Buying a Short Sale Home when you already own a home?

[labdogs42]

We found the most awesome property recently and we weren't even really looking! But, unfortunately, it is a short sale. So, it sounds like we can't make an offer that is contingent on the sale of our house. So, how in the world are you supposed to make an offer on a short sale? We thought about asking my MIL to make the offer and get the mortgage since she doesn't currently have a mortgage on her house, then we could sell our house and then pay her back, but we're not sure of all the tax implications of that plan. And, she's pretty anti-risk, so we don't think she'd go for it anyway. So, how in the world do people buy short sale properties if they already own a home? If the house goes from short sale to foreclosure, would we be able to make a contingent offer then? we love this house and it stinks that we can't even put in an offer right now! Suggestions are welcome!

 

[Darcy03231]

We found the most awesome property recently and we weren't even really looking! But, unfortunately, it is a short sale. So, it sounds like we can't make an offer that is contingent on the sale of our house. So, how in the world are you supposed to make an offer on a short sale? We thought about asking my MIL to make the offer and get the mortgage since she doesn't currently have a mortgage on her house, then we could sell our house and then pay her back, but we're not sure of all the tax implications of that plan. And, she's pretty anti-risk, so we don't think she'd go for it anyway. So, how in the world do people buy short sale properties if they already own a home? If the house goes from short sale to foreclosure, would we be able to make a contingent offer then? we love this house and it stinks that we can't even put in an offer right now! Suggestions are welcome!

Typically the short sale process moves very slowly. You could put a contingent offer in and list yours for sale right away and hope it sells quickly. Also, if you have enought equity in your home to buy the other house you could take a home equity loan and pay cash for it and then pay off the loan when your home sells.

 

[mom2val]

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[Claire&TheBoys]

We did this last year. My realtor advised against making our offer on the short sale contingent on selling our current home because she said our offer would probably not get any consideration. We made the offer in March or April and it was not accepted until the end of June. Our house was listed but didn't sell at that time. We were able to be approved for the second mortgage while still holding our first. (We'd been in the house 11 years, we'd bought before the housing boom when houses were reasonable, and my husband had had a significant raise in salary.) We closed on the short sale house in Sept and moved in, and re-listed our first home in October. It sold in March this year, so we had 4 months of making double mortgage payments.

The whole situation worked to our advantage. My husband was mobilized to Active Duty during all of that, and so I was the one packing up our old house by myself. I took the first house off the market while I packed and readied for the move. I was able to take time to do some improvements and paint most of the rooms in the new house before we moved in. Short sales can take a long time and if we'd had a buyer for our old house before we were ready to move to the new house, it would have been a huge headache.

Good luck!

 

[cats mom]

Things may be different where you are, but in my area many houses that are listed as short sales never actually transact through that process.

Of course I probably live in the HELOC capitol of the universe. Since any secondary liens are completely wiped out in a short sale, it's difficult to get all the necessary approvals. Overextended homeowners know that, and unfortunately many are trying to buy more time by listing short.

I've been watching several houses that have been on the market as short sales for well over a year now.

If the house does end up in foreclosed on cash is king at the trustee sale, but if no one bids and the house ends up REO (real estate owned, meaning the lender takes it back) you could submit a contigent offer then. Of course you have to realize that more cash down and no contingencies equals a stronger offer.

 

[seashoreCM]

You can make an offer on a home up for short sale quite easily if you can pay cash or otherwise get it financed without the need to get rid of your current mortgage loan which may mean sellinig your present home.

Just that the qualifications for bank financing of the short sale will be different when you are keeping your present home for the time being.

If your MIL takes out a mortgage on her home for the purpose of lending to you the money to buy the (short sale) house and she is not a co-owner then she cannot deduct the mortgage loan interest. If you simply hand her the money to pay the interest with then she will have to declare that money as taxable income and you would not be able to deduct it.

If your real estate attorney draws up a mortgage document with you as the borrower and MIL as the lender, for your short sale house, and establishes a borrower/lender relationship between you and her then you get to deduct the interest you pay to MIL and she also has to declare it as income. She still may not deduct the interest she has to pay (using the money you paid her) for the new mortgage loan on her house.

If in reasonable due haste you succeed in taking out a new bank mortgage loan on your short sale house slightly after closing on it, for example to pay off MIL's mortgage loan and get MIL out of the picture, you may deduct the interest on your new mortgage loan, up to the limits regarding "second homes". f you don't act in due haste and also there is no mortgage on your short sale house take back by MIL then you may not deduct the interest on a new loan you take out on the short sale house.

 

[labdogs42]

I really don't want to carry two mortgages, so I think we may just play the waiting game. I also don't want to sell my house in hopes of buying this property and have the deal fall through and end up with no house at all. I think I'll just keep on watching it and see. Maybe in a year we'll be in a better position to buy and maybe it will be foreclosed by then. Good info!