Because I am very active in Short Sales in the Portland, OR metro area, I get all kinds of questions by email and phone.

As much as possible, I try to keep the questions and answer in email form.  One of the most common questions I get is:

"should I short sale or not".  My answer is almost always "it depends".  Basically, whether a short sale is a good strategy to unload a property, or not, depends on the specific situation.  The email sequence below is a good example of this.

Email Sequence:

Customer questions are in navy.  My replies are in blue.

Hi -

I have an initial question on my possible options. I got divorced 2 years ago and still jointly own a house with my ex wife, which is under water by aprx $55k, I owe $260k. I am current on my mortgage.

I have a first for $200k and a second for $60k. My problem is I could afford to pay the defect, but don't want to pay her 1/2. Additionally I'd like to not impact my credit or damage my chances of buying a new house in the next few years.

Please could you let me know possible options from your perspective, so I can begin a plan on selling my house.

Thanks.

Ken

Ken,

Thanks for contacting me. 

It seems to me you are not much underwater.  Maybe you need to buy her off the title and keep the house.  The ticket is to do it now rather than when there is equity, because you will get there.  At that point she will want her cut, even if she is not paying now.  Cash plus resentment area bad combo.

Is the property vacant?

Another option is for you to pay the short fall of the sale if you want to sell with no default.   That would be around $80K by the time you add the second mortgage, the unpaid part of the first, the real estate commissions and other things.

Hopefully this helps.  For a short sale you need to default.

Oscar

Thanks for the quick response Oscar. The house is not vacant, I am actually currently residing there.

I assume that default is the worst possible option and would completely ruin my credit (and potentially leave me exposed to lenders wanting to come after debt recovery)?  I have a feeling this would be my ex's preferred option, which I want to steer clear of. Do you know if a default in her name would impact her new husband or just limit their future lending options as her credit will be poor (that could be a good deterrent).

I guess my other option could be to buy her out, then potentially look at renting it, although my mortgage is currently at 6.5% :(

Thanks again.

Ken

Ken,

It seems you are better off buying her out.  You will have to pay for rent or mortgage anyway.  Offer her $2K for getting out of the title.  Do it at a title company.  I can connect you.

Don't take this as legal or tax advice.  Just a pointer.

Let me know if you need anything else. 

Oscar

Oscar Morante
Ph:  971-222-3734
Fax: 866-844-7009
PDX Experts Real Estate, LLC
www.PDXExperts.com
534 SW 3rd Avenue
Suite 305
Portland, OR 97204

Real Estate Agent
Realtor

By now, you should have heard that the real estate market is picking back up. Low interest rates and low inventory are spiking the average home price here in Washington State. Homeowners are now deciding on their options of either letting go of their underwater homes via short sale or foreclosure, continuing to live in it, or even rent it out and becoming a landlord. Which option would be best for you?

According to Corelogic, home prices nationwide increased on a year-over-year basis by 8.3 percent in December 2012 compared to December 2011. The spike is largely attributed to investors buying out most of the inventory thus increasing demand. This appreciation rate will most likely be unsustainable but of course, only time can tell. Zillow Home Value Forecasts (ZHVF), expects home values to increase 3.3% (Dec 2012 to Dec 2013).
Ah good news, home prices are rising again! So shouldn’t we keep our home that is underwater until we break even so we can avoid a short sale and a ding on our credit?
Let’s explore this option.

We will use the example of Mr. and Mrs. Smith who are barely making their payments and have a home that is worth $230,000 but owe $300,000 to their lender. The Smith’s think to themselves, if they live in their home in hopes to sell it once they come out from underwater, they don’t have to sell short. Assuming we will get a 5% appreciation rate (being optimistic), it will take them about 4 years just to break even. The Smith’s realize that it isn’t worth throwing away about $57,000 over the years in a home that has negative equity.

So they discuss their option of making their home into a rental property for the next 4 years to avoid the ding on their credit. Most likely, they will have a negative cashflow situation for all four years if you include PITI (principle, interest, tax, insurance) along with maintenance and repairs. Most importantly, the Smith's do not realize how difficult it is to be a landlord. Dealing with tenants (finding and maintaining), lease contracts, property maintenance/repairs, among others difficulties many times suck the life out of landlords. Many homeowners who opted to rent their homes because it was underwater are concluding to short sell years or even months later. Just ask friends or family about their experiences as landlords.

Mr. and Mrs. Smith’s situation is very typical and if they took the route of holding until breaking even, they will most likely be left with an even bigger headache.

What if Mr. and Mrs. Smith chose to short sell now?

A short sale is when you sell your home for less than what is currently owed on the property. The Smith’s decide to find a short sale expert and talk to their lender to see if they qualify for a short sale. IF they short sell now, they will finish in about 120 days which means if they started now, they will be done and out of their negative equity situation by summer time.

How would the financial rebound look like for the Smith’s? If they were not delinquent on their payments but was able to show inevitable delinquency, the ding on their credit score would be significantly less. If they were delinquent prior to closing the short sale, you will be facing about a 80-160 point ding in your FICO score.

