You sound like a prime candidate for a Short Sale. I give you credit for trying to hold on to your home rather than walk away, but if what you are stating about the home's true market value is accurate, than you might consider it.
What you have stated in your posting is a perfect start to what you could include in a "hardship letter" to your lender. Yes, your credit will be blemished, but not as much so as a foreclosure would. Your lender would consider how much to "forgive" of the mortgage debt, and you would have tax responsibilities for the "forgiven" amount. Unfortunately, your HOA dues would be shown as a lien against the property....If you don't pay the amount due, the buyer of the Short Sale property would have to assume that debt as part of the transaction.
Try to get a zero balance stated in your contract this will help you later to fight any type negativity on your reporting. The only negative reporting should be ,if at all, settlement... This willl affect your scoring. However most banks will absorb the loss and report it as a zero balance. Use this as your last negotiating tactic. or open up with it for it to be put in writing. Becasue there is no short sale reoprting on credit reports the only term used I've sen is settlement. Settlement is not the actual legality of this contract. Yes it is for all intensive purposes but you are absorbing the difference on next years taxes so therefore it is not really a settlement. It's not a writeoff term either. It is a writedown for the bank and they will use it offset their tax basis but you are paying the taxes and you will get a 1099 for the difference to reproted as actual income. So if you earned 80k and the difference in the short sale is 50k you will now report income of 130k.
With that said the next thing yo need to understand is the tax in how the gov't has changed it will be delt with. The Mortgage Forgiveness Debt Relief Act of 2007 says that the difference of the short sale will be forgiven on "qualifying" primary residences. This must be stated upon the contract of short sale. Qualifying is the key. I really think most primary residences do qualify but a tax advisor would best answer that if there is any question as to your situation. Becasue you have 2 homes you may have a difficult time qualifying... Seek a professional. Understand if the home does not qualify you will have to pay the income tax on the difference as regular income.
Also 2nd and third mortgage or equity loans will be handled quite different too.
You will have to prove you are unable to pay the mortgage monthly amount.
Prove that to your income
Prove the value of the property is lessor than what is owed. FHA VA type loans are handled differently so there is another scenario.
Do not use a trial by error negotiation you need a professional and preferably a legal person who actually understands the process. You are somewhat informed here so you have beginning...
It is not easy but you can do it... But do it right. Ask all the right questions and you will be ok. You should not list your property before you get approved ot at least get a preliminary approval.
Hope this gives you a little better understanding. It's not going to be a cure all but you can get out.
There are no taxes on your mortgage. Property tax can be paid directly to the municipality. Most taxes are in escrow of your mortgage payment. You can get this number from your mortgage comapny if you want to subtract taxes out.
Taxes will always have to be paid.
HERE'S what is is INTERESTING.... I just found ot yesterday from an Equifax executive short sales cannot be reported negatively on credit reports. LAte payments and foreclsures yes but not short sales. If you can avoid late payments and negotiate a short sale with the bank that will be in your favor. However with that said... usually short sales result because of late payments, You said you can prove you cannot afford the nmortgage? You will have to do this convincingly to the bank in order to get a short sale approval. Short sales approvals can take a long time...
So get a short sale without any late payments and you will not have a negative report on your credit. The reporting agencies have no way to report this information YET. Oh, They are trying, but cannot because it is not negative since the bank is agreeing to accept the lesser amount and absorb the difference due to valuations. It is not a write down. It is not a write off.
Good luck! Hope this helps.
You are right in most cases though, that the lender does have a good idea of the value before any offers are made..... All of this needs to be left for discussion at a GTAR meeting.
Sorry La, we have gotten off the point of your particular situation. If you would like discuss your options give us a call, we will be happy to discuss with you.
I wouldn't recommend that any Short Seller take their house of the market unless the offer is at least 85% of market value, so a $125k FMV house might want to attempt a $107k sale but probably not a $90k sale.
As far as "saving your credit", I believe that once the lender reports the short payoff to the credit bureaus it will not make much difference if you were never late on your mortgage payments, your credit will be tarnished the same. I may be wrong... I'm not a mortgage broker or credit specialist.
