Is A Stategic Short Sale For You?
Is doing a Strategic Short Sale the right thing to do? First let me define Strategic Short Sale. A Strategic Short Sale is when you can afford your mortgage payments and are making payments on time BUT you owe more than the property is worth. You make a strategic decision to sell the property and offer your Lender less than what is owed as a settlement of your debt. If the Lender accepts your offer you have just completed a Strategic Short Sale.
So is this the right thing to do? Maybe. To make this decision you have to look at your overall situation.
- Does continuing to make payments and keeping the property make sense?
- Are you able to continue making payments without using credit cards and savings?
- Is making payments harming your family's financial position?
- Is the property close to being paid off?
- Will you be happy with the situation you are in now five years from now?
If you've answered "No" to these questions then you may be a candidate for a Strategic Short Sale. Contrary to popular belief I do not believe that a Strategic Short Sale is shirking your responsibilities. A Strategic Short Sale is a decision to try and settle your debt with a creditor. Notice I stated "settle" NOT avoid or walk away from. Settle. As in "Mr Lender, I would like to offer you $50,000 instead of the $100,000 I owe you. Will you accept this as settlement?".
Offering a settlement is the right thing to do. It's just as right as continuing to make mortgage payments. You are giving your creditor an option. It's their decision whether or not to accept it. In most cases they will.
Of course, there are negatives to doing a Strategic Short Sale. You will mess up your credit for awhile. Your lender may require you to participate in the loss by making a cash contribution, signing a promissory note or both. You may owe income taxes on the forgiven debt. And of course you will no longer own the property. You may have to be a renter for awhile.
So, folks, if you are struggling with whether or not to do a Strategic Short Sale step back and look at it as a business decision. You are in the business of looking out for your family's welfare. Weigh the pros and cons. Then make a decision that's right for you. I truly hope this helps. Any questions?
Related articles:
You Must Be A Deadbeat To Do A Short Sale!!
Do I Have To Miss Payments To Do A Short Sale?
Why Would a Lender Accept a Strategic Short Sale?
Not All Short Sales Are Pre-foreclosures
Comment
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Comment by Bryant Tutas on June 28, 2011 at 2:22am
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GBL2123, It sounds like you are in quite the quandry. I am hearing this from commercial property owners right now. Lenders are even contacting them and telling them to put or more money or collateral for their loans. You probably have a very good chance of getting a short sale approved. Depending on your financial position the lenders may want you to participate in their loss by making a cash contribution or signing a new note. Or both. You should certainly seek legal advice.
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Comment by Nicole Fabiano on June 27, 2011 at 5:55pm
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I could not agree more! I always tell my clients to take the emotional part of this out of it and look at this a business decision. 9 out of 10 times a short sale is what makes sense.
Nicole Fabiano
Founder and Lead Negotiator
Home Solutions, A Full Service Short Sale Co.
312.623.7001
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John. A loan mod in my area is a pipe dream. Values are down almost 80%. How do you mod aloan of $300,000 when the property has a value of $85,000? You can't. These folks are doing the right thing. They are working out a settlement with their lender instead of just walking away.
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Comment by Neddie B. on May 30, 2011 at 9:35am
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@Harry LOL...exactly.
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Regarding strategic short sales it's worth mentioning that the Mortgage Bankers Association did this about a year ago, they sold their headquarters for $41.3 million of the $75 million in debt they owed.
http://banktalk.org/2010/02/08/mortgage-bankers-association-succumb...
Morgan Stanley also strategically walked away from 5 San Francisco Towers bought at peak.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aLYZhnfo...
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Comment by John March on May 30, 2011 at 7:37am
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What ever happened to " I am responsible for the cake I baked?" what about exploring loan modification, first? I have been in a position in life where I had to use my credit cards to keep things afloat. I had to sell my home and I paid off my debts. So, is the new thing no pain in life? I disagree. The problem today is no one wants to take responsibility for their actions.
So is this the right thing to do? Yes, when there is real hardship and there is no other way out--first step up to the plate and do all you can to meet your obligations.
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Harry. I think it's important that I clarify the difference between a strategic default and a strategic short sale. They are not the same thing. A strategic default is a walk away. It's walking away from your financial obligation and eventually getting foreclosed on. It is not a smart move.
A strategic short sale is negotiating a settlement with your creditor. It can be a smart move if you are hopelessly upside down on your mortgage.
A strategic default is surrendering and throwing yourself at the mercy of your creditor. A strategic short sale is taking the bull by the horns and solving the problem.
These two terms are not interchangeable.
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