Now how soon will they will be able to rebound on their credit depends on different factors. If the Smith’s end up using Lexington law to expedite rebuilding their credit score, they can easily repurchase another home within 2 years (possibly sooner) using the money that they saved from the mortgage payments that would’ve wound up in their underwater home. Once they are in a home, again, assuming that there is a 5% appreciation rate, they will start BUILDING equity.

So what is the best choice for Mr. and Mrs. Smith?

What do you think?

Peter

In my previous blog post, I estimated that in 2014, home prices were expected to rebound. 2012 however surprised all of us with sharp price increases. What is causing this price increase? A number of factors may play into it but one of the main variables is the lack of supply thus increasing demand and prices. It is a seller's market and will probably remain until the latter half of this year. However, I don't believe this will last.

Based off our research, there is a artificial lack of inventory meaning, home prices may very well halt its increase and decline for some time. Let's explore why short selling now would be in your best interest.

What will the status of the housing market be in the next couple of years? Only time can tell. What we can investigate are the factors that led to the volatile home prices.

We are seeing large hedgefund investors like blackstone and other cash investors, buy out most of the inventory. Concurrently, new legislation as seen in California, Oregon, Nevada, and Washington, are slowing down the foreclosure flow in those areas which according to Daren Blomquist, VP of RealtyTrac, will result in a backlash of foreclosure activity at the end of this year and into 2014. RealtyTrac is still expecting to see about 600,000 REO's enter the market in 2013. This indicates a hit on home prices to come.

At the same time, homeowners are vulnerable to a large tax liability at the end of this year. The mortgage forgiveness debt relief act is set to expire Dec. 31, 2013. For more information, please read our previous blog post.

A short sale is when you sell your home for less than what is owed. The remaining balance owed is negotiated so if home prices decrease, the difference between the sale price and the amount owed will only grow meaning you have a higher risk of owing more to your lender after you short sell your home.

Moral of the story, no one can fully time the housing market but the uncertainty should create urgency this 2013 year.

Hope this helps

Peter

 www.seattleshortsaleblog.com

REAL ESTATE SHORT SALE FORMULA

(Read this article first, then click on the link above)

Do I Qualify for a Real Estate Short Sale in Lake Elsinore CA?

So you're considering a real estate short sale for your Lake Elsinore, California Home…..

Either you are near default or have already missed mortgage payments, and you are undoubtedly under-water on what you owe on the Lake Elsinore home compared to what it is currently worth.

We see this every day from people of all aspects of life and economic backgrounds. We know it's a difficult and daunting position to be in. We know there is so much information out there that its difficult to decipher what is correct, and what isn't.... and who to trust.

We also know its embarrassing. We've been in similar situations ourselves, and we'd like to discreetly help you avoid foreclosure and get out from that upside-down Lake Elsinore CA house now, at no charge to you. In fact, if your circumstances are right, we may be able to get you up to $30,000 in the process.

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We ARE for real, and we are licensed, legal and ligitimate. Our real estate license numbers are 01844441, and 01844442. Take these numbers and go to the California Department of Real Estate's website here, click on Verify a License, and check our license numbers for validity. We work for Coldwell Banker Kivett-Teeters, a highly respected real estate brokerage that's been in business for decades. We handle 20 to 30 Short Sale Listings and Sales per month, and yes we successfully close 95% plus of our short sales! We are for real, and we work hard for our clients... Let us work hard for you...

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Call Us Now: (888) 9-List-It.

That's (888) 954-7848.

Or Check out our website here ---> California Short Sale Agents

How to Qualify For a Real Estate Short Sale - Lake Elsinore CA

REAL ESTATE SHORT SALE FORMULA

(Read this article first, then click on the link above)

Do I Qualify for a Real Estate Short Sale in Moreno Valley CA?

So you're considering a real estate short sale for your Moreno Valley, California Home…..

Either you are near default or have already missed mortgage payments, and you are undoubtedly under-water on what you owe on the Moreno Valley home compared to what it is currently worth.

We see this every day from people of all aspects of life and economic backgrounds. We know it's a difficult and daunting position to be in. We know there is so much information out there that its difficult to decipher what is correct, and what isn't.... and who to trust.

We also know its embarrassing. We've been in similar situations ourselves, and we'd like to discreetly help you avoid foreclosure and get out from that upside-down Moreno Valley CA house now, at no charge to you. In fact, if your circumstances are right, we may be able to get you up to $30,000 in the process.

Who Are We and Are We For Real?

We ARE for real, and we are licensed, legal and ligitimate. Our real estate license numbers are 01844441, and 01844442. Take these numbers and go to the California Department of Real Estate's website here, click on Verify a License, and check our license numbers for validity. We work for Coldwell Banker Kivett-Teeters, a highly respected real estate brokerage that's been in business for decades. We handle 20 to 30 Short Sale Listings and Sales per month, and yes we successfully close 95% plus of our short sales! We are for real, and we work hard for our clients... Let us work hard for you...

