Anyone done a short sale?

[tlbwriter]

If you are current on your payments, why not just put the house on the market and sell it the old fashioned way? Why opt for a short sale which is so much more complicated and drawn out?

I didn't see that the OP said anything about being current on payments, or able to make them.

Educate the ignorant here, please. I never went through a short sale, but this is what I always understood:

If I owe the bank $250K and the house is only worth $200K. Why not just sell the house for $200K and pay the bank the difference? Why go through the rigamarole of a short sale and still wind up in the same place. I think the very purpose of a short sale is to get bank approval for selling for less than the mortgage.

Because you would have to have that $50K on hand. If you have to get out of your house, it's better to sell it for $200K and then only have to make payments on the $50K (assuming you can finance that separately).

 

[Juliet25]

Believe me our realtor told us a large majority of homes for sale right now are either short sales or foreclosures. Dont blame someone who is in a bad situation for bringing the values down. They are already down, hence the reason for the short sales and foreclosures!

Do you really think anyone asked for this to happen to them?

I agree. I spent $50,000 more for my house than my next door neighbor (and $3,000 less than my other neighbor) based solely on when we purchased. I don't remember getting a thank you gift for raising the neighborhood's collective equity when we moved in, so I don't feel any responsibility for maintaining their equity when we exit (which we currently have no plans to do any time soon, unfortunately; we're completely current on our mortgage).

 

[Juliet25]

Yes, it sucks for people who bought when prices were inflated, but does it make sense to keep pulling more and more people into a real estate market where prices are still artificially inflated? Doing so just means that everyone who buys a house will have to allocate more income to debt service than they would have if there had been no RE bubble, instead of having that income available to help the economy grow (since it seems our economy is based largely on consumer spending).

Just another point of view.

Even as someone with an underwater mortgage, I completely agree. I think housing needs to crash even more. I wish I knew back in 2005 what I know now--that we were in a bubble and housing prices were outpacing fundamentals like income. People were paying for homes with creative financing. In my naivite, I just thought my contemporaries had much better jobs than DH and I.

 

[undertheradar]

Doesn't living in a recourse/non-recourse state have an influence upon short sales?

 

[snarlingcoyote]

First I should preface this by saying my comments may have absolutely nothing to do with anyone in this thread, I have no idea what their reasons were/are.

In my location I see the same things over and over...
1. People who used risky loan products like the 0 down, intrest only nonsense that was so prevalent. Still don't understand how those folks are "home owners". But I digress.
2. People who used their home as an extra wage earner since every time they built up a little equity they pulled it out via HELOC. I've seen folks whose house have doubled in price since they bought, but they still ended up as a SS or foreclosure. It's crazy.

People who wound up up in the #1 situation are majorly the same kind of people who wind up with timeshares they can't afford. For the same reason. And/or there was fraud involved on the side of the mortgage broker that the homeowner is probably still unaware of.

#2 are some of the folks in this situation, but the vast majority are people who have either had their salaries cut or who have lost their jobs.

Please guys, let's stop blaming the victims!

 

[snarlingcoyote]

I stated that I didn't really have an issue when people have to move (ie relocation, job loss etc etc). But in AZ at least, MOST of these short sales are people who have realized that their home will not recoup its value and just short sell it to be done with it and they can start over in a few years. Or they are people who had no business buying a house, put 0% down and had an adjustable mortgage. It isn't right. At a MININUM, I feel like they should have to pay back the bank for all those months they just stopped paying to get to the point where they could do the short sell. It also frustrates me that all these people (again in AZ where things are really nuts) took hundreds of thousands of dollars of "equity" out of their homes 5 years ago and now are foreclosing and short selling. Where is the personal accountability for those people?
As far as the "right thing." I don't know. I understand there are hardships and people may NEED to get out and a short sale is an option. I am okay with that. For all those people who just WANT to move and see what their home is worth, I think they should do as my best friend did- save their money, cash out some retirement or savings and pay it off. I believe my best friend had to pay off somewhere in the $120K neighborhood. But at least she can hold her head up high and they are now in their "forever home" which ironically, cost less than their "starter home."

Where is all the corporate responsibility for all the companies that sold mortgages they knew, 100% knew, that should not have been made? Who actively used high pressure sales tactics, lies and fraud to get people to take these mortages?

Unless we as people ever hold them responsible for their actions (and they're at least still sitting on the money they made) we have no right to hold anyone else responsible.

 

[m&m's mom]

Where is all the corporate responsibility for all the companies that sold mortgages they knew, 100% knew, that should not have been made? Who actively used high pressure sales tactics, lies and fraud to get people to take these mortages?

Unless we as people ever hold them responsible for their actions (and they're at least still sitting on the money they made) we have no right to hold anyone else responsible.

You asked for the loan, they did not go to you proactively tell you to buy a certain house for an amount that you could not afford. You went to them and requested an amount and they gave it to you. The collective "you" is responsible for bad choices- not "them".
Dr Phil has a wonderful quote "You cannot fix what you do not admit".

 

[DianeV]

Actually part of the problem is that banks were approving people for loans that were higher than they really should have. People would believe the bank and find homes that were in that price range..when the housing market tanked they were hit if they needed to sell

 

[tlbwriter]

Actually part of the problem is that banks were approving people for loans that were higher than they really should have. People would believe the bank and find homes that were in that price range..when the housing market tanked they were hit if they needed to sell

Then people were stupid, and must share some of the blame. If my bank approves me for a mortgage with a payment of $2K/month, and I can't make that $2K/month payment now, it's stupid to "believe the bank" and think I'll magically have that money when I own a house. (And I'm not talking about people who lost jobs, but to people who supposedly bought too much house because that's what the bank was willing to loan them.)

