Anyone done a short sale?

[AZMermaid]

Seems to me like you (and others on this thread) are blaming people who are making the best financial decisions they can for themselves and calling them immoral. I wonder if that somehow makes you feel superior.

Well, they are not immoral like a purse snatcher is immoral. But, I was taught to stand by my word. Maybe immoral is the wrong word. Maybe untrustworthy is better. How can I trust what they say (or sign) when it means nothing. Again, not talking about job loss/ sickness/ forced relocation- just people who want a better house so they sluff their commitment to their current one.

 

[AZMermaid]

Seems to me like you (and others on this thread) are blaming people who are making the best financial decisions they can for themselves and calling them immoral. I wonder if that somehow makes you feel superior.

I'm not going to lie, I have NO credit card debt and haven't since college. I didn't get sucked into the housing trap, even when I qualified. I didn't finance my wedding or honeymoon. We did what we could afford. We are currently saving money to buy a pool, not just financing it, because we don't really need a pool. So, do I think I make better financial decisions than many? Yes. I am not going to say I am a better person, I am not, I have many faults. But when it comes to financial matters, yes, I think I make good decisions and I have a right to be proud of myself for that.

And yes, my husband has been laid off for a period of time. We had savings. We survived. I get that if it goes on for months and months or years, people didn't plan for that. Or I get that if your child gets cancer, there are massive bills. Hopefully we never experience that. But, I don't think that is where the average person is getting caught up.

 

[cats mom]

umm...not exactly. The contract says that if you don't pay, then the bank can take your house. That's the contract and I would be following it to the letter.

I fail to see a moral issue. I do see some monetary reasons why you might not want to default, but morality...nope.

But unless I missed something we're not just talking about people choosing to let the lender take the house back through foreclosure as provided for in the contract.

We're talking about people expecting the lender to modify the terms of the contract after the fact. Whether that be by changing the loan terms, reducing the interest rate, writing down the principal, or allowing the house to be sold for less than the amount owed and forgiving the deficiency.

It could be argued that all of those options are better for the buyer than proceding with a normal forclosure (although realistically I wonder) and I highly doubt any of them were provided for in the initial contract. A small distinction? Maybe, maybe not. Personally I tend to think not.

I won't even get into the fact that it's not uncommon for people to live payment free for approx 3 years while they game the system, at least in my location.

Of course I agree with piperdown that lenders were complicit in this mess too, as were underwriters, and appraisers, and real estate agents, and the list goes on and on. BTW, I can't take the list too far since I don't want infraction points for discussing politics.

But I don't think the fact that a whole long list of people were acting stupidly absolves buyers from taking responsibility for their choices.

 

[punkin]

But unless I missed something we're not just talking about people choosing to let the lender take the house back through foreclosure as provided for in the contract.

We're talking about people expecting the lender to modify the terms of the contract after the fact. Whether that be by changing the loan terms, reducing the interest rate, writing down the principal, or allowing the house to be sold for less than the amount owed and forgiving the deficiency.

Yes, but that's all done under threat of possible foreclosure which is not in the bank's interest in the present environment

It could be argued that all of those options are better for the buyer than proceding with a normal forclosure (although realistically I wonder) and I highly doubt any of them were provided for in the initial contract. A small distinction? Maybe, maybe not. Personally I tend to think not.

It is also better for the bank not to have to foreclose

I won't even get into the fact that it's not uncommon for people to live payment free for approx 3 years while they game the system, at least in my location.

Of course I agree with piperdown that lenders were complicit in this mess too, as were underwriters, and appraisers, and real estate agents, and the list goes on and on. BTW, I can't take the list too far since I don't want infraction points for discussing politics.

But I don't think the fact that a whole long list of people were acting stupidly absolves buyers from taking responsibility for their choices.

I don't think that the buyers are absolved of anything. Many people lost a great deal of money. I'm just arguing that it is not immoral to cut your losses at some point, not because I blame the banks, but because taking the loss on the house, selling it for what the market will bear and writing down the rest is the best thing for the market to get back to normal.