Hope this helps.
Alma Rose Kee, P.A.
Charles Rutenberg Realty, Inc.
Anyway, La's best option is to rent or lease the property with a property management company for a period of time and let all this mess get somewhat corrected. i doubt the Real Estate market is going to bound back to the volume of 2005, however the construction business will start back up with roads, bridges, and general infastructure that may give him a job back down here and he can live and wait for the market to get better. It really depends on his motivation to get rid of the home or save his credit.
As we said before, Good luck La on your decision.....whatever it may be.
Whichever Realtor you decide on, make sure they put an electronic lockbox that will record every entry and exit to your house and also make sure the listing description indicates in the "public remarks" and "realtor only remarks" that it can be shown anytime and without notice. Then every week ask your Realtor to pull up a lockbox activity report with the Realtor contact info and email it to you. It will keep your Realtor honest if they are attempting to get a "steal" for one of their investor clients or even worse if they are hiding other offers. If your Realtor tells you she doesn't own an electronic lockbox, tell her it is not negotiable. If she doesn't have an extra $200 ($100 used) to buy a lockbox, I would proceed with caution. Most Realtors are highly ethical but unfortunately a few have emerged in this short sale market that are less than honorable.
Hope this helps..
Alma Rose Kee, P.A.
your best bet is to find a realtor who is experienced in short sales, all are not so you will have to ask lots of questions. they should help you negotiate a short sale at what the going price is. it is no guarantee. you will need to call your bank and tell them the situation you are in, ask to get approved for a short sale. you will have to do the same with the second mortgage compnay as well. the propblem is teh first wont want to gove up much to the seciond and teh second will want something. if they dont approve you, then you could always do a deed in lieu fo foreclosure where you basically give them the property.
your first thing is to contact the mortgage companies and start the process, then search for the realtor. i wish you luck on working things out
I know it is not the best situation, however renting with a property manager handling it may be your best option. They do the back ground check, take 100's of pictures before the move in, do annual inspections of the property/ with pictures, and will hold the renters more accountable than you would be able to do out of state. There might be damage, and you may not be able to get the full amount of your expenses, however it would be better paying maybe $300 or $400 a month, rather than the full $1,200 + HOA's and such. We are not sure of the subdivision you are speaking of, and we would be happy to check out the situation for you with a little more information. The office we work for has a property management department and we could get all the information for you if you would like. If this would work, you could actually hold on to the property until the market comes back. Short sales will hurt your credit......maybe not as much as a full foreclosure, however it would be close. There are many things that have to be considered to do a short sale as well. Let us know if we can be of any further help to you. Good Luck in what ever you decide to do.
There is a company that has certified short sale specialist on board who will sit down and discuss the best options. They will come to your home at your convenience. There is absolutely NO obligation, NO fees or charges.
They'll sit down and ask a list of questions and even put you in touch with Government subsidized pre-foreclosure counselors.
The web site is http://tampaflshortsales.com.
A short-sale is certainly a way to get out from under your mortgage obligations- but you won't walk away with ANY proceeds of the sale. IF in fact the property is worth $125,000 The lenders will be out a significant amount.
Most lenders expect to see non-payment for 3 months or so- before considering a short sale. Contact your 1st mortgage holder and let them know of your situation. The second mortgage usually accepts pennies on the dollar. The lender [1st], will want to see a purchahse contract to support the short sale and a preliminary HUD-1 showing the estimated net to the lender.
Your property should be listed with an agent and time is of the essence. Your credit will go down a bit- unless you can get the lender to waive derogatory reporting.
There are a multitude of questions you are asking here. I will do my best to try and answer them for you. Firstly you mention this is your "primary" residence. So is this property homesteaded? I think you are saying you are currently employed in another state and you also own another property in this state? If your Florida property is homesteaded and you are in as much trouble as it appears you are you may want to consider filing for bankruptcy. It will be the only way you can potentially keep/save your homesteaded property.
I. Short term way out? There is not really a "short term" way out to anything unfortunately. If you want to try and short sell this Florida property you must prove to your lender that you can not handle making the payments any longer. Your best bet is to find a RE Attorney that specializes in this sort of situation.
