Foreclosure in Austin>Question Details

Divag, Home Seller in Austin, TX

If leasing my home does not work, etc and I consider a "short sale" and closing costs are usually paid by the lende, what about my credit

Asked by Divag, Austin, TX Fri Jan 8, 2010

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Leasing Your Home Will "Work". However, it simply may not lease for that much (enough to cover your mortgage note and HOA $1,280-ish).

When you say "if leasing my home doesn't work", I assume you mean "at the price that I need to cover all expenses", correct??

Alright Diva Graci, I'm going to help you out here and give you the exact game plan for you to follow....

It will require precise execution, or it WILL cost you thousands of dollars that it should'nt have cost you.

(I'll assume you are still living in the home right now, and you folks have a hardship of some sort, such as - no jobs, no income, etc. If you do not have a hardship, then what the heck is going on? and that's why you should pick up the phone and call me, or one of these knowledgable Realtors, so you can discuss your EXACT details and receive detailed directions. Until then, we'll just assume a hardship, so here is your game plan)

1.) Your house needs to go on the market For Sale asap, with a full service Realtor who has a solid Marketing Plan. The reason your home NEEDS to go up For Sale, is so you can show your Lender later that you have made effort in getting it sold so you can pay off your loan to them (imagine if someone owd you money and they wanted to walk away from it without even attempting to make it right. By listing your home for sale you are trying to "make it right", and very thoroughly!).
The reason for the "Fulll Service" Realtor with a solid Marketing Plan is so you can also demonstrate how thorough your efforts were, opposed to a Discount Realtor service, which almost always comes with a lack of sales skills, lack of thoroughness, lack of exposure, and/or a lack of current market competence (at least one them, you get what you pay for and there is a reason their prices are so much lower than the full services).

2.) While your home is on the market For Sale, also offer it For Lease, and see how much you can get for it. If you get offers for $1,050 or $1,150, then you can decide for yourself if you'd like to go ahead and rent it out and absorb the additional cost every month to hold on to the home. If you receive enough money in a rental agreement and you are comfortable covering the additional money each month, then rent it out and hold onto the home! IF YOU ARE NOT COMFORTABLE covering the costs to hold onto the home, then go to step 3. ONLY THEN, GO TO STEP 3 if you cannot afford to hang in there as the home owner!

3.) Stop making your mortgage payments!! If your mortgage is being directly pulled out of your bank account, you need to go close that particular account so it stops being depleted. Food for your family is much more important than your home, your credit, your Lenders wallet, etc, etc, etc. Provide for your family first, or it will get much worse for you, very fast! Keep that $1,250 you are spending every month on you rmortgage note.
ALSO, when you stop making payments, you now qualify to receive help from your mortgage Lender. Without late payments or missed payments, you simply do not qualify for help from your Lender. They have thousands and thousands of loans out there, so it's a simple system for separating the people that just WANT help with their loan, from the people who really NEED help with their loan, so they must see you suffer first with signs of a "hardship".

4.) After your home is listed For Sale, have your Full Service Realtor show you how to handle your Lender to receive help, and start the short sale process. Remember, millions are doing this, it's not the end of the world and you can recover fastly from a short sale. Again, providing for you and your fam is much more important, AND it's just a short sale! Getting back on your feet will be much easier when you quit spending your savings on a house payment, start helping your Lender sell that house to show that you do care, and then start rebuilding your credit immediately with all the money that you saved by stopping payments on your home.

5.) Relax.... it's going to be ok. Just don't try this without the guidance of a professional. You don't pay Realtors on a short sale, the Lender does, and they are happy to, because we all just saved them a foreclosure!

If you execute this just right, you can actually do all of this without even needing to move out, including repairing your credit! Basically, you'll stop making payments on your home while living there and start saving your money to provide for your family, then you'll sell the home to an investor who wants to rent it out, then you can become the investor's tenant and you can probably rent it out for $900-$1,050. The investor will love to have an immediate tenant in the home, so you may be able to strike a deal on rent!

First step: Get off Trulia and call someone.

THIS INFORMATION PROVIDED, ASSUMING A HARDSHIP AS MENTIONED ABOVE.
1 vote Thank Flag Link Fri Jan 8, 2010
The "fact" that lender pays some closing costs is not as important as the fact that you will walk away with zero. The bank will be sure that you do not get a cent from the closing. The bank also will not cover many things that a normal seller would: no credits for repairs, no carpet allowance, no home warranty, in fact practically nothing.

