Do you have any other money to put down on your move up home? It doesn't look like you will have any equity from the sale of your townhome. Instead of doing a short sale, which is the only option, unless you have money to pay off the existng mortages at closing, have you thought about renting this townhome for a while, until the market improves? Then use any money that you now have as a down payment on your new home.
Windermere Real Estate
This is a fabulous market for selling to buy up. You may take a hit on the townhome but you are going to give the seller on the other side a big hit too and you will probably come out ahead.
Say you sell your townhome $110,000 which is a $11,000 loss or 10% loss. Lets say you go to buy a $200,000 home and you give that home the same 10% loss which is $20,000...you just washed your $11,000 and gained another $9,000 off. Find a great agent to help you and you can negotiate less on the sell of your home and negotiate more off the one you purchase!
I wish you the best!
Bottom line... get with a lender and work from a position of knowledge because knowledge is power. Then connect with an experienced agent that is having success in this market selling homes. And go from there.
Secondly, there are different options with short sales. And there are options to keep your credit from being impacted negatively. The answered you received below is speaking of a short sale where the bank agrees to accept less the home is paid and you are foregiven the difference which does negatively impact your credit. You can do a short sale where you do agree to pay the remainder of the balance by signing a note with the mortgage company at closing for the balance. The negative equity would then form a new loan and you would be obligated to a monthly payment until the balance is paid in full.
Since you have no equity and in fact have negative equity have you considered leasing your townhome until which time the market turns in your favor to sell? I would advise first and foremost that you speak with a reputable lender regarding your options for purchasing a new home without selling your home and/ or with adding the negative equity to your debt to income ratios. Knowing where you stand is important so that you know what you can and cannot do so that you know what options you truly do have.
Best of Luck!
Quick question: that "note" you were talking about - in order to pay the mortgage company the balance? Is that the same as a short sale, or is that something entirely different?
Like I said, everything is riding on what the city says tomorrow. THANK YOU for all the help and insight!