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Not a normal market

Posted by Cody Vandermyn on October 5, 2009 at 1:50pm in Short Sale Discussions
I am a homeowner considering a short sale. I'll be upfront and say that there will not be a hardship until we close on the new house. My wife and I are purchasing a new house and in a normal market, we would be able to sell our condo for an amount that was adequate and move on with our lives. But, this is not a normal market so we will soon have 2 houses and 3 mortgages. We owe $192k on the condo and a trusted agent friend told us that we would be lucky to get $185k. When we close on the new house, we are considering putting up the condo for a short sale. Does this sound like the right move? There will be no way we can afford both houses and we cannot rent due to the HOA rental cap. Do I continue to pay the mortgage as long as I can while going through the short sale process? I hate feeling trapped like I feel right now.

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Replies

  • Jeff Payne October 7, 2009 at 10:12am
    Keep fighting, don't give up and everything will work out for you, a few years from now it will be a distant memory.
    One thing to think of, is there someway to "lease purchase" your condo to get around the rules of the HOA?

    Cody Vandermyn said:
    Jeff,
    You are absolutely right. There is going to be some sort of repercussion following any of the routes available at the moment. Even if I rent, I will have to pay some out of pocket per month. I have thought about not buying the new home, yes, but I find it hard to pass up a deal like we are getting now, especially because we are going to have our first child soon and the new home actually has space for 3 people.

    Just to be clear, my intention is not necessarily to slide clean out of the obligation, I would be willing to pay a reasonable amount, but I have to think about it like this: If I tried to sell last year, I may have sold high enough to pay off the loans. If I sell in 1 or 2 years I may be able to sell high enough to pay off the loan. Just right now, the market is not letting me do so and I'm sick and tired of getting the short end of the timing stick. My intention was never to buy a condo and then slide out from the obligation of paying at some point in the future. The intention was to buy a condo and sell it in a couple years to move into a house. Well, a couple years have passed, a new house is available, and I can't sell my condo for reasons outside of my control. Nobody at my level could have foreseen the market collapse like it did (well, some people did, but I wasn't friends with any of them). Don't bother playing the violin for me, I know how it sounds. =o)

    There is a new development in that the rental cap I thought we had approved in the HOA may not actually be in place. Something about not having the right number of votes for approval. I'm trying to get more information.
  • Cody Vandermyn October 7, 2009 at 10:00am
    Jeff,
    You are absolutely right. There is going to be some sort of repercussion following any of the routes available at the moment. Even if I rent, I will have to pay some out of pocket per month. I have thought about not buying the new home, yes, but I find it hard to pass up a deal like we are getting now, especially because we are going to have our first child soon and the new home actually has space for 3 people.

    Just to be clear, my intention is not necessarily to slide clean out of the obligation, I would be willing to pay a reasonable amount, but I have to think about it like this: If I tried to sell last year, I may have sold high enough to pay off the loans. If I sell in 1 or 2 years I may be able to sell high enough to pay off the loan. Just right now, the market is not letting me do so and I'm sick and tired of getting the short end of the timing stick. My intention was never to buy a condo and then slide out from the obligation of paying at some point in the future. The intention was to buy a condo and sell it in a couple years to move into a house. Well, a couple years have passed, a new house is available, and I can't sell my condo for reasons outside of my control. Nobody at my level could have foreseen the market collapse like it did (well, some people did, but I wasn't friends with any of them). Don't bother playing the violin for me, I know how it sounds. =o)

    There is a new development in that the rental cap I thought we had approved in the HOA may not actually be in place. Something about not having the right number of votes for approval. I'm trying to get more information.
  • Jeff Payne October 7, 2009 at 9:39am
    Understood, my thought is this, you have good credit and pride that you are dealing with. It seems to me that it would be much better to get rid of your 192K loan by borrowing the 25K to make up the difference IF the HOA won't let you rent the condo. Anyway that you go, there is going to be some sort or repercussion involved. Short sale could still be money out of your pocket and credit hit, foreclosure could be a judgement, selling and making up the difference is money out of your pocket. Not to sound cold but you most likely are not going to be able to slide clean out of your obligation. Have you thought about NOT buying the new home so that you don't put yourself into a tough situation?