Your credit will suffer, first from all the lates (30-day, 60-day, 90-day) and then also from the short sale itself, regardless of what other information has been said here. Worse, you may get a deficiency judgment lodged against you for the shortage. These all show up on your credit report.

The deficiency may fall under the Federal guidelines that it is not income to you if you are forgiven the deficiency, but there are rules about that.

As to comparatively whether foreclosure, bankruptcy, or a short sale have more long-lasting impact on you. It is true that currently the lowest (the least of these evils) impact is from the short sale. However, bankruptcy can protect your assets. Which of them to choose depends on a number of factors, not the least of which is the willingness of your lender to help you with a loan modification.

If the lender is willing and you are able to support a loan mod, that is the preferred route to go. Yes, there is some damage to your credit, but it is the shortest term damage so long as you pay according to the modified payment plan.

You should also discuss your situation with an attorney who handles bankruptcy if you can't work something out with the bank. Having dealt with scores of cases where the homeowner can't afford their home because of some event, I can assure you that the bank is the first place to stop and the worst thing you can do is 'nothing' (just let things happen). In between doing nothing and working with the bank are bankruptcy and short sale.
Web Reference: http://www.SumnerRealty.com
1 vote Thank Flag Link Fri Jan 8, 2010
Behind bankruptcy and foreclosure, it is the worst thing you can do to your credit. Bottom line.
0 votes Thank Flag Link Tue Mar 23, 2010
Good evening,

When seeking advice on this important topic, be sure to do so from a trusted source and beware of those giving legal advice who are not licensed attorneys. As an Attorney in Austin with a lengthy background both as a Mortgage Broker and Realtor I bring a unique perspective to your situation. Ultimately, I would suggest seeking the counsel of an Attorney before making any decisions.

Best of luck,

John Hay
Attorney at Law
Hay Compere PLLC
http://www.haycompere.com
0 votes Thank Flag Link Mon Mar 22, 2010
Divag,

I work with a local company that specializes in helping homeowners who may be facing foreclosure. We specialize in dealing directly with your lender to help you with an outcome that is a win/win for everyone.

There are many options available and we'd be happy to discuss them in detail with you. Options include: a short sale, getting refinanced if you qualify, negotiate a workout with your lender(s), also called a forbearance agreement or loan modification and, there are several other options for keeping your home that can be discussed.

Best of luck and I definitely recommend working with a Realtor who has short sale knowledge if this is the route you take.

Janae Oliver
0 votes Thank Flag Link Sun Jan 10, 2010
Hi D,

With regard to your credit question. Here is the issue with credit and short sales. First off you need to know if your loan is a recourse loan or a non-recourse loan to confirm where you are vulnerable to the lender and what type of recourse they may have against you. Bottom line, if your loan is recourse then the lender will pursue you because they have the legal right. This is why I like short sales for this situation.
Next, let's say that you are able to lease out your property, with unemployment on the rise do you feel that your tenant is going to be able to come up with the rent each month? Do you have a 6 month reserve of hard costs to cover the expenses if the tenant doesn't pay you? For these basic reasons I would suggest a short sale. Sell the house responsibily, undebt yourself while their is an "environment" which is somewhat cumbersome towards short sales but certainly open to the idea. Pick an agressive realtor who is going to work hard for you for FREE to find a buyer and help you get out of this debt. Especially if your loan is a recourse loan, then at least you get an opportunity to negotiate the debt for FREE though a short sale. If the loan is non-recourse sometimes the loan mods out there change the loan to become "personally liable" which is basically the same thing as recourse.

Now with regard to credit. If you are current on your loan and you can work with a short sales realtor who can negotiate a short sale on your behalf (FOR FREE I MIGHT ADD) it costs you nothing. Then your credit will be negatively effected but not hammered. You will have a negative trade line showing on your credit report. Something to this effect "Settled for less than agreed" However this is much better than a foreclosure or a Deed in Lieu. A short sale is not the same as a Foreclosure as someone else answered, that is very incorrect.

