Skip to comments.Short Sales While in Foreclosure
Posted on 01/11/2011 4:04:44 AM PST by hsmomx3
I recently found a full time job after almost two years of not being able to find one but our home is scheduled to be auctioned in February.
I have heard different things and am not sure what to do.
My parents, who live out of state, want to buy the house with cash, free and clear, not for them, but for me and the kids so we have a place to live.
Is this possible? I have heard realtors say it is forbidden, while others say it could be done.
I have not notified the agency who has our home loan but I am trying to work out a modification with them which leads me going around in circles as many well know. I am trying to do whatever can be done to save my house.
I have never been thru this so I would appreciate any advice you can give me.
Oops..should read SHORT sales......
Bad idea. The bank will tie you in knots for the next year. Get out of the place, rent somewhere nice, have your parents buy a different place.
Unlike some on this forum I understand that the real world is a hard place. I'm sorry you got in trouble and I hope it works out for you. Always know there are better days ahead.
Any freepers who are realtors care to comment about this thread?
You can click on “Report Abuse” then ask the Moderator to fix the title for you.
Find a realtor who can get it done.
I believe they wanted to buy it before it got to auction. I would pay rent to them, though.
I am not even sure if that is possible—short sale prior to auction.
I have contacted five and they all refuse to do it and say it is forbdden.
It may be illegal in AZ, I don’t know. Having lost my house this year, I can tell you that the bank will tie any short sale up in endless paper if they think they make more money by buying it at the auction and reselling it. Get ready emotionally to move, and secure a lease before the foreclosure. My best wishes to you and your family.
Any freepers who have self-identified as realtors care to comment on this thread?
Clearly with your receiving a benefit of reduced rent (and living there after the sale) and your parents potentially receiving a financial benefit. I doubt it passes the requirements imposed by the FDIC.
Also don't forget you will likely receive a 1099 for the debt forgiveness.
Unless there’s some weird law in your state, a short sale is valid at any time. The problem is that most banks take the risk that it will bring more money at auction, and it’s their call. My two cents is that whatever dollar amount your parents are willing to pay, let them buy another property in your area, avoids having them have to bid at auction and may get more bang for the buck.
Can you comment on this thread, I saw that you made some very interesting remarks about short sales in this thread:
Short Sales: A Fraying Lifeline for Homeowners
Meaning: none of your friends, relatives or business associates can buy the property. Since they get to brand you a "deadbeat" for losing your job that would be considered underhanded.
If the alleged lender or foreclosure mill attorney wants it, whether or not they are the true party in interest would be fine. Same would apply to their friends and relatives. Since they represent the bank, and you signed something on the dotted line they are immune from any and all laws.
Be very careful what you sign and I wish you the best. The best thing for them would be you signing anything they hand you without competent legal representation. The worst thing for them would be filing a Quiet Title action forcing them to prove standing before proceeding to sale.
Taking on a Second Mortgage to Pay the Foreclosure
"If you do a little research...actuallly, study this foreclosure mess for more than a minute or two on CNN, you'll find that what they're doing makes sense.
"The legal system is gamed in favor of the banks, and unfortunately, the banks screwed up massively in the paperwork and have limited to no chain of custody of title to the properties they try to foreclose on.
"The idea is that 90% of the mortgages out there in the last 10 years are so full of legal holes, that a half assed attorney with a little time can get the bank to go away with its tail between its legs.
"They do a service to society by getting rid of liar banks with liar paperwork and return the house to the owner once the fraud is uncovered. They simply draft up an agreement that once the first mortgage is wiped out, or renegotiated, that the lawyer will be repaid for his and his legal staffs time for the work and court costs they incur in the process.
I know two companies which have been successful and making these things go away after a little courthouse work is done. wild times we're in...
12 posted on 11/07/2010 3:32:50 PM PST by 1st I.D Vet
Your parents should find a lawyer that deals in “short sales” The bank, however, may not cooperate with you. THe local bar association can point them in the right direction.
A fellow freeper needs advice in this thread, any of you care to assist her? OR know of any freepers knowledgable about short sales following foreclosure?
