House is 40% underwater. We can afford payments, but PITI is 36% of net income. Would love advice on best exit strategy.?

Asked by Lisa, Long Beach, CA Tue Aug 30, 2011

Hello, and thanks for any good advice! We bought our home for $515K and it currently Zillows for $320K. (The house is built in 1944, 1,000 sq ft, one bathroom, 60 year old furnace, etc, and no money to improve it. We thought we'd have it for 5 years, turns out we bought at peak of bubble. We'll never get any equity in it)

We have very good credit, no late payments. 1st is 30 year fixed at 6.25% and balance of 400K, 2nd is line of credit used to purchase house - 20 year fixed at 8.0% and balance of $65K. I'm ready to get out (short sale/walk away if necessary) as I believe we could save $2K/month cash. I understand that the first is non-recourse, but am unsure about the situation on the second. Any factual info/advice/personal experience is greatly appreciated.

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Answers

59
BHHS- Don Jo…, Agent, San Antonio, TX
Sat Nov 19, 2011
@ Dianne Hanka
I am assuming that you are talking about doing a short sale to a third party, leasing it from that party and then re-purchasing. If that is the case that is unethical and may even be illegal. In Texas you have to sign papers that you are having to sell due to certain conditions and equity reduction is not one of them. You wonder why the mortgage industry has received a bad wrap during this whole debacle. The banks aren't going to bear the burden on this shortfall.... we will. Mortgage insurance premiums will increase due to activity like this.
4 votes
Dot Chance, Agent, Burbank, CA
Tue Aug 30, 2011
Craig,

Believe it or not...some agents just want to help!
3 votes
Dot Chance, Agent, Burbank, CA
Tue Aug 30, 2011
Lisa,

I know it is very frustrating to be in that situation. So many people are. You are one of the fortunate ones who can still afford their payments. Although 6.25% interest is high in comparison to today's market rate, it is actually still very low if you compare it to the 17% and 18% of days gone by.

Zillow is not always reliable for market value of your home. You need to have a Realtor do a market analysis for you to get a more accurate valuation of your home.

To short sale your home you need a true hardship for the bank to approve it. A good negotiator of a short sale can usually get non-recourse negotiated for the seller.

Feel free to give me a call or email me to talk about your situation and to determine if you have a hardship that could be approved.

All the best to you!

Dot Chance, Realtor®
Certified Distressed Property Expert – CDPE®
DRE License #01494182
Keller Williams Realty World Media Center
http://www.DotChance.com
818.339.7712

WHEN YOU THINK OF REAL ESTATE...Think DotChance.com! My business thrives from your referrals!
Web Reference:  http://www.DotChance.com
3 votes
Michael Magaw, Agent, Torrance, CA
Tue Aug 30, 2011
Craig, I am sorry that you feel the need to be negative about Realtors. It seems your "one purpose" is to charge this distressed homeowner for an appraisal that she does not need. I have handled many successful short sales and I have never needed the Seller to pay for an appraisal.

A good Realtor will be able to give Lisa a very accurate CMA. Yes, the Realtors probably want to take the listing, but that is Lisa's option after she has received the free information and consultation. If the listing does move forward, then the Selling Bank and the Buyer's Bank will both require independant appraisals and CMA's, none of which will be paid for by the Seller.
2 votes
Debbie Lovr…, Agent, Long Beach, CA
Sat Jan 14, 2012
Lisa,
It sounds like you're at the point that you don't know what else to do, so you're considering just "walking away". I'm so sorry it's come to this, but whatever you do, don't think of foreclosure or short sale as something that you let happen to you because you don't know what else to do!
Firstly, don't ask your friends for advice, or take to heart the "water cooler" information from people who insist on telling anyone who'll listen that "I did it and nothing bad happened!". The truth is, yes, short sale and foreclosure are options for families in your position, but these are serious options that can, and will, affect you financially for years to come. Many of those folks who "short sold" or "walked away" have not yet seen all of the consequences. Creditors can come back years later in some instances and even with the relief programs in place, there are strict qualifications and you must be able to show a paper trail for everything.
Secondly, it's probably not something you want to hear, but any responsible agent will tell you that before you make any decision, you need to gather information from reliable sources to make smart decisions. This means talking to your attorney and your CPA. Find out what outcomes are in store for you if you take this option or that option. Putting your head in the sand won't make them go away. The few hundred dollars in consultations are much less than unforeseen judgements or tax consequences.
Then, if you decide to short sell your home, work with a Realtor who knows what to look out for, the timelines that are in play for you, and the best strategies to get your sale approved, your home sold, and your life back on track.
Good luck to you!
Debbie
1 vote
Debbie Wong, Agent, Burlingame, CA
Thu Nov 17, 2011
Hi Lisa,
There's a lot of really great information here, some really great answers from great agents!
The passing of Senate Bill 458 will help you tremendously! Seek out the advice of a good CPA and or real estate attorney to help you decide the best course of action that is suited for your unique situation.If your CPA or Attorneys advises you to do a short sale, look for an agent with either of these two professional designations: CDPE- Certified Distressed Property Expert or SFR-Short Sale Foreclosure resourse, they will have the training needed to help guide you through this complex transaction. Remember three things: (1) Your not alone. There are tens of thousands of homeowners that are having a simiar or same experience. (2) It's not your fault. (3) It's going to be OK. There's help and hope. Good Luck!
1 vote
NonRealtor, , 23456
Fri Oct 7, 2011
Hi Lisa,
No need for an exit strategy. Pay your bills on time. After 25 more years, the house is yours. Good Luck.
1 vote
Alex Montelo…, Agent, Seal Beach, CA
Sat Sep 7, 2013
If you are considering a Short Sale to get out of your home... You will need to prove an actual hardship to the banks. Loss of wages, Divorce, Separation, Health, etc, etc. You will need to get on it soon because the mortgage tax forgiveness law is set to expire on Dec 31st 2013.
In fact, I just read the date of the post. I am assuming that the decision was made a long time age. Please feel free to inform us of what you chose to do and how it worked out for you.

