Posted on 10/05/2009 2:41:13 PM PDT by Kartographer
Troubled homeowners may be losing a major lifeline: so-called short sales. To get bad loans off their books and spur home sales, lenders have been forgiving the difference between the outstanding mortgage balance and the purchase price. Banks were never eager participants in short sales, and now financial firms—even those that can offload losses to the government—are balking at such transactions. Some lenders are forcing the sellers to pay extra money at closing. Others want a promissory note for part of the amount due.
The situation could be a setback for the already wobbly housing recovery. A record one-third of borrowers owe more on their mortgage than their properties are worth, notes research firm First American CoreLogic. The number of underwater homeowners will only continue to rise since values are still falling. And if distressed borrowers can't negotiate short sales, more may be forced into foreclosure, further depressing prices.
(Excerpt) Read more at businessweek.com ...
Yep. The really nice house across the street from me is in foreclosure after they couldn’t short-sale it. The divorcee owner comes by to pick up her mail in a brand new Lexus every now and then.
The only thing worse than being $100K upsidedown in a home you can’t afford, is being foreclosed and still owing the $100K differnce. Glad I’m in good shape.
We tried to buy a short sale...it was an exercise in frustration...this particular lender also wanted earnest money from us (not a lot but 500 bucks which they kept way past the date the contract was voided by their failure to agree to the terms.) We ended up buying a foreclosure the day after it hit the market, and we had closed within a couple weeks.
I am $400K upside down. Tried a short sale, it was denied. So I paid it off. Now I am broke.
It wasn’t a matter of affordability. My house fell from $900,000 to $400,000 wiping out my $100,000 downpayment. I drive a VW, not a Lexus.
In California, I think a Deed in lieu of forclosure might be a way to go. As I recall, that type of deed exonerates (first mortgage only, not other liabilities) first mortgage differences between what is owed and the current value of the house.
Check it out with an attorney.
bump
short sales were generally a rip off.
They owners are better off filing a bankruptcy and staying in the home as long as is allowed by law or practicality.
What is really stupid is that banks will not short sale to the owner in order to perfect the lost promisory notes.
Get the waaaaaambluance. Not everyone should own a home.
In some areas short sales are setting market price and killing JQ Public’s market value.
The issue is that the balance gets 1099’d as income EXCEPT if it is in bankruptcy.
You in California?
Basically I have learned from this episode....I will never move there no matter how much Arnold gets on TV.
It isn’t your fault though....sorry you endured that.
You should have walked away from the mortgage. The last thing you shopuld have done was pay it off.
Me too.
Love the Dave Ramsey quote, “The paid off home mortgage has taken the place of the BMW as the status symbol of choice.”
I definitely agree with this article.
I have been trying to sell the house I am in since May of 2006. My wife had to move out of state because of her job and I stayed here to sell this house.
It’s been over a year now since we have been apart. And let me tell you it has been a HORRIBLE exercise in frustration.
We started out around 220K which is what it was appraised at. It was nothing but chase the market and get bad advice from the realtor. Now Finally we are close to a closing at 80K. Definitely upside down on what I owe.
And the short sale was my final option and that started back in late April of this year. I sometimes feel like the bank has this timer on when to do things at the last moment.
Oh yeah, I almost forgot this one. I got a call a work on a late Wednesday afternoon. The bank had some more paperwork that the Buyer and I both had to sign. And if it wasn’t on the bank negotiator’s desk by noon on Friday, well then they would just close the case and we would have to start all over again. Well we made it but my realtor ended up sending the paperwork by both e-mail and Fax to the negotiator’s office. And we sent it to the negotiator’s boss too, just to be sure that it was properly received.
Wish me luck! Closing is around the 23rd of October.
We bought our home from someone in that situation. It was a shortsale. I'm sure they couldn't file for bankruptcy because they would lose their security clearance. They were in an impossible situation.
But why did you have to move?
Most don’t have that. Primary residence loans are usually non-recourse.
However, that does not include rentals (investment property). Look up IRS form 982. If you have low assets and high debt, you may be able to avoid the tax, even on rental properties. See a tax attorney and don't take some guy's word for it on the internet.
It can take 3 months including a 30 day escrow to sell. Most lenders take 6-8 weeks to process and approve, after we send them an offer. Then we go into escrow.
The lenders lose money on the property the longer they have no payment and take back the asset. It is to their advantage to support short sales.
For the seller, it may mean their credit will be restored in 2-3 years, about half the time it taks in a foreslosure scenario.
Before you see an agent to short sale, try to renegotiate your loan with the lender. You can do it yourself or hire someone. Try it yourself. Call the customer service number and say I'd like to re-nogotiate my loan.
Well, there is that integrity issue.
Short sale prices are set at market value. It’s the foreclosure rate in an area that has brought down home values.
Congress passed a law, I believe in the housing stimulus package that underwater homeowners will not be taxed on the difference between the sale and the debt..aka debt forgiveness. I don’t have a link...I have a realtor friend who is a short sale specialist.
Congratulations. We’ve been trying for 2 years to sell our house in Georgia because of a job move to another state.
It’s rural so that is the first problem, other than that the market has been steady as far as pricing but folks just don’t want to buy yet. I’ve never ever had a home on the market for more than 2 months until now.
If it sells, that IS the market price.
Actually the definition of “fair market value” is “the price a willing buyer will pay a willing seller”.
It’s debatable whether both prongs of that test are satisfied in a short sale.
But we may be mixing up the terminology in this situation.
