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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

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