A Short Sale says that this borrower got out of a debt "responsibily" and as a result of this your next lender FHA will be willing to extend a new mortgage to you in 24 months so long as you qualify, have a job, money in the bank and your credit rating is in good standing. This is why you will want to sign up for credit restoration services to repair and rebuild your credit rating after your short sale so that moving forward you have good credit to be able to utilize it down the road for homes, cars, utilities, insurance and job screenings.

Now, let's say that you default on your mortgage leading up to your short sale. This is where the credit is hammered. After two reported late payments your score drops about 80 points and other credit you might have such as credit cards will reduce their lines of credit to you or in some cases close your accounts. This causes a further drag on your credit score I have seen it 120-180 points. The good news however, is that once the property is sold your score will go up about 25 points typically. The reason is that the "debt" or the "mortgage" is no longer on your credit report and your score will recover somewhat because there is less debt.

Therefore, after the property is sold you will want to work to repair your credit and rebuild your credit rating through credit restoration services. Keep my name and number in your records so that I can assist you after your short sale. Pick a good realtor to work through that short sale and good luck!

Hannah Fliegel
The Credit Restoration Expert
415-999-9348
0 votes Thank Flag Link Sat Jan 9, 2010
Just to clarify Divag, a portion of my comments are being reposted immediately below.

"lender won't likely entertain a short sale request (depending on lender and type of loan FHA / VA / Conventional) until you're behind on your mortgage."

Please note the words "won't likely." There are exceptions to every rule, but they are just that...exceptions and not the rule. The top short sale specialists in Austin will confirm the accuracy of this statement. It is also a fact that you can have all the necessary conditions to meet a short sale, and even have a short sale approved, and the lender can and often will foreclose anyway. Bottom line you can only do what you can do and everything else remains in the lender's hands.

Just didn't want you to misunderstand my earlier comments.
Web Reference: http://www.phgbrokers.com
0 votes Thank Flag Link Fri Jan 8, 2010
Give the market an opportunity to work for you for sale and for lease. Contact your lender to see if you qualify for your loan to be reconfigured. If not, and you've had some time on the market, you may qualify for a short sale depending on your specific circumstances and what is going on around you in the immediate area.

You need to be working with a Realtor who is experienced with short sales.
Have a blessed day!
Ronda


Ronda Allen, Realtor and Certified Purchasing Manager (C.P.M.)
CEO of comingsoonhomes.com of Texas
RE/MAX Dallas Suburbs
0 votes Thank Flag Link Fri Jan 8, 2010
All,

Some have stated, and it is simply not true, that the only way to get a short sale done is to be behind on payments. I have helped seller's complete three in the last 60 days alone where two of the owners were current on all payments and the third was almost 6 months behind and the seller 6 months behind was in much worse shape. These deals were all with major banks holding hundreds of thousands of notes.

As far as negotiation with the buyer's went, both sales were handled similarly to a normal sale. Repair amounts were negotiated and home warranties, etc. were given or not based on what we could get the buyer to agree to do. What the banks cared about was their bottom line, which is to say how much were they going to lose. In two of the cases mentioned, the buyer made an offer, the bank countered, the buyer countered again and so on until we eventually got to the banks bottom line and the buyer had to decide if they would pay. They were lengthy negotiations as it frequently took a week or two or more to get the bank to respond. In the third case the buyer made an offer, the bank took it and on down the road we went. In one case the seller had to borrow $1,200 or so from a family member and each Realtor in the deal kicked in 1/2 percent because the banks bottom line and what the buyer could do were that far apart. All the sales took between 60 and 70 days from contract until closing.

Davig, you lender is going to allow a short sale or not based on any number of factors including but not limited to: your total assets, the lenders opinion of your ability to continue paying, the reason for the sale (death, divorce, financial hardship, job relocation) and the debt against the home vs. what it is worth in the market today. Depending on situation it is possible you would have to be behind on payments to get attention from your lender, but that is most certainly not a requirement. Certainly a loan modification, if you can get it, will be preferable to any of the alternatives mentioned in this thread. I love what Mr. Sumner says below and think it sage advice on how to proceed.

If you pursue the short sale you may find it difficult to impossible to get the bank to talk money with you without a contract in hand. You can start the process with them, but they are not going to give a real bottom line or probably even discuss money with you until their is a buyer with a contract. If a short sale looks like the best option, then do consider listing the home for sale and for lease if the money on a lease is close enough to your total payment for the deal to work. Find a Realtor you trust and one that has some good depth of experience because certainly the pain of the process and possibly a successful conclusion for you will depend on him or her.