II. How bad does it affect my credit? If you lose the property to foreclosure your credit score will drop 300++ points. If you short sell it it can drop 150+ points. The short sale is the best alternative in terms of your credit. But again, you will need to contact a RE Attorney to discuss this further.
III. Do I have to pay taxes on mortgages? I don't understand this question. Please clarify for me.
IV. What will happenif I stop making payments to both Mortgage lenders and HOA company...these three payments I can no longer afford. I think you know what will happen. But if you don't your properties will go into foreclosure and the bank will take them back.
Best of luck,
Real Estate Pro
if you still have any questions, we might be able to help. we aren't realtors but actively buy houses including short sales.
After careful review of the Short Sale addenda, (which is offered
by MFRMLS) please note the following:
Paragraph 3 states that all deadlines except approval, including
deposit(s), commence from the time that the seller delivers written
notice to the buyer of the lenders approval of the offer........ Thus the
escrow deposit is due within 24 hours of written notice from the
seller of the lenders approval..... This would make it pending...
Paragraph 5 states that the seller has the right to continue to market
the property and submit accepted offers to the lender.
I have not said we do this, however you do what you want to do and we will do the same. We do however, withhold the escrow check or put a hard date for acceptance so it will not tie up our client from purchasing a property (looking out for our buyers best interest). It is hard for us to understand exactly what to do when you have conflicting statements .................don't you think?
Have A Great Day!
Pending Status of Short Sale Properties
Once a contract has been signed for a property in a Short Sale Transaction, even if the contract is subject to approval by a court, lender, or other third party, the status of the property listing must be changed to "Pending" within two business days. Because short sale properties may be more likely to fall through, we understand the temptation to keep a listing as "Active," but this does a grave disservice to your fellow real estate professionals that may continue to recommend your client's property, unaware that the property is under contract.
see link below
If I were to see the that In say another year I could start making equity ,, I would hold on to it a bit longer, but as time goes by, property continues to lose its value.. why live on $250 a month to maintian a property that will not give me anything in return in at least the next 5 years? Not worth it...
I have considered renting however, doing numbers and trying beofre here is the scenario :
Rent in comparable homes today are 1100-1200 max - There are aprox 17 +houses for rent in this community for the same price total homes are 60. To compete I can rent for 900 + /- to rent fast. ( 1400 sf/3 bed/2a/2 bath - 2 story)
They few times I did try to rent for that amount, the croud I was attracting was not the best. This is very nice NEW place, I have been the only owner, granite, marble, stainless steel, tons of upgrades, etc.. I was afraid to have a family of 5 or more with pets destroy the place. I was asking for deposit/1st month rent,, I was hard getting both,. hence the reson I kept paying out of my pocket instead of renting.
My mortgage is 1200
Quarter Fees 170
Taxes just went up + need to add that too....
I thought for $900 less out of my pocket it is not worth renting and taking chances- credit/background reports were not very attractive/ So, I am in the boat I am now.. I DO want to rent it to the right person-family I just have not found it ... I am in the west coast and having to try to hire a PM over the phone has not been the best experience either....
If you have paid for both rent and your house for a year it sounds like you can afford it. Maybe you can rent out the FL property? What did you buy with the second mortgage? Maybe you can sell it for $$,$$$. It sounds like you have options. A short sale will damage your credit almost the same as a foreclosure. Exhaust all your other options before short sale. Good Luck
In reference to your questions, It is my primary, I did loose the homestead when I changed address.
But I did NOT purchase a second home here,
I rent now., but still make all payments for the home in FL, I had not other option but to move out f state in order to get a decent job.
I.Short term- I meant Short sale ( TYPO) sorry!!!!!! I am considering short selling, as I have proof that I can not support two homes ( I pay rent, utilities, food, gas, normal living expenses for the place I currently live in plus the FL one)
III. Taxes on mortgages question: If I short sale the property and both mortages are forgiven, do I have to pay taxes on these amounts...
Again thanks for your help!