 

[DianeV]

Well that is your opinion...but it is what it is and blaming homeowners is ridiculous

 

[tlbwriter]

Well that is your opinion...but it is what it is and blaming homeowners is ridiculous

Yeah... ridiculous to blame people who didn't know how much of a monthly payment they could afford...

 

[jedijill]

And not all people impacted couldn't afford the mortgages. In my case, I could afford just fine. Then I had to move to keep a job and the mortgage plus the (higher) rent in my new location was more than I can afford. Thank goodness I found good renters but if I lose them then I will be back in the situation of considering a short sale.

Jill in CO

 

[snarlingcoyote]

You asked for the loan, they did not go to you proactively tell you to buy a certain house for an amount that you could not afford. You went to them and requested an amount and they gave it to you. The collective "you" is responsible for bad choices- not "them".
Dr Phil has a wonderful quote "You cannot fix what you do not admit".

Actually, yes, a lot of mortgage brokers profiled home owners and targeted those who they thought would be vulnerable to their pitches and talked them into new mortgages on their homes with lies that were 100% false.

 

[snarlingcoyote]

Yeah... ridiculous to blame people who didn't know how much of a monthly payment they could afford...

What's ridiculous is that mortgage brokers often lied about the payments and the terms and the ease with which the new, adjusted mortgage holders would be able to re-negotiate a new mortgage again when their rates went up and that we aren't blaming them for flat out lying to homeowners.

 

[undertheradar]

There were borrowers who knew they couldn't afford what they were signing for. If you blame the lenders, don't forget about the realtors, home inspectors, title companies, and local governements who saw tax revenues sky rocket. There is plenty of blame to go around.

 

[AZMermaid]

Well that is your opinion...but it is what it is and blaming homeowners is ridiculous

What??? If I make $2500 a month and the bank tells me I can afford $2000 a month in mortgage, how am I not in the wrong for making that decision? I am not saying the banks, relators, etc etc are blameless. But, they are not non-profit organizations. Obviously, they wanted to make money. But to not blame the homeowner who writes the checks every month? That is ridiculous.

I was approved for a loan in the boom time. I think it was for $1600 a month. I made about $2500 a month. So, I know this is shocking, I didn't buy a house. I waited until I could actually afford one. Home ownership is a privilage. It is something our parents dreamed of and worked for years to save that 20% down. At some point everyone decided it was easy and for them. Yes, the banks and builders wrapped it up in a shiny bow and made it sounds real easy, so they are not blameless, but at the end of the day, no-one held a gun to the borrowers head. It is simple math, you have the money or you don't. Obviously, this is not at people who could afford it and something happened. I also have little sympathy for those who went for intrest only loans. I was 22ish at the time and I could see that was a disaster waiting to happen.

 

[dakcp2001]

My friend was in this situation and it was SUPER frustrating for her- part of the reason for my harsh opinions. Her home was totally remodled and in perfect move in condition. Her neighborhood (trashed short sales mostly) was pricing for $160-$200K, so even though they paid $380, they listed it for $200K and it sold in 2 days. You have to price it at market value. This is why people whine their house isn't selling. Sorry, you gotta price it for what it is worth, even if that stinks. Even then, it did not appraise, so they ended up taking $180K. They paid off the difference using savings and retirement.

Bankruptcy makes you take the hit for the next 7 years, not 3.

DING DING DING!!! This is exactly why some people are forced to short sale. So now I am confused, which is more a problem for you, people who are short selling or those who price their house too high (to avoid a short sale) and then "whine that it is not selling" ?

 

[IndigoLove]

Well that is your opinion...but it is what it is and blaming homeowners is ridiculous

So if someone couldn't do simple math it's the banks fault? If you made $100 don't have a payment that's $200. Anyone could have chosen to buy a less expensive home. Not any in that price range? Tough luck and keep renting or move. I don't think the bank told anyone to get the most expensive home you could get approved for. They had a choice-believe it or not. When you buy a house they tend to show you what your payments will be so it's not like that should be a shock. (fixed loan)

 

[DianeV]

I guess some of you are misunderstanding part of my point. Maybe people were able to make those high payments just fine, but they ended up with a high end home and when values tanked they were hit more than others

 

[AZMermaid]

DING DING DING!!! This is exactly why some people are forced to short sale. So now I am confused, which is more a problem for you, people who are short selling or those who price their house too high (to avoid a short sale) and then "whine that it is not selling" ?

My issue is people who short sell just because the market is so down and it will be years (decades?) for their house to be at the value they paid. If you have to move, fine, short sell. Here a LOT of people (75% or more of short sales according to 3 friends I have who are realtors) are doing so because they made a bad decision and want out. They don't NEED to move, they just want to so in 3 years they can start over.

I also have issue with the fact that you have to stop payment to qualify for a short sale, but I agree that is the bank's dumb rule, so not really the homeowner's fault. I just wish the law was that once the sale was approved, you at least had to repay all those months you got to live for free. I pay my mortgage, why shouldn't you? My realtor friends (and people I know who have short sold for frivolous reasons) that many people use this money to go on crazy vacations or buy new cars and stuff.

Now, I also have said, I live in AZ where this is a HUGE issue. Most people's houses are worth about half of what they paid or refinanced for. Heck, we bought 2 years ago at what we thought was the bottom and our house has gone down 10%.