I didn't see your questions before this thread.
1. A short sale can stay on your credit for 2 or three years, sometimes more. There isn't a formula for it at this time. Lenders are telling my clients they can buy again in just a few years.
2. Your second won't allow the loan to be dismissed but may approve a payoff of less than you owe. Today lenders are now starting to ask for promissory notes with 2% interest over a 15 year period to pay them off. It depends on the lender.
3. Yes, the second has to be notified of the short sale, they are going to take the biggest loss more than likely and can hold up the short sale if they do not approve the amount offered on their portion.
4. It depends upon the lender we are talking about, some lenders we submit completed packages after listing in the mls and getting an offer and others we have to negotiate with as soon as possible to get their cooperation but most are wanting a complete package including an offer because they are so overwhelmed now that they don't have time to go back and forth negotiating and adding to packages.

A short sale will not affect your credit for 10 years like a BK will but each situation is different and you might need to consult an attorney.

Thank You, Laura
ERA Dream Team

GMAC is the first and Bank of Amierica is the second.

Hello Sam,

The 3 responses I've seen so far, are fairly close to being correct - none are 100% correct, but that is due to market variations more than agent's philosophies/strategies. I DO disagree that you will be in a position to qualify for a loan on a house again after only 2 years, and of course I disagree with such a variety of answers as to how long a short sale will stay on your credit report.

Also, with regard to how much a second mortgage holder will "accept", varies wildly, depending on which lender we're talking about. Most, want a 10% recovery, which in your case would be $15k. Some, however accept as little as $500-1500. And a few will not even cooperate unless you sign a promissory note for the shortage.

It would help to know who the two lenders are - if they are the same lender, that makes everything go smoother - usually.

I'm also curious as to how you arrived at your current value? It seems a bit low for the loans involved. How much was your original price? Or, did you refinance at the height of the market? ( In which case you might have some additional issues, both legally, and with the IRS. Some potential issues are beyond the scope of most real estate agents and should be more specifically addressed with either an attorney, or a tax advisor, or both.)

Good luck in sorting out your options, Sam.

Sam,
1. The answers provided are great regarding your credit and how that affects you.
2. The second lien holder is often the hardest to work with. They usually get $3000. Sometimes they get more and sometimes they will ask you to pay out of pocket before they will agree to a sale. In either case, a "hardship" package will have to be provided to both the first and second and approval will have to be granted by both. In the end, the first will end up deciding how much the second will get. If it's not enough the second can withhold approval and force a foreclosure.
3. The agent or someone the agent will hire will negotiate with the bank on your behalf. You will be asked to sign a letter that grants permission for the agent and/or the negotiator to talk to the bank on your behalf. This saves you time and pressure. Please understand that if you are not making your payments you will still get calls from the collections department demanding payment. You'll need to tell them your home is for sale and you need to communicate with your agent to make sure that everyone is on the same page when it comes to talking with the bank. The collections department and the short sale department may or may not be the same department, usually not.
4. When I list a short sale, I disclose the short sale in the MLS right away. In your situation, it's obvious that' it's going to be a short sale. There is a place where we have to disclose whether or not the sale is traditional, and REO, or a short sale. Buyers need to be told what is happening before they make an offer.

As to when you notify the lenders, they typically are notified before you list the home because you have to call the banks and request the hardship package. It'll take some time to complete the package which includes a hardship letter, an income vs. expense worksheet, a full list of all your monthly debts, etc...I have my negotiator work with my clients before we input it into the MLS so that we have a complete package before offering the property to the public.

Once the package is completed, the bank will usually say, "Don't send it to us until you have an offer." Therefore, the hardship package is not truly complete until an offer has been receieved.

Once the offer and the package have been sent to the bank, the waiting game begins. B of A is taking over 60 days to give a response. Other banks/lenders don't take so long.

One final thought. Don't expect the first buyer to stay with you in the transaction if it goes longer than 3 months before getting an answer from the bank. I've done a short sale in as little as 3 weeks and as long as 4 months. I know of agents who are involved in shorts sales right now that are going over 10 months!

It's crazy out there. It's unpredictable. You want to hire someone who has done this before, who has a track record of closing transactions. Every bank is different, so be ready for all this advice to be wrong should your bank take a different approach.

Good luck Sam! Sorry that you have to go through this. Let me know if you need any help.

you're welcome :)...... hope it was helpful!

K

Thanks for the responses!

Hi Sam,

I'm sorry....but so many people are in this condition! Let's answer some questions.

1) This will appear on your credit for 10 years. Currently lenders are williing to lend to you for a new home purchase after 2 years.

2) The second has to approve the short sale too. In order to make this attractive to the second, the first trust deed will include a few thousand dollars to the second in exchange for them to allow the sale to go through. Sometimes they will include a statement which starts that they "reserve the right to pursue the deficit"....we don't agree to that. We need to see a statement which releases you from all liability.