 

[tlbwriter]

As I said earlier, it is not in my financial interest to default, so it's not what I want to do. I put down a deposit so big that even should my house devalue by half, I'll still have equity. I live in an area where house prices have stabilized nicely, and in fact, are going back up. I live in a school district where the houses are snatched up as soon as they go on the market. I have nothing to justify.

Fine. (I'm in the same position you are, BTW... my house's value has risen slowly but steadily since I bought it.) But there are a great many people who justify walking away from a mortage they could pay by saying "it's no longer a good investment for me," and I just have no respect for that attitude. If their homes unexpectedly gained in value, they wouldn't feel compelled to share that windfall with the lender, and yet they feel the lender should bear the brunt of an unexpected loss in value. That's hypocritical IMHO.

Seems to me like you (and others on this thread) are blaming people who are making the best financial decisions they can for themselves and calling them immoral. I wonder if that somehow makes you feel superior.

So, the only way you can respond is to attempt to personalize it, and make it some character flaw of mine that I pay my debts and think others should do the same if they can, and not just if they WANT to? Good try.

 

[cats mom]

I don't think that the buyers are absolved of anything. Many people lost a great deal of money. I'm just arguing that it is not immoral to cut your losses at some point, not because I blame the banks, but because taking the loss on the house, selling it for what the market will bear and writing down the rest is the best thing for the market to get back to normal.

I think we agree on more than not. Honestly from a strictly financial standpoint I'm guessing there are a lot of people who have never even considered a strategic default who would probably be wise to take a look at that option.

It's the way many (not all) are going about it that's the sticking point for me. I do see a moral element there. But if I understand correctly, your response is that because it's also better for lenders to modify contracts, it's OK. That can be a slippery slope you know.

What about the Las Vegas Lawyers who are running an ad entitled Live For Free: "Do you know neighbors, freinds, and family who are living in their house and not paying their mortgage? Do you want to know how they're doing it? Call <snip> we'll tell you how. The banks got bailed out. Call today and we'll tell you how you can get bailed out."

In an interview about their ad campaign one of the partners said "These are people who need some time in their homes to get their lives together" he neglected to ad payment free. Is there some reason they can't get their lives together in a rental, one they can afford? No moral consideration here either, or is there a line somewhere? If so, who gets to make the determination of where that line is?

Maybe I'm just a bit jaded since I've been following the mortgage mess pretty closely, have seen a lot of nonsense, and am tired of watching tax payer money being funneled into a seemingly bottomless pit.

BTW, I agree about it not being in the banks' best interest to take back all the houses that owners are delinquent on. The problem I see is that by playing this amend, pretend, extend game, more and more people are still being pulled into an artificially inflated real estate market. Disclaimer: this may not be the case in your location, it definitely is in my location.

Lenders were much quicker to take action against delinquent borrowers at the low end of the market here. Their balance sheets could sustain those smaller hits. If they took action against all the delinquent borrowers at the high end, they would be crushed, and they know it. Prices at the high end are being artificially sustained because lenders are not taking action against delinquent borrowers, many of whom are choosing to strategically default, some of whom are gaming the system for all it's worth in the process.


Personal example:

Friends of ours bought an entry level SFR in 2005, not quite the top of the market here, but close. They paid $665,000 back then and sold for $475,000 last month. They didn't default, they brought money to the table to close. They went that route because they want to preserve their credit so they can buy again. Their rationale? They think the market has bottomed and they can now buy a house almost twice the size of the one they lost all that money on for only $750,000 (their words, not mine) IMO they will likely get burned twice.

They are now buying up into a small neighborhood of about 5 streets. I'm personally aware of at least 8 houses currently in some state of defaut in that neighborhood, I'm guessing there are more. If the system was working as designed, most of those people would have already been foreclosed on, prices would have adjusted accordingly, and my friends would be fine. As it is, the can is being kicked down the road, and more innocent people are going to be impacted. But hey, bank balance sheets still look decent-ish.