Apparently, IF there is a successful short sale to your parents, you will have to claim the money on your tax return as "debt forgiveness" ... OR something; sounds like a CPA and an attorney, as well as a realtor would be needed to confer with about the best option for you.
They may be a treasure trove of accurate advice.
Contact your local legal aid and find out if you can have an appointment with some realty-saavy attorney who might be able to correctly advise you, according to the specific laws of your state.
Over the past half dozen or so years here at FR, I've read many freepers complain that they weren't able to buy any property on SHORT SALE, as the qualifications/regulations were out of this world, and that anyway, it seemed that the banks are not interested in selling their foreclosed homes, as they appear to be making the process extremely difficult.
There MUST be a way that you can get competent legal & financial advice, either for free or at an extremely reduced price given the fact your income has been so low for so long.
or the bank will accept no bids and eventually someone in the bank or some friend of someone in the bank will get the house
Have you or your parents got an attorney who can advise you on the law (the bank may not be honest about this, I would not expect them to be)
Can you sell your house at this point, in lieu of auction?
FIND OUT YOUR RIGHTS.
If not your parents can get advice about entering the auction, but I wouldn't hold my breath
Your parents sound wonderful, they can certainly give it a try to bid at auction, but can then help you out by looking For another place
I've read that banks are NOT being helpful in the sale of either short sales or foreclosed properties, and that they want to make money..... but I had NO idea that they were using these properties as "favors."
Should Attorney Generals of the states prosecute against such bad practices by the banks?
You could fight the foreclosure and stop it then do what you want with the house.
Google issues like stop foreclosure now.
I don’t know where in Arizona you’re at but you need to contact these guys, if they can’t handle your short sale then they would be the ones to know who in your area would be the best to do it. These guys are incredible, more like phenomenal. They apparently are very religious as well, which would seal the deal for me should I be in your position.
This website I’d say is more for other agents trying to do short sales and needing education, but check it out nonetheless. If your home is scheduled for auction, do not delay any further and have your situation evaluated by the most competent Realtor you can find (these guys if possible) If you get an offer before the auction, the bank will pull it from the auction block. I don’t know if AZ has a redemption period or not, but if it does, you can continue to live in your home til the sheriff says you must vacate. You could be saving up your money in the meantime and looking for another home and with your parents help (you are blessed my friend!) you can be on the road to recovering and repositioning your credit and your life. The main thing with a short sale is to save your credit to the extent that it can be salvaged, not stay in your home. Realtors can and have helped folks with the loan modification process too, for a fee they will help you.
Since you’re in AZ, call these guys, they will either help you personally or point you to someone competent enough to help you through this. Either way, don’t it NOW, time is not on your side.
Most banks (if they approve the short sale) will forgive the outstanding balance. Obama signed an order a year ago that allows this “income” to be not taxable. Otherwise don’t sign and let it go to forclosure or tie it up in the above mentioned ways in the courts and rent it for as long as you can. Sign a lease with the renter that protects the renter in the case of a foreclosure.
Bless your parents, they are wonderful.
don’t = do it NOW
(my pulse rate and IQ are way down- need more coffee:)
BTW, what the agents are telling you is true. Your parents or any relatives or people acting on your behalf CAN’T buy the home your living in on a short sale for you to continue to stay there. Even a perfect stranger to you can’t buy your home and then turn around and rent it back to you. It’s the law I’m afraid. Banks have been slammed with scam after scam and that is just not an available option to you. Also, there is such a thing as a deed-in-lieu of foreclosure, which is the between full blown foreclosure and short sale on the scale of what is most damaging to your credit.
Your parents should find a lawyer that deals in short sales
They might advise whether a corporation owned by the parents could take title to the property, circumventing the family relationship concerns.
Also, to those who suggest that many mortgages are invalid because of some paperwork deficiency, be advised that in virtually every case, the bank can fix the deficiency. They will and they do, and it’s not worth the bother to try this gambit.
A short sale can be done prior to the auction IF the bank will accept the loss.