Best of luck,

Brandon Gardner
Web Reference: http://www.teamgardner.com
0 votes Thank Flag Link Fri Jan 8, 2010
T.E. gave you a very good through answer.

Basically if you do a short sale you will not have any closing cost or other cost, the bank will pay what ever is short. If you owe $100,000 and the net proceeds is $80,000 the short fall the bank will take as a loss if they approved it. Your credit iwll be hit more than likely 200-300 points, but depending on how deliquent your loan is you could purchase another home right away or in a couple years instead of 4 years after the discharge of a chapter 7 bankruptcy.

A good document to look at is :https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0816.pdf



Good luck

Keith Manson
First Weber Group
Certified Distressed Property Expert
Metro Milwaukee


http://www.milwaukeebailout.com
0 votes Thank Flag Link Fri Jan 8, 2010
Your credit will be affected, short sales are reported like foreclosure and will show on your credit record for 10 years, Your credit score will most likely take a 200 point hit which can be over come in a short period of time but if you want to buy another home you will be you up against what is known as the "Waiting Period" after foreclosure requirement, which with a short sale is 2 years.
I would try a mortgage modification that will start to help your score as you make modified payments.
Good Luck Bob
0 votes Thank Flag Link Fri Jan 8, 2010
Divag.

I've been following your posts and highly recommend you contact Jeffrey Nyland (from an earlier post) to see if he can help you get out from under your house without having to consider a short sale or foreclosure.

If you need his information, feel free to contact me.
Gina Nyland
Prudential Texas Realty
Exclusive Buyer's Agent
512-626-8165
Gina@Nylandteam.com
Web Reference: http://www.nylandteam.com
0 votes Thank Flag Link Fri Jan 8, 2010
As stated, credit will take a hit and you won't be buying another home for at least 2 years, but still better option than a foreclosure. As I recall, you're current on payments...correct? If so, lender won't likely entertain a short sale request (depending on lender and type of loan FHA / VA / Conventional) until you're behind on your mortgage.


Guy E. Gimenez ABR, CRS, GRI
Broker / Owner
The PowerHouse Group
512-731-5613
guy@phgbrokers.com
Web Reference: http://www.phgbrokers.com
0 votes Thank Flag Link Fri Jan 8, 2010
Divag,

That is an excellent question! To be considered for a short sale (by your mortgage holder), you must be behind on your payments. Your credit of course will suffer if you are not making your house payment. It is not the short sale itself that will hurt your credit, it is the missed payments. The short sale protects you from foreclosure and is much better than having a foreclosure on your credit report. I have helped numerous sellers this past year go through the short sale process. Somtimes people get in a position where they just cannot make their house payments, the short sale is a very viable solution and most people find it a much better alternative than foreclosure. Please let me know if I can be of further help!

Pamela Peck
Realtor
Keller Williams Realty
512-609-9877
pamela2kw.com
0 votes Thank Flag Link Fri Jan 8, 2010
Your credit is definitely affected, because you have to be delinquent on your mortgage. It is not as bad as a foreclosure or bankruptcy, but it is affected. I am very confident that your home would lease as it is a very good price and in a desirable area. The rental market is huge right now! I would list it for both, slae and lease that way you are covering both markets!

As I mentioned yesterday, I am very familiar with short sales and quite knowledgable; therefore, if you want to just chat and get some guidance, please feel free to call me. I think once you know all of the facts, you will feel more confident about the next steps!

My number is 954.605.6461
My email is hillary@hillarybernstein.com

I look forward to speaking with you.
0 votes Thank Flag Link Fri Jan 8, 2010
Your credit will take a hit, but not as sever as a foreclosure. Plus, a foreclosure will stay on your credit for up to 7 years. As my attorney said - it could last forever because most applications ask "have you ever had a foreclosure?"

Fannie MAE will not usually approve a new home loan for up to 5 years after a foreclosure. Where you can get a new home loan after 12-24 months after a short sale assuming you maintain good credit going forward after a foreclosure.

Call me at 832-330-4588 and we can provide you a more detailed discussion.
0 votes Thank Flag Link Fri Jan 8, 2010
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