    Cody Vandermyn said:
    Jeff,
    If only money grew on trees and "find[ing] the money to pay the difference" was that easy! Yes, we got a nice discount on the new home, but that doesn't translate to cash in our pockets. The first thing we are going to do is try to get the HOA to allow us to rent the unit. We don't have a "hardship" per se, but if we can't rent it, then we will simply foreclose or short sell and lower the property values even more. If there wasn't an HOA and this was just another house on the block, then we would just rent it out and there wouldn't be a problem. I think it is lame that the HOA would force us to foreclose in this case...either that or they would be forcing us to stay in the condo which opens up some civil liberty issues. I think it is in the HOA's best interest to let us rent it. They may see otherwise, though. We don't want to be permanent landlords and will sell it as soon as we can. We'll try to pitch a rent to own lease to the HOA board if we need to.
  • Cody Vandermyn October 7, 2009 at 9:02am
    Jeff,
    If only money grew on trees and "find[ing] the money to pay the difference" was that easy! Yes, we got a nice discount on the new home, but that doesn't translate to cash in our pockets. The first thing we are going to do is try to get the HOA to allow us to rent the unit. We don't have a "hardship" per se, but if we can't rent it, then we will simply foreclose or short sell and lower the property values even more. If there wasn't an HOA and this was just another house on the block, then we would just rent it out and there wouldn't be a problem. I think it is lame that the HOA would force us to foreclose in this case...either that or they would be forcing us to stay in the condo which opens up some civil liberty issues. I think it is in the HOA's best interest to let us rent it. They may see otherwise, though. We don't want to be permanent landlords and will sell it as soon as we can. We'll try to pitch a rent to own lease to the HOA board if we need to.
  • Jeff Payne October 7, 2009 at 8:47am
    Not a normal market is not necessarily a hardship and might be tough to prove. Did you relocated to another area due to a job or loss of a job?
    My advice would be to suck it up and find the money to pay the difference, afterall, didn't you just recieve a great discount on your new home since it is not a normal market? Pay the mortgage if you can, find the money to pay the difference if you can before going the short sale route
  • Cody Vandermyn October 6, 2009 at 10:18am
    Wendy,
    Yes, thank you for this insight. I have thought about doing this. My real estate agent believes that we would be lucky to get $185k for our condo. We owe $191k so we are $6k in the hole. Then we have to pay the agents 6% (maybe 5% with nice agents), so that would be another $9k to $11k. (It would be nice if the government could subsidize the real estate agents in cases like this because that is a hefty charge to pay out of pocket.) Then the excise tax and other fees would mean we would have to borrow around $25k in the best case and maybe up to $35k in the worst case! I'm not sure we could afford to pay off that amount with interest in a timely/non-stressful fashion. It solves the pride issue, but puts us into further debt. The payments on $35k would probably be around $500 a month and would take about 12 years to pay off.
  • Wendy Rulnick October 6, 2009 at 10:05am
    Cody - Another thought - to avoid the short sale - is to try to sell the condo and borrow the deficit to bring to closing.
  • Cody Vandermyn October 6, 2009 at 8:53am
    Wendy,
    Both mortgages are owned by Bank of America right now. We started with Countrywide.
  • Wendy Rulnick October 6, 2009 at 8:43am
    Cody- Who is the lender/lenders on the condo?
  • Cody Vandermyn October 6, 2009 at 8:35am
    Thank you for the input. I certainly will consult a lawyer if necessary. I'm struggling with the best course of action, right now. There is a pride aspect of having perfect credit up to this point, never missing a payment or needing any help, and then now perhaps not paying a loan I signed up to pay. I'd gladly pay it if I could, but the market just doesn't look like it will allow it. I'll let you know what ends up happening. We live in Washington State near the Seattle area.
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