will be moving in with the other?

I do not see a justifiable hardship. Short sales are not for borrowers who just want to get out of it but have no financial hardship. I would agree with your agent.

She must also issue a hardship letter and thinking up ways to be fraudulent in it aren't too good.

Has your fiance considered renting out her condo?

I love how all the "experts" can peer into the mind of a lender and know what they will or will not do.  They WILL do this scenario most of the time, you just have to know what you are doing.

I think you need to talk to another agent. I have gotten approval on short sales that sound like this one plenty of times. For my folks that lack a significant hardship I usually just tell them to expect to have to contribute. Sometimes they do, sometimes not...it all depends. It depends on your full financial picture, the investor on your loan, whether you have MI, etc. Usually contributions end up being in the neighborhood of 5-10% of the loss, or so I have noticed.

The only exception where I absolutely will say it wont get approved is if its an FHA loan and you have liquid assets equal or greater than the whole amount of the loss.

Look at this from another angle also.  IRS allows the owner a $250,000 deduction for sale of primary residence- if owner has lived there 2 years of the last 5 years on date of sale- from the net sales price.  Now do some calculations.  Take the reasonable sales price anticipated, subtract the purchase price and improvements, add that to your 2011 taxes, then see what the sale triggers in a tax increase.  So, depending on her home value, and subsequent sales price, it might be just as good to sell it on the open market, take the $250,000 deduction, and not worry about a short sale.  It might net you more money and avoid the "short sale" aftermath.  You could get married before you sell and the deduction jumps to $500,000 with the same scenario outlined above.

Anthony. It's my opinion that all short sales are doable. The only questions are will the lender want you to participate in their loss and for how much? And will they force you to miss payments. As long as the seller full understands this going in I will always take the listing.

I know it's not the place of a real estate agent to be judgemental, but choosing a 'strategic default' to help you move on with your life without unnecessary pain is also an ethical decision each and every homeowner SHOULD consider before listing and selling as a short sale. Everybody wants to get what they want right now, rather than wait. Just how desperate are you to make your wishes and dreams come through that you couldn't, in good faith, save some extra money over the next year or 18 months to avoid the short sale process, which might well also diminish your finace's credit enough to make that new housing purchase difficult right now. You might well be able to craft a short sale package with you that would imply more hardship than just wishing you could sell now in order to buy a house, have kids, live the good life. But even in the best of circumstances, short sales are hard to do for all involved, so I would just say to review all the FACTS carefully before putting everybody, including yourselves and your trusty agent, through the process. What other options might you have right now, like renting that condo?

Well said. The client would be the fiance and not the poster who wants her to lower her credit, possibly still owe a deficiency and be unable to purchase a house for some time. I have seen some short sales go through that surprised me. Facts were presented honestly and choice left up to lender. If the facts don't mesh with a hardship letter....

Roberta. It's not a strategic default. What they are wanting to do is work out a settlement with the lender. A strategic default is a walk away. A strategic short sale is a compromise where 2 parties agree to change the terms of the original agreement. That's a huge difference.

While some on here would want to take this listing and see it as doable. I, for one, would be very uncomfortable presenting a package in which the borrower told me they could afford it and was just trying to dupe the lender. I would run from that - but that's just me.
Also the short sale will lower your fiance's credit and not yours. That's a lot of risk, including not getting the deficiency waived in her name only, for someone to do.

 

Yours is not unusual question.  I get it all the time.  Here's some thoughts and roadblocks I have encountered on this same situation;

1) It is a strategic short sale / default and the lender will recognize that as soon as they see the paperwork.  The listing Agent needs to be upfront with the lender and not hide that fact.

2) Your fiance's credit will take a hit - how big depends on how many payments are missed and what the final outcome may be.  Question for both of you - Although we hope this never occurs, but, what happens if her credit is trashed because of this strategy and the two of you break-up.  You will be ok and she will be in real trouble going forward. Something to think about.

3) Lenders will not see this as a hardship -

 

Real example: I had a file recently where a couple with their 2 children were in a 2 bed 2 bath very small condo and severely upside down.  She was expecting baby #3.  They could afford the mortgage but needed more room with a new baby on the way.  Lender said - so sorry, "having another baby was their choice - they shoudl have thought about it".  No hardship exists - file declined.  File escalated to Senior Management - same response with "when borrowers make choices to short a lender even though their income can support it, we will always decline the file".

 

Lenders are addressing true hardships and a choice to consolidate your expenses, shed some debt and live happily ever after will not be seen as a hardship in a lender's mind.

 

My bigger concern is puposefully trashing her credit.  Is there no way you can cut expenses and rent the property and lose less per month.  If that were possible, you may be able to recover the small monthly loss in a couple of years especially as rents continue to increase.

 

just my .02

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