Home Buying in Canton>Question Details

jacarr82, Both Buyer and Seller in Westland, MI

Short selling and getting a new home

Asked by jacarr82, Westland, MI Sat Oct 27, 2012

I want to get out of my home and get into something bigger as my family is growing. My home is way upside down (owe 120,000 and similar homes are selling at 40,000). I spoke with a loan officer who pre-approved me and his advise was to look and buy, then short sale my existing home. I don't want to ruin my credit if I don't have too. Loan guy said it won't but not sure if thats true. Also, my ex-wifes name is still on current homes mortgage. We have divorce documents that say home is mine and she should be taken off. How should I approach this??

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I strongly advise you don't listen to people who advertise things like this on TV or on the radio. Kudos to you seeking out other opinions.

As previously mentioned, Michigan is a recourse state.

While you may be able to purchase the current home, your credit will 100% be affected if you finalize a short sale. Some lenders require you to be delinquent on your loan before they will negotiate a short sale, so your credit would go down there. If you settle for less, then your credit gets dinged too with that on your report and you're prevented from purchasing another home for three years from that date. That is a fair trade for many people, as they would already have their "new" home and don't care about the three year penalty period.

You may want to consider renting your current home as being an option. You're going to have to write a letter of intent when you purchase the new home to appease the lender, so make sure you're honest in what you write -- if you say you plan to short sale the current one, they may deny you from getting the new loan. If you say you plan to rent it and then don't and the files ever come back and get audited, then you could find yourself in an ethical (and possibly legal) dilemma.

Many people do choose to do this, so you're not alone. I just think that not enough time has gone by to see how the banks will come back at people for more money, if ever. One thing is for sure -- when you seek out your short sale, make sure you get a full deficiency waiver to exempt yourself from any further recourse.

If you want some private advice, let me know.
1 vote Thank Flag Link Sat Oct 27, 2012
You may be opening yourself to big problems:
Michigan is a RECOURSE State,

Not to mention the fact that being UPSIDE-DOWN is not usually a good reason for doing a Shortsale.

You may need legal advice.
1 vote Thank Flag Link Sat Oct 27, 2012
I would suggest talking to an attorney.
0 votes Thank Flag Link Sat Oct 27, 2012
If you can be approved to buy with the existing mortgage then you can do that. However no one guaranteed that your short sale is going to be approved and go through. Be advised that if you choose to buy and then short sell the house, that you could be stuck with both houses.

Keeping that in mind, please drop me a line at the below email address with any additional questions. If you decide you want to buy and/or list, I would love the opportunity to help you with your real estate needs.

Jeff Gushman - REALTOR
0 votes Thank Flag Link Sat Oct 27, 2012
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