is what is called the "mortgage tax relief act". It was signed by President Bush before he left office, and extended by President Obama and Congress. It was originally set to expire in 2010 but will instead expire in 2012. So if you want to short sale, do it now, before this law expires.
Now, if you chose to borrow money from a hard money lender, and come up with the short sale price in cash, and buy back your house from the bank, with a non-family member acting as the "buyer" and then he deed the property over back to you, this would re-attach the negative difference back to you once the bank finds out. This is considered mortgage fraud. The "forgiven amount' would be re-attached to you, the borrower.
I'm sure that it is painful to be losing your home, but in the long run, you'll be better off if you play by the rules. Find a buyer for the property, and let it go. Move on and start rebuilding your credit, and hopefully in just a few years, you'll be able to buy again.
If you do decide to go ahead with this, you absolutely must consult a real estate attorney, who can provide an independent opinion on the legality of this option. (Note: independent, find this attorney yourself).
Be aware of scams and "quick fixes" people may offer you in your situation.
If on other hand, you're not financially in trouble and you are able to afford the payments and you are simply trying to short sale the house at present market value, and then yourself buy it back, to get principal reduction, than that is a whole different question. That is mortgage fraud. A sale must be an arms-length transaction. Therefore, you can't have your cousin Vinny buy it and then deed it back to you. That is collussion to defraud the lender.
So I'm not clear on your question. If you're in trouble, you have options. If you are not trouble, then stay and pay.
If you current mortgage balance is $189K, and your offer is $167K, the amount you're short would be $22K.
(You may also want to weigh the pros and cons of doing a short sale here... there will be some consequences to your credit. If I could make the payments, I'd try to hold out.)
Now you also say the house is worth $230K, which is curious. Is that the list price the agent put on the house? Because if that is where the number came from, I wouldn't count on it.
In any case, there's no guarantee the banks will approve any short sale. If you think this offer is well out of the acceptable range for a sale price on this home, then I'd say to wait for another offer that's higher (unless you've already received a notice of foreclosure sale. Remember, you only need to get an offer for at least your mortgage balance to come away with your credit unscathed. Heck, if I got an offer of $187, I'd pay the $2K up front to close the transaction without the damage to my credit.
I need your insight Please:
Equity in the house $40k ( owes 1st mortgage 140k since 2011 , 2nd mortgage 49k (85% OF LOAN) HOW DOES THE MONEY GET DISTRIBUTED? First vs second. Scenario $230k. If 2nd mortgage didnâ€™t get all their money what happen to the different amount that I owes?
House price in the market is worth $230k but buyer offer $167k. I owed total off $202k. Will the bank approve for $167k? What are the most important factors of the short sale being approved and what happens if the short sale is not approved?
Contact an attorney.
Assuming your financial situation improves months or years later - and you can prove where the money comes from - you could purchase the property as long as the owner is unrelated and unconnected to you.
To be safe if you decide to go there, be sure to consult a lawyer. Better yet, buy something else.
More than likely answer would be NO however confer with mortgage broker.
It seems that MANY people are getting into this aspect of buying property back [or trying to] It looks and smells like potential bank fraud.
IF, everything is disclosed- I'm sure it could be acceptable.