Hi Luke,

A short sale will really trash your credit (and hers too). Is there any way that the two of you can take money from IRA / 401K, etc. to make up the short-fall and sell it? It would be a real tragedy to demolish your credit if there's a way around this.

What are the current Sold comps for that home? That's the best indicator of what it's worth, regardless of the appraisal. Perhaps things aren't quite as bad as they might seem? I hope so for you!

Establish a relationship with a real estate tax attorney to review short sale approval letters to ensure there is no language in there that would allow the lenders to come back after judgment in the future.
Even though california is a non recourse state on original purchase money loans, some lenders have put verbiage in these short sale approval letters that could remove protections now in place for homeowners.

Sometimes a short sale may not be the best option due to that and a real estate tax attorney may advise you to foreclose instead.

Due to the change in laws for bankruptcy , if you were to need to file for such you may need the house in order to have enough deficit to file for bankruptcy....Many home owners have been erroneously told to go ahead and do a short sale and if the lender comes back after do a bankruptcy.

It is worth the $300 or $400 to have a relationship with a real estate tax attorney to avoid future issues down the road.

Hopefully in your situation both lenders will agree and let you go with out strings attached. We have had several that went that way.

Good Luck!

Are both you and your x on the mortgage? Or is she just on title?

Is your new job more than 50 miles away? Check with tax advisor, but something less may be considered just a long commute....rather than a hardship.

Some lenders won't even look at a short sale until you have an offer to present to them along with the
hardship letter and all the other items of information the lender requires to consider it.

Definitely want someone that is experienced or uses a short sale negotiator. Short sales are not for the
uninitiated!

Time's a wastin'. Get that short sale package from both lenders and get a move on! If that is what you intend to do. Your only other options are to pay cash out of pocket to make up the difference between the sale price and what you owe against the home at the close of escrow plus closing costs or quit paying anything to anyone regarding the home and let it go to foreclosure.

If you both would like to save your credit standing paying the difference at close would be best, however, few sellers have that luxury. A short sale should look better on your credit rating than a foreclosure but that may be up for debate too.

Number one is to list your property for sale at a fair market value, hopefully one that will minimize any loss incurred that will need to be paid at close of escrow or if you are certain it will be a come out with a substantial deficit to you then you must contact your lenders regarding your options. Your second trust deed holder will be more inclined to work with you than your first, but not always. If your first trust deed holder goes to sale your second trust deed holder stands to lose everything as all secondary liens on your property are wiped out by the senior lien holder, except for property taxes and most personal liens.

Your second trust deed holder does not want to lose everything so they should be the easier of the two lenders to work a deal out with. Some money paid back is better than no money. Sometimes both lien holders will work together and reduce their payoffs accordingly.

Now, the final and maybe most important question is do you qualify for a short sale? Usually a lender will need a hardship letter stating why you are unable to continue to make the payments with proof, bank statements, tax returns, pay stubs, a broker price opinion of the home, proof that you have attempted to sell it by showing a listing agreement but no sale, and other specific information each lender may require. It is difficult to qualify for a short sale if you are current on your payments, show a good payment record, have a good credit score and money in the bank to boot. Just be aware of these questions you will be asked so that you can better prepare yourself ahead of time. I'm sure you will learn a lot throughout this process but you need to just take it one step at a time, be patient and you will get through it. Consult your tax and legal advisors as well to be sure of your status and how all this will impact you financially and legally too. Good luck!

Luke:

If you and your girlfriend HAD TO move for your job most banks will consider this a hardship. I am guessing you cannot rent the property for enough to cover the mortgage payment. I would not trouble the lender with "ending the relationship" part, since the job relocation is hardship enough. There are realtors who specialize in short sales. Working with someone who has had success negotiating with the lenders could make your short sale go more smoothly and increase your chance of success.

Luke
The key to having a successful short sale is lender approval. Lenders usually have a short sale package, included in that is a request for a letter of hardship. A hardship usually means that some terrible happened to cause you to no longer be able to make mortgage payments.

I am not sure that just because you two broke up and moved the lender will understand that to be a hardship. Life happens, this does not sound like something that would rise to that level, but try anyway.

There are people who think that any circumstance will qualifu for a short sale, and that is not the case.