 

[tlbwriter]

Well, they are not immoral like a purse snatcher is immoral. But, I was taught to stand by my word. Maybe immoral is the wrong word. Maybe untrustworthy is better. How can I trust what they say (or sign) when it means nothing. Again, not talking about job loss/ sickness/ forced relocation- just people who want a better house so they sluff their commitment to their current one.

This. It doesn't mean I think you are morally bankrupt (no pun intended). But it does mean that I will never, ever, loan you anything.

 

[m&m's mom]

I’ll preface this by saying that we own our house outright, no mortgage, so my take may be different than most. If fact, I’m fine with my home value decreasing, because I can possibly get a decrease in my property taxes if I can convince the appraisal district. Just so happens we live in an area where the housing crisis has had very little impact.

I’m sorry, but I’m one of the ones that believe that banks and mortgage companies bear equal fault for the current housing crisis. Yes, the homeowners should have done their homework (and the math), but banks and mortgage companies had no business giving loans to people they should have known would not be able to pay them back. They are the professionals.

Toward the end of the housing bubble, mortgage companies were giving out mortgages without even verifying employment or income. They were actually called NINA (No Income, No Asset) loans. So tell me again, who made the bad investment? Why should the homeowner be held to a higher standard that the mortgage company? Who should have understood the implications more?

It came into perspective for me when I listened to This American Life’s episode called, The Giant Pool of Money (http://www.thisamericanlife.org/radio-archives/episode/355/the-giant-pool-of-money). There was a lot of greed on part of many players that resulted in our current economic situation, and I believe that most homeowners were not the greedy ones. Overly ambitious…yes, greedy…no.

Would I make a strategic default? Probably not, if I could make the payment, and I had a steady income with little chance of relocation. However, if I knew that I was probably going to have to move in the next few years, or my income changed causing a hardship for my family, you bet I would walk away.

We all have to do what is in the best interest of our families….so judge away.

So using your logic- If I am sold a car that goes above the speed limit I can expect the sales person to pay for my ticket?
Also, TX has not had the huge swings like other parts of the country so if you let yourself get in over your head it is YOUR reponsibility to get out.

My credit card bill was not secured by the coin. If the coin doubles in value, I still cannot mail it to the credit card company to pay off my bill. However, if my house doubles in value, I certainly can "default" and give the house to the bank to dispose of. If they sell it for what I owe (including expenses), I have no further obligation to them. The situations are not parallel.

Soooo- as soon as your house is valued at higher than your balance you will be sending the check a bank?

Fine. (I'm in the same position you are, BTW... my house's value has risen slowly but steadily since I bought it.) But there are a great many people who justify walking away from a mortage they could pay by saying "it's no longer a good investment for me," and I just have no respect for that attitude. If their homes unexpectedly gained in value, they wouldn't feel compelled to share that windfall with the lender, and yet they feel the lender should bear the brunt of an unexpected loss in value. That's hypocritical IMHO.



So, the only way you can respond is to attempt to personalize it, and make it some character flaw of mine that I pay my debts and think others should do the same if they can, and not just if they WANT to? Good try.

Doesn't it seem like personal reponsibility is in very short supply these days?

 

[Rafiki31]

So one poster with helpful advice for me? This thread was a bit of a disaster.

 

[cats mom]

So one poster with helpful advice for me? This thread was a bit of a disaster.

Yes, the thread did turn into a discussion of short sales in general, but it is a discussion board after all.

In all honesty, a Disney discussion board probably isn't the best place to get legal advice, and you did say you already had a meeting set up with a lawyer.

But more than one person shared their personal experience with a short sale. Is that not what you asked for?

 

[tlenzendorf]

So one poster with helpful advice for me? This thread was a bit of a disaster.

