Sean - not to sound like a broken record, but since you didn't mention in your question that you NEED to sell your home, what is the issue here? There are tens of thousands of borrowers in your situation, IN THIS AREA! Virtually everyone who purchased a home between mid '05 and the present, with little to no money down is underwater, a sobering fact related to the what might be considered the most difficult real estate market our area has seen. But the good news is that we're starting to see many signs that the bottom is near. However I want to mention that it could still be several years before you're able to sell your home without having to come out of pocket.

Having mentioned all this, there's a new alternative to the short sale, called the short refi, that is just starting to crop up. One of my associates completed one of these a few weeks ago. It's similiar to a short sale, the main difference being the house is sold back to the same owner, using today's current value. You still have to qualify for the new loan, and this loan is based on a much lowered value, so most likely your payment will go down (unless you're in a pay option ARM loan)..

Call me if you'd like to see if you're eligible for this process!

Jeff Marr
Stanford Mortgage
916-947-1312

Hi Sean,

To echo what some of the others have already said, are you in a situation where you have to sell right now? Is this your primary residence? How many loans do you have on your property? Have you missed any payments?

If you find yourself in the position where you are unable to make your payments, or you must sell for whatever reason (relocation, divorce, death, etc), negotiating a short payoff (aka Short Sale) with your lender(s) might be a good option for you to explore. I did a Short Sale Q&A on my blog not long ago...

http://sacramentorealestateblog.blogspot.com/2008/03/short-s…

To decide if this is an option you want to explore, you might want to discuss the potential ramifications of completing a short sale with folks like your CPA or a qualified attorney. If you decide to engage a Realtor for assistance, they generally can not answer tax or legal questions. Also, make sure the agent you choose to work with has a track record of successfully negotiating short sales. These transactions require diligent negotiation, persistence, and much more work than more traditional real estate transactions. Good luck to you...

Erin

Sean:

I am going under the assumption that this is your home and not an investment property. I am also making the assumption that there is a reason, other than the declining market, that is prompting you to want to sell your home (ie. you can't afford the payments, you are being transferred out of state, etc.)

If both of these assumptions are true, then with a $380,00 payoff and a $330,000 market value you have the following choices:
1. Stay in the home and or rent it out until the market turns and then sell.
2. Work with a REALTOR who is also a short sale specialist and negotiate a short sale (in which case you would not have to make up the difference in cash).
3. Find someone (or do it yourself) to work with the bank to restructure your loan to make it more affordable and then rent or stay in the home until the market turns.

If you have significant assets, the bank probably won't approve a short sale. If you don't have assets, but don't have a reason for selling that creates a hardship for you and you are just selling because of the declining market, the bank may require that you sign a note for deficiency and pay them back over time with interest. If you decide to "wait the market out" remember, the date for the market turning is not clear cut. You could be waiting 2 years or 5 years or even more before your home to regains enough value to allow you sell it for a profit.

You may want to start the process by speaking with a REALTOR who is knowledgeable in the Short Sale process to see if this is an option. Once you understand your options from a real estate perspective, you might also want to check with tax advisor, financial advisor and/or lender to make sure that your decision makes overall financial sense for you. Let me know if I can be of further assistance in discussing your options, as I do specialize in assisting homeowners understand their options in this type of situation.

I think first you have to ask if you *need* to sell right now.

If you're concerned simply because the difference in loan/value - while I can certainly understand being concerned - you're not nessicarily at the same risk as someone who's facing foreclosure or forced to sell at a loss because of a financial hardship (short sale).

It's definately not a fun place to be in knowing you owe more then your house is worth. However, if you can still make the payments - and everything (aside from ltv) is fine - there's not as much to be alarmed about. Make your payments, keep on track with everything, and ride it out. If you can afford a couple extra bucks here and there between regular mortgage payments - that will reduce the principle much faster. Even 1 extra payment a year can make a big difference.

I've seen many people on here freak out because thier homes lost value, and they're upside down. They just want to dump the place even though they can still afford it. That's a really bad idea - as doing so GUARENTEES financial ruin. If you can afford to ride it out - you can come out the other side with your credit and your life intact. Selling just to sell is simply not a good idea.

Hi Sean: You are in a short sale situation if you "need" to sell. If you need to sell and you have the money to pay the difference between you proceeds of sale and your loan amount, you'll need to do so.

If you have a hardship, you may be able to get approval of your lender(s) for a short sale. You need to do the following things:

Talk to a Realtor and get a comparative market analysis for your home.
Start communicating with your lender about your need to sell and try to "work out" a solution with them.
If you need to sell, get your home listed right away for the high selling season coming up very soon.

If you have a hardship, there is information on my website and forms that you can use to submit to your lender for short sale approval provided you have a hardship. Even better yet, you should request a short sale package from your lender(s) and have that ready for your Realtor.

If you don't need to sell now, my advice is to wait for the market to change. I think it is in the beginning stages of changing to a Seller's market. You can also get "Market Condition" information on my website.

Good Luck!

Erin Phillips
Keller Williams Realty
916-580-2227

If you are contemplating going FSBO, contact an agent in your area for help. Be up-front with the agent about your motives, and make a pledge to yourself and the agent to give that agent the listing if you can't work things out on your own.

Your best option would however be to list your home with a local REALTOR member of the MLS who can advise you further, and work out a marketing plan for your home.

Good luck.