IF there is a successful short sale to your parents, you will have to claim the money on your tax return as “debt forgiveness”
For those who bought low, mortgaged high, blew the dough, and can’t make the payments, they have tax troubles and little sympathy from me.
See #13. I am doing a short sale purchase and I had to sign a statement that I had no financial interest, etc with the sellers.
Also if you do a short sale you must pay the bank the balance of the loan due on your house.Say you sell and it does not cover 30,000.00 you owed on the house you will have to pay them back even if it is sold.
You also need a good attorney to represent your interests.
The basic difficulty in getting a short sale property is that the bank wants at least market value for the short sale. Most buyers don't want to wait four months to buy at market value when they can get another (or new home) in just a few weeks.
The potential for people to game (fake hardship to get out of a loan) this type of scenario is why it is not allowed.
First, the bank does NOT control the auction. Second, the sale goes to the highest bidder, not to someone the bank owes a favor to. Third, the bank CANNOT require that no bids are accepted. Fourth, your advice stinks.
Our first offer was submitted to Wells Fargo, within 1 week we heard back from the bank that they received it, I got a contact number and transaction number and they extended the forclosure date two months.
We had to sign an affadavit that is was an "arms length" transaction, certifying the buyer was not a family member, friend or that they would sell or rent the house back to you, so the parent option is out.
The buyer withdrew from the first offer and now we have received our second offer. From my understanding most banks will extend the foreclosure date three times and try to make a short sale work. Although it takes some time and you have to have a very patient buyer, your credit will be saved and the bank prefers that you stay in the house.
After a short sale is complete in most cases the credit report is marked paid in full and you can have good credit and maybe even buy a house as soon as 12 months of no late mortgage payments. A foreclosure on your credit report will hurt you for 3-7 years.
I have found that Bank laws trump state laws, so whatever your state law is concerning loan and sale behavior the banks totally ignore it.
Stay in your house, hire a Realtor to list it (if you get no's find the short sale expert) and then get the necessary paperwork in for a short sale. I had to fax 67 pages of documentation, the Realtor will do it and the bank will pay the commission and maybe repairs if needed for financing.
See my previous post. SL is out to lunch on his advice.
Legally yes, but most banks never pursue.
There is nothing in my short sale purchase agreement to prevent me from renting back to the sellers.
That is specifically prohibited. People have lost their jobs by buying a foreclosure or short sale that their bank employer owns or in most cases just services.
Maybe that stuff could happen with Bob's Bank and Bait Shop; but most lenders of any size would have prohibitions in place to prevent this.
It would be a huge conflict of interest....
So who controls the auction?
Is it not the party who holds title to the property?
Read the fine print, most allow the title holder to accept or reject any auction bid at their option.
I supose you think the stinkiest part of my advice is GET A RAL ESTATE ATTORNEY TO ADVISE YOU AND PROTECT YOUR INTERESTS.
How do you know of these folks, and since so many people are facing foreclosure OR are buyers wanting to capitalize on short sale real estate, just how would one go about identifying reputable honest professionals in this precise field in one's own home state?
For instance, what kind of searches would one conduct at google.com, and how could one verify that such realtors found who specialize in distressed properties are actually competent & trustworthy?
It would be almost difficult top prove why the bank accepted one bid over another (wink wink)
Picture this- a bank client who is a builder or general contractor with large loans and lines of credit outstanding tells the bank he can fix up the house and resell it for $XXXXXXXX, and already has a buyer in his pocket ..... and the bank gets its money back on the old loan plus gets the new loan.
His bid is gonna carry some weight
see my post above
It’s just buseiness Sonny, it’s not personal
Minor correction. You are LISTING the house below the payoff amount. The bank will be doing the 'pricing' of the house. Your listing price has NO legal standing for the price of the house UNLESS it is high enough to pay off the balance OR the seller has agreed to make up the short. Otherwise, it is just a marketing tool used to get offers to send to the bank.
25 percent seems like a very low number.
And we have friends who wanted to look at a short sale on the market and their realtor friend told them NOT to even bother, that it would take way too long to buy any short sale in this housing market.
And that there might be five percent of residential housing investors as opposed to a mere five years ago.
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