Question Details

Michelle Win…, Real Estate Pro in Illinois

Short Sale-No default on mortgage payments

Asked by Michelle Winters, Illinois Tue May 20, 2008

My bank is allowing my house to be sold as a short sale even though I have not defaulted on any payments. I have moved to another state and took a new job. My home is in Ohio (3 .5 hours away) but I live in Illinois, I am currently paying my mortgage timely as well as my rent (500 sqft). I am being told now that the short sale will be recognized by the underwriters of new mortgages as a foreclosure and I will not be able to get a new home where I work and live. I have had four showings on my home (in 1 year) and it is 2 years old (no equity) only lived in one year and on the market now for a year. No one has been able to provide me with clear answer on what is going to happen to my credit if a short sale contract is approved. I really would like to plan my life. Do I need to rent for the next five years or will I be able to buy. From what I have read and researched the effects of a short sale will take 150 points off my FICO score. I won't be able to get an new apartment or home?

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I am confused. The point of conducting a short sale is to sell a home, rather than foreclose. I gather from your post that you had to relocate for job reasons, now your home is on the market. Although you are still making the mortgage payments, the sale of the property is going to net proceeds that are less than the amount you owe the lender, so there will be a "short" in the sale. Is that right?

So when you conduct a short sale, somebody should be negotiating with the lender as to the end result. The best result is that the lender agrees to let the mortgage to listed as "settled" or " paid in full". The truth is that most lenders will not agree to a short sale unless you can prove hardship and are in financial distress.

I am curious as to what the lender as agreed to?
The other truth is that a short sale will hurt your credit, however not as badly as a foreclosure.

Know the end result up front and try to negotiate.
1 vote Thank Flag Link Wed May 21, 2008
Keith Sorem, Real Estate Pro in Glendale, CA
MVP'08
Contact
Michelle,
You need to see a real estate attorney and a CPA. Whatever you do, you should take those two steps immediately to get the proper advice.
I wish you the best!

Charles Coachman
1 vote Thank Flag Link Tue May 20, 2008
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