FReegards, GG
So where you moving?
“So where you moving?”
_________________________
My wife is in Kentucky. So that is where I am moving to.
And the home you sold was in Kentucky or what state?
Here's the example I use. The bank is selling the same model as yours as a forclosure for 250,000. You have a short or standard sale and you want to go 300,000 (on a short sale, no need to sell high). Most things being comparable, who would look at your house for 300,000?
The houses which are driving the price are the lowest comps, be they forecosures, traditional, or short sale. Got to compete to sell.
“Congratulations. We’ve been trying for 2 years to sell our house in Georgia because of a job move to another state.”
______________________________________
I can see being rural as a potential negative for most people. For myself and my wife that’s the way we are going to go. Staying as far from cities as we can. I think we have managed that now. The closest Wal-Mart is about an hours’ drive away.
I must admit that selling at a huge loss is really a part of my frustration. Before the big boom in building selling a house because you had to move for job or another reason was fairly simple. And you made enough on the sale for a decent down-deposit on the next place.
Now though.... I recommend to anyone that has the slightest chance on moving in the next five years to only rent. If they plan to stay or their work is stable buying a home is the way to go.
“And the home you sold was in Kentucky or what state?”
________________________________________________
The Home I am selling is in Florida and we are going to be in Kentucky.
Ain’t that the truth. Had I known better I would have rented but never having a problem before and a year before Obama I just never expected it to sit for six months let alone 2 years. We’re consultants so we move every few years and yes it hurts. At first I think it was the cost of gas, 4 dollars and being so far from a city, now it’s just that no one wants to commit in this economy.
Best of luck!
What integrity issue? The guy’s house was purchased at an artificially inflated price to the shenannigans of the feds, the mortgage companies, and congressional action that allowed almost anyone to get a loan, which artificially and greatly inflated demand, casuing the prices to soar.
The guy could have wealked away and gotten a very nice house for the amount he paid off due to fraud committed against him. He was the least cupable person, so why should he have paid for someone to screw him?
In some states, the lender cannot come after you for a deficiency. Talk to a lawyer, and I can refer you to one if you need one. If your state does not permit the lender from going after you for a deficiency, you can tell them to pound sand; but I’d cite the statute when you do so.
You should have walked away from the mortgage. The last thing you should have done was pay it off.
He borrowed money and he paid it back. That's the right thing to do when you make a promise. Whether anyone "screwed him" has nothing to do with his promise to pay back a loan.
"whitedog57", integrity intact.
And what if the law provides that a borrower can walk away from a mortgage? Did you know that such laws were enacted to discourage lenders from doing exactly what they were doping? If the lender knew the law in advance, and they did, how can you claim that a borrower following the law lacks integrity?
I really don't want to argue with you, do as you please, I'm not your judge.
That being said, the law is a human made issue, break man's law and you are only a criminal. no laws broken? No problem.
Breaking one of God's laws is called sin and integrity is a moral issue. I have no idea whether you are a Christian or even a believer in God of any faith or religion. For me, reneging on a promise to repay is wrong, no matter what the law says.
You've kept the discussion civil and I respect you for that, not everybody does. God bless you and your family.
Did you BUY your house for $900,000.00? Or was the market value at some time worth $900,000.00??
I am a Christian, and I know and have experienced government corrupt in ways you can’t imagine and I do believe in paying ones debts that are legally owed.
Part of a contract includes, even if not specifically stated in the contract, that provisions of the law at the time it is signed are incorporated into it. I can assure you that banks and other mortgage lenders knew of statutes about not being able to go after deficiencies in states where that is the law. The fact that they ignored those laws and their implications when making their lending decisions is their responsibility.
Thank you for the compliment about me being civil. I think you have also been civil.
Calif. has MANy, MANY ups and downs. A house we owned has gone from $220,000.00 to $800,000.00 up and down over the years...UP and DOWN.....back and forth MANY TIMES.
I wasn’t engaging in speculation; and neither should you.
You told him he should have WALKED AWAY! geesh....
Yes; and for all the reasons I stated. Why should he be the only one to pay for the manipulation of the market by the individuals and companies who made a lot of money doing it at his expense and the expense of millions of others?
If the law in his state does not permit the lender for going after the borrower for a deficiency, he has every legal right to turn over the keys to the lender and move on with his life.
Perhaps you can answer this...
Property listed in the paper - foreclosure notice, amount owed, address, etc. If the amount ‘works’ for a buyer can that buyer step up and bid that amount, or more, and secure the property?
Of course, it would have to be a property that one ‘knows’ since no inspection is available. Also, most of the properties listed at that point in the foreclosure process appear to be for amounts that are way over market, e.g. the amount owed is way over market.
In practice they would not sell back to the same buyer. That buyer owed say 300,000. The lender would have previously re-negotiated the loan if they wanted, but if they get to the auction, they would not sell to the buyer they refused to negotiate with for say, 200,000.
Maybe someone can cite a government or FHA regulation.
I have heard that buyers can have someone else buy, perhaps a relative and then get the property back later on perhaps a lease purchase. Don't know the time frame for that.
Bought it for $900K. Then discovered that appraisers were colluding on appraisals. Once Lehman blew up and ABCP rates blew up, there was no financing available for jumbos. Then i lost my job.
Other than that, its been a lot of fun.
YIKES.....so sorry fpr you. Did you REALLY think your house was WORTH that amount....REALLY? We sold 6 years ago and have rented since just because we didn’t think real estate was worth it.
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