Replies to This Discussion

Permalink Reply by Brian M. Rust on October 25, 2011 at 6:28am

Jessica,

Although it makes sense in theory, as do many of the crazy ways around debt that sellers concoct, your sellers are going to need to completely rethink their strategy and reset their expectations. Here's why:

First, even if they stay current during the entire short sale process, the mortgage/note that was released due to a short sale is typically reported to the credit bureau's with a status of "settled for less than the full balance owed", or something to that effect. This will cause a negative hit to their score as it is a settlement of a debt, not the full payment.

Second, and more importantly for their specific goals, nearly all major lending institutions will not be able to lend money to a borrower within 2 years after they complete a short sale, and typically that lender will overlay an additional 1 year on top of that. This is due to a 2 year cooling off period or penalty that is imposed by Fannie and Freddie guidelines that prevents lenders from delivering loans to them from borrowers with past short sales.

So in short, unless your buyers plan to purchase something for cash or hard money loan, which they obviously wouldn't need credit for, they are going to be renting for 2-3 years either way.

It's good that they are open to the idea of accepting a promissory note to clear up any possible deficiency issues, however the payments they are making on time are only saving them from additional credit damage and the initiation of the foreclosure case. That money is otherwise going down the drain, assuming they successfully complete their short sale before an inevitable foreclosure.

Sincerely,

Brian M. Rust
Licensed Real Estate Broker
Residential Realty Partners, LLC

"I am a Licensed Real Estate Broker within the State of Florida, not an attorney or CPA. Any legal or tax advice should be obtained from an attorney or CPA."

Permalink Reply by Stephanie Fix on November 1, 2011 at 1:46pm

Hi Jessica, In my professional opintion I do not find this a qualified distressed homeowner and would not waste my time. My understanding is that they want to do a short sale just because they have an underwater property and want to buy a bigger home. I have had this same discussion with homeowners. I don't believe US Bank will see this as a legitimate hardship.

 

I do have a recommendation though. They might try applying for HARP which allows homeowners to refinance their home without being in default but can prove that the property is valued for less than the mortgage balance. They still have to have good credit and an appraisal. It is a big initiative as of Oct. 27th.

 

Lastly, US Bank is so  slowwwwww......once of the slowest. You will have a long battle with them which you should consider. I hope this will help.

 

Stephanie Fix

REMAX Professionals.

Permalink Reply by Guy Lofts CRS on January 11, 2012 at 7:41am

Why advertise it short?  If seller is willing to bring $$ to close it is a regular sale and you will get a better price.   If you go for the short, you can still try thatt, knowing seller will close either way..