3) Your agent/broker will handle the short sale for you.....or at least make sure you find one that will. They either negotiate themselves or hire (at their expense) a short sale negotiation team/expert. But you will provide documentation and then sign a consent form for the lenders to talk with someone....like your agent....and you can allow them to handle this for you.

4) Every situation is different.....if you are hoping to use this short sale to convince your lender of a loan modification, which sometimes happens. (I'm always amazed how many of my short sale clients suddenly get great loan modification packages once they send them a short sale package). If that's the case, we want to send the MLS to the lender to let them know it's worth discussing things with you ( I don't take any money for loan modifications....nor to I handle that, but happy to work with you to do that).

If you are planning a straight short sale.....then we can list it and put the package together. What I like to do is find a solid buyer, we price the home aggressively, but fairly. We find one solid buyer and open escrow, including a deposit. Then we send the one accepted offer to the bank for them to approve. We put the home into back-up and if we get offers, they are back-up offers. I find that this can greatly improve the chances of getting a quick decision.

We definately list the home as a short sale....so all buyers need to be aware of that.

I hope this is helpful....the point is to have you disrupted as little as possible. We don't have to have a sign in your yard, for instance, and I like the "seller controlled" lockbox.....so if you are home, no one will let themselves in while you're in the shower. Also if you are out-of-town, you can leave the lockbox inside and know noone is coming through while you're gone.

If you have other questions....please don't hesitate to contact me....or any of the fine agents on this site who will answer this question. I also have more detail of how I work short sales on my website.....below.

Hope this helps....

Karen

Sam,

These are all great questions to be asking before you decide to sell your home. I will do my best to help out.

The answer to number 1 has yet to be determined from what we can tell. Anyone who tells you a time for certain that it will take for a short sale to remain on your credit is fooling themselves. I understand that some people will tell you 5 years, others will say 3 and some will say 10. The bottom line is that the only thing people tend to go off of to answer this question is their experience with the past. However that is an improper tool in my opinion. These are unprecedented times and no one knows how the credit burrows are going to handle coming out of this monster, so to say that they will do things the same way they have in the past would be crazy.

#2 This depends on who has your 2nd and is it the same company as your 1st? Is it a purchase money 2nd or was it a HELOC? This is a hard one to answer without taking a look at your situation. So I will say yes, sometimes. However it greatly depends on how you answer the two questions I posed above. You may need to call me to discuss this one.

#3 Yes. That is the only way you will be able to close. They will have to agree to something in order for you to close escrow. We are seeing that they will often go away for as little as 1% or $5,000 depending on which is greater. However…. Again…. This depends on the two questions I asked above.

#4 Not too often. If a phone call is made to the loss mid department just to let them know your home is listed, you will just get a big fat “thank you have a nice day.” They only want to talk to you when…
1. You have missed a few payments.
2. You have a fully executed short sale package submitted.
Or
3. You are going to make your loan current.

I hope this helps. Feel free to give me a call at 714-270-2424 if you have more questions or you want to talk about your particular situation. DO NOT CALL A MOD COMPANY OR SHORT SALE COMPANY.

Have a great day,
Aaron

Hi there Sam. Typically 2 years but nowhere near as devasting as a Foreclosure
The Second needs to agree to the short sale. Sometimes they do but it depends on your case.
It also depends on how your case is preopared and presented to them
If you sign
a realease ,broker can discuss the details on your behalf and can negotiate with the second.
Question 4 is specific to each situation. It depends on you hardship letter and other factors, taxes, legal.

If you would like futher clarification please feel free to contact me . We have a department designed to negotiate short sales and can offer you some great advice

Kind Regards
Michael Barron
Realtor/MBA/REO & Short Sale Specialist
First Team Estates
(714) 552-6817
Dre: 01723223

Sam,
I'll try to give you a brief answer to each of these points
1) It is unclear at this point how lenders will respond to request for loans from people wit a short sale on the record. Some have said that you could borrow again within 2 years although the report may stay on your record longer - though not as long as a foreclosure or bankruptcy. Federal policy may force lenders to be more lenient to those who have suffered a short sale than they current are.
2) Seconds are often the cause of it taking so long to conduct a short sale. The negotiations with them can take a substantial amount of time. They are in a weak position so they often take a small pay-off, but can play hardball and force the 1st to foreclose, which would eliminate any interest they have.
3) Your agent will be negotiating with both lein-holders as they negotiate between themselves.
4) It can be put on the MLS immediately with notice that it will be a possible short sale. Once your lenders agree to your hardship and grant you short sale status then it will be a approved short sale, although we will still not have an approved price until we have submitted an offer to the lenders and they have agreed to what amount of mark down they are each willing to take.
I hope this will help you.
I have a team of experienced short sale negotiators and would be happy to discuss the specifics of your situation.
Regards,
Bill