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Avoid Foreclosure Short Sale

October 24, 2007

in Community Blog

avoid foreclosure short sale
need advice on my house?

I purchased my house about 5 yrs ago at around $300,000 now its worth $160,000 im trying to get out so im considering short sale and trying to avoid foreclosure. My question is there any other way or suggestions and also i have assets in my savings account will bank touch that if i decide to get rid of my house? Please help any suggestions of getting out im soooo stressed ..thank you and God bless!
Just to add more info…i am trying to get not just because my house is worth than i owe but also i have an adjustable mortgage rate and it seems to be increasing every year. I can no longer catch up with my bills and i just had a baby last year so it adds to my financial situation..i need to get out so any suggestions would help thank you

Why are you selling? Because you owe more than it’s worth? If that’s the case chances are slim that a lender will agree to a short sale. You must prove some sort of financial hardship in order for a lender to approve a short sale.

In reviewing your file for a possible short sale, the lender will carefully look at many many documents. If you do have money saved up, they could require you to either sign a promissory note or bring money to the closing table to help minimize their losses.

If you decide to walk away, you will make things even worse, and, depending on your state and type of loan, they can still come after you for the difference after they foreclose.

If you don’t need to sell, then why sell? The value of it shouldn’t matter since you are not planning to sell. And if you look at it, everything you owe money on is worth less that what you owe on it (your car, etc…).

Your best bet would be to try to sell the property via a short sale. When a lender agrees to a short sale, they will either:

a) cancel the remaining debt. (it releases you from any future liability to re-pay the debt. They will send you IRS fomr 1099-C and the cancelled debt must be reported as income when you file your tax returns. You would need to talk to an accountant to see if you are exempt from paying taxes on it.

b) The lender will demand that you either sing a promissory note for a part or the entire difference in order for them to agree to a short sale and minimize their losses. (most, if not all of the time, it is for a part of the difference)

c) The lender will demand that you contribute money at closing to minimize thier losses.

d) The lender will not ask for money at closing, but will not cancel the debt right away and leave open the possibility of them coming after you at a later date for the difference. Timeframe varies by state as to how long they can go before they lose their rights to come after you.

Every short sale is different from each other. Everything depends on the type of loan you have, who is the lender, who is the investor, whether you have pmi, etc… Short sales do take time to negotiate and close and many short sales never do close for various reasons, buyer walked because it took too long, lender won’t agree to short sale, etc… They can easily take anywhere from 3-4 months to complete…some are much longer.

One last thing…the more assets you have, the higher the chances are that the lender will not cancel the debt and will seek to work out some type of payment plan for part of their losses or demand money at closing.

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