From my experience:

We had to write the bank why we needed a short sale and fill out some forms. The person put in the offer and we negotiated back and forth-like a typical home sale. We were cut out of any decision making after we accepted the offer as high as we could push it, then it was up to the bank. We had to agree to pay some of the amount back that we were short, paying $190/month for 5 or 10 years(I can't remember how long, the ex pays). I hadn't been able to make the payment for 6 months due to the ex and then my roommate moving out before we sold so we were in the beginning stages of foreclosure but that was all cancelled with the sale of the house. I asked the realtor about making partial payments while waiting for a sale and he said that it was basically a waste of money and I should save it for wherever I was moving. I paid down some other debt with it.

It's not an enviable position to be in.

 

[Mommy Of 3]

I completely agree with AZMermaid. I put down 20% on my house (one that I could actually AFFORD). Since I bought it, the value has gone way down. But because my payment (and my income) have stayed the same I'm OBLIGATED to pay for it.

Meanwhile I know people who financed 100% of their homes and when the value went down, they took advantage of the current crisis and walked away from their homes. They've since bought newer homes that are nicer than mine! And went to Mexico and Florida on vacation while they stopped paying for their house.

Excuse those of us who are responsible for being frustrated by this.

 

[tlenzendorf]

Meanwhile I know people who financed 100% of their homes and when the value went down, they took advantage of the current crisis and walked away from their homes. They've since bought newer homes that are nicer than mine! And went to Mexico and Florida on vacation while they stopped paying for their house.

Excuse those of us who are responsible for being frustrated by this.

This I think is wrong. I did not vacation when I was going thru this. I was living as a single mom trying to make ends meet and they just weren't. We put money down on our house. After it was over I did not buy a nicer house. I moved in with my boyfriend in a house he owns and I pay rent to him. Older and with more stuff falling apart than mine was and the kids have a smaller bedroom to share from before.

 

[pooh2001]

I won't say exactly what my DH does - but Short Sales are normaly associated with Chapter 13 bankruptcy.

Talk to the attorney for a consultation of your options. Do not pay a retainer fee as of yet. see below....

Did you talk to your mortgage company. Laws are changing. They may work out deal with you depending on how much you owe on the mortgage.

If you mortgage is for $120,000 and your home can be sold for $120,000 - the bank may let you sell the house and not charge you anything if the house is sold in 2 months - in contract for sale with an approved buyer. No short sale.

 

[Virgderon]

I am going through this right now. My husband got laid off, and we moved to another state for a job for him. I found renters, and altho they paid the rent, they did some damage that had to be fixed before we could show the house.

We have the house priced at what we owe on it, plus the realtors fee. We have had 26 showings, and not one offer, not even a low ball offer.

In the meantime, we paid people to mow the lawn and clean the house. My daughter stopped by the house the other day and those people were in the house partying and smoking. I'm terrified someone will have a party there, and I will be liable for the damage.

I'm now in the process of doing a short sale. I cant help it that the market has changed the value of my house, and I don't want the house to get destroyed sitting there vacant.

I could have stopped paying the house when my renters left, rented it to someone else, and made money on the deal. It would take 2 years to foreclose in my state.

I didnt do that- I tried to do the right thing. Now I want the bank to agree to lower the price so I can sell it to somebody who will appreciate it and love it the way that I did.

I will never buy a home again.

 

[Mommy Of 3]

The frustration is only at those who did the short sale unnecessarily just to get out of their house (people whose income and payment didn't change- they just wanted out).

It's NOT directed at people who had unforseen circumstances beyond their control. There's a difference, and we're probably all in agreement on that.

 

[Rafiki31]

I am going through this right now. My husband got laid off, and we moved to another state for a job for him. I found renters, and altho they paid the rent, they did some damage that had to be fixed before we could show the house.

We have the house priced at what we owe on it, plus the realtors fee. We have had 26 showings, and not one offer, not even a low ball offer.

In the meantime, we paid people to mow the lawn and clean the house. My daughter stopped by the house the other day and those people were in the house partying and smoking. I'm terrified someone will have a party there, and I will be liable for the damage.

I'm now in the process of doing a short sale. I cant help it that the market has changed the value of my house, and I don't want the house to get destroyed sitting there vacant.