So let's talk...

Call Us Now: (888) 9-List-It.

That's (888) 954-7848.

Or Check out our website here ---> California Short Sale Agents

How to Qualify For a Real Estate Short Sale - Moreno Valley CA

REAL ESTATE SHORT SALE FORMULA

(Read this article first, then click on the link above)

Do I Qualify for a Real Estate Short Sale in Beaumont CA?

So you're considering a real estate short sale for your Beaumont, California Home…..

Either you are near default or have already missed mortgage payments, and you are undoubtedly under-water on what you owe on the Beaumont home compared to what it is currently worth.

We see this every day from people of all aspects of life and economic backgrounds. We know it's a difficult and daunting position to be in. We know there is so much information out there that its difficult to decipher what is correct, and what isn't.... and who to trust.

We also know its embarrassing. We've been in similar situations ourselves, and we'd like to discreetly help you avoid foreclosure and get out from that upside-down Beaumont CA house now, at no charge to you. In fact, if your circumstances are right, we may be able to get you up to $30,000 in the process.

Who Are We and Are We For Real?

We ARE for real, and we are licensed, legal and ligitimate. Our real estate license numbers are 01844441, and 01844442. Take these numbers and go to the California Department of Real Estate's website here, click on Verify a License, and check our license numbers for validity. We work for Coldwell Banker Kivett-Teeters, a highly respected real estate brokerage that's been in business for decades. We handle 20 to 30 Short Sale Listings and Sales per month, and yes we successfully close 95% plus of our short sales! We are for real, and we work hard for our clients... Let us work hard for you...

So let's talk...

Call Us Now: (888) 9-List-It.

That's (888) 954-7848.

Or Check out our website here ---> California Short Sale Agents

How to Qualify For a Real Estate Short Sale - Beaumont CA

REAL ESTATE SHORT SALE FORMULA

(Read this article first, then click on the link above)

Do I Qualify for a Real Estate Short Sale in Rancho Cucamonga CA?

So you're considering a real estate short sale for your Rancho Cucamonga, California Home…..

Either you are near default or have already missed mortgage payments, and you are undoubtedly under-water on what you owe on the Rancho Cucamonga home compared to what it is currently worth.

We see this every day from people of all aspects of life and economic backgrounds. We know it's a difficult and daunting position to be in. We know there is so much information out there that its difficult to decipher what is correct, and what isn't.... and who to trust.

We also know its embarrassing. We've been in similar situations ourselves, and we'd like to discreetly help you avoid foreclosure and get out from that upside-down Rancho Cucamonga CA house now, at no charge to you. In fact, if your circumstances are right, we may be able to get you up to $30,000 in the process.

Who Are We and Are We For Real?

We ARE for real, and we are licensed, legal and ligitimate. Our real estate license numbers are 01844441, and 01844442. Take these numbers and go to the California Department of Real Estate's website here, click on Verify a License, and check our license numbers for validity. We work for Coldwell Banker Kivett-Teeters, a highly respected real estate brokerage that's been in business for decades. We handle 20 to 30 Short Sale Listings and Sales per month, and yes we successfully close 95% plus of our short sales! We are for real, and we work hard for our clients... Let us work hard for you...

So let's talk...

Call Us Now: (888) 9-List-It.

That's (888) 954-7848.

Or Check out our website here ---> California Short Sale Agents

How to Qualify For a Real Estate Short Sale - Rancho Cucamonga CA

REAL ESTATE SHORT SALE FORMULA

(Read this article first, then click on the link above)

Do I Qualify for a Real Estate Short Sale in Montclair CA?

So you're considering a real estate short sale for your Montclair, California Home…..

Either you are near default or have already missed mortgage payments, and you are undoubtedly under-water on what you owe on the Montclair home compared to what it is currently worth.

We see this every day from people of all aspects of life and economic backgrounds. We know it's a difficult and daunting position to be in. We know there is so much information out there that its difficult to decipher what is correct, and what isn't.... and who to trust.

We also know its embarrassing. We've been in similar situations ourselves, and we'd like to discreetly help you avoid foreclosure and get out from that upside-down Montclair CA house now, at no charge to you. In fact, if your circumstances are right, we may be able to get you up to $30,000 in the process.

Who Are We and Are We For Real?

We ARE for real, and we are licensed, legal and ligitimate. Our real estate license numbers are 01844441, and 01844442. Take these numbers and go to the California Department of Real Estate's website here, click on Verify a License, and check our license numbers for validity. We work for Coldwell Banker Kivett-Teeters, a highly respected real estate brokerage that's been in business for decades. We handle 20 to 30 Short Sale Listings and Sales per month, and yes we successfully close 95% plus of our short sales! We are for real, and we work hard for our clients... Let us work hard for you...

So let's talk...

Call Us Now: (888) 9-List-It.

That's (888) 954-7848.

Or Check out our website here ---> California Short Sale Agents

How to Qualify For a Real Estate Short Sale - Montclair CA