Recently, Aug 15th 2013 FHA changed its guidelines for purchasing a home 1 year after having done a short sale. Call me for the details. There are stipulations to qualifying.

All the best,

Alex Montelongo/Broker
Coldwell Banker Star Realty
562-810-7387 Cell
DRE Lic #01456982
0 votes
Alexander Gr…, Agent, San Jose, CA
Thu Aug 15, 2013
I was just looking through old post and I noticed yours. If you were not able to refinance at the time of the post, I can certainly help you out now. You can call me at 408-352-5147 or email me at AGreer@themortgageoutlet.com. You can check us out at http://www.TheMortgageOutlet.com. I will look at your situation and present you with some options.

Alex Greer
NMLS #1056079
0 votes
Celso Neves, Mortgage Broker Or Lender, Downey, CA
Fri Apr 13, 2012
Hello Lisa,

The fact that the house is under water isn’t a reason for short selling. The fact that PITI is more than considered reasonable would be a reason to ask for modification. The short sale program creates a huge cost for banks and for the tax payers and it is funded on the need to slow down the number of foreclosures. The program is called HAFA Home Affordable Foreclosures Alternatives.

The program starts with a modification. You don’t need to be behind, just show that PITI is unbearable and they should do the modification. If your first mortgage is an FHA they may do a refinance without appraisal. That would lower the interest rates.
I think that a good credit is worth a lot. Additionally, rentals are too expensive and they will go up with inflation. Get informed about your options on http://www.makinghomeaffordable.gov/programs/exit-gracefully… .

If you manage to bring your interest rates to around 4.5% fixed your payment with mortgage insurance would be around $3,000, your tax credit that would be around $8,474 / 12 ~ $700. So if you refinance you would be paying $3000 fixed for 30 years with a credit on the first year of about $700 or $2,300 per month (almost the rental on the first years if not less). Your equity would be growing and you won’t need to worry about rental increases for 30 years.

Even if you decide to rent and then buy after 2 years, the interest rates might be higher, and that premium would have a cost too. If you buy or lease a car you will see a cost there too. I think that it is not an easy refinance, but I think it is the best exit for you.

Check the rent vs Buy Calculator bellow and you will see the huge benefit of owning even when you buy at the peak.
0 votes
Anna Kitras, Agent, Las Vegas, NV
Thu Apr 12, 2012
Hi Lisa,

The good news your loans are all "Purchase Money" and the answer is YES! However, we would have to discuss further what your actual "hardship" is. I would be glad to assist you with the Short Sale ! I am a Short Expert and these transactions can be very complex to complete . Not all agents can handle them or have the experience with dealing with the lenders. In addition, there are many new programs coming out depending n who your actual lender is . Some banks are actually writing down the principal loan balances for some homewners, in addition there is a HARP Refinance program availalble too! Since every situation is different, please contact me at annamariasellshouses@gmail.com for a more personal response and to fully qualify you.

Looking forward to assisting you in any way that I can .Please take a peek at my short sale website,
http://www.losangelesforeclosuresolutions.com, it is a website soley dedicated to information about Short Sales and the process.

Anna Maria Kitras, Broker Associate, Keller Williams
Cell:323-608-4881
annamariasellshouses@gmail.com
http://www.losangelesforeclosuresolutions.com
http://www.longbeachhomes-forsale.com
NAR Certified Short Sales and Foreclosure Resource, SFR
Certified HAFA Specialist, Short Sale Expert
0 votes
Debbie Lovr…, Agent, Long Beach, CA
Mon Jan 23, 2012
Beware any sale/lease back options such as the one suggested by the "lovely" broker from Minnesota, below! Under no circumstances are these permitted in a short sale and if someone helps you "fudge" information in order to do this, you could be found guilty of FRAUD!
Also, only take advice from professionals in your own state, as laws differ from state to state.
Be up front with whatever you do, provide all information requested by the professionals you have carefully chosen to work with, and realize that if you are current on your payments and have no financial hardship you probably won't get approved for a short sale.
The good news is that you're in Long Beach, which is a great market, and you WILL have equity eventually.
:)
0 votes