I could have stopped paying the house when my renters left, rented it to someone else, and made money on the deal. It would take 2 years to foreclose in my state.

I didnt do that- I tried to do the right thing. Now I want the bank to agree to lower the price so I can sell it to somebody who will appreciate it and love it the way that I did.

I will never buy a home again.

Your story is similar to mine, and I will also NEVER buy again. Renting for us was a huge disaster, they stopped paying and ruined everything.

I also loved this house. Now I can't even sleep thinking about it. I hate it and want it to go away.

Meeting with the lawyer tomorrow am.

 

[punkin]

Your story is similar to mine, and I will also NEVER buy again. Renting for us was a huge disaster, they stopped paying and ruined everything.

I also loved this house. Now I can't even sleep thinking about it. I hate it and want it to go away.

Meeting with the lawyer tomorrow am.

I am so sorry you are going through this. Lot's of people got hurt in this bubble. Remember to take care of yourself and get enough sleep. I am sure you will be able to get rid of the house fairly soon. Good luck.

 

[pandora174]

I had 2 co-workers currently going through this. Both of these situations were not due to financial hardhsip. They both had townhomes & upgraded to McMansions. First co-worker did a short sale & she told me that her credit took a big hit & her DH's Citi credit card was reduced by half.

The 2nd co-worker couldn't get anyone interested in a short sale initially & decided to stop paying his mortgage in Nov. by April the bank forclosed. He hired an attorney then to fight the foreclosure & still is trying to do a short sale but his realtor says while they have an interested Buyer the bank is bogging the process down. The offer was made in Feb & we're in Aug & he's in limbo.

Don't know if it helps but this is 2 cases I've come recently.

 

[leight]

We moved to the tampa fl area in late 2004. We wanted to rent the first year to make sure that the subdivision we chose was right for us. It wasn't. But the surrounding areas that we loved had prices that rose more than 100k in the first 6 months we were here, and another 100k the following year. Our dream house was 214k when we moved here- when our lease was up it was 385k. I knew that while we qualified we couldn't afford it. We rented until 2008 when we bought a short sale. It wasn't our 'dream house' but a nice house in a wonderful neighborhood. The short sale process was a nightmare- we lost one home without knowing it until I saw the new owners move in. Then this home took over 6 months to close as after 4 months the bank approved the short sale while another section of the SAME bank foreclosed and tried to auction it. We had the foreclosure rescinded to proceed with the short sale but our landlords wouldn't give us a short term lease to cover the month. But so close to school starting we had to go into storage and stay with my mom for the month after the lease expired. At that point we knew we had the short sale approved we were just waiting on the official court document to reverse the foreclosure. Our agreement to proceed with the short sale included the ability to rent it until closing once the court reversed the foreclosure- so we moved in 45 days prior to closing so our kids could start school at their permanent residence. What a nightmare.

The sellers were investors- this was their 5th home in a neighbourhood that people actually camped out to put deposits on lots and they flipped the houses for 50-80k on average. Realtor groups made huge amounts doing this- they owned multiple homes in neighbourhoods then flipped them by listing them for much higher. Banks, realtors and investors ruined the housing market here-in many of these cases the homes are still falling in prices as the investors & realtors who bought them were financed at 0% down- using 80/20 mortgages and could easily walk away without paying a mortgage and it didn't affect them personally but their 'corporation'.

Its still affecting our subdivision as homes in foreclosure are selling at $150k while non-distressed sales (less than 50%!) are selling at 200k. Neighbors bought their houses at over 300k and I really feel for them. We've lost about 10% in value since we closed in 2008 but since this is for the long term for us we're fine- we have lost 30% income due to the lousy florida economy/job market but still make our payments.

OP speak to an atty or realtor who specializes in short sales in your area. You need to know how this will affect your credit, tax situation & liability for the default amount. Its not an easy road but I wish you the best of luck. I don't know how anyone here in my area can afford not to do a short sale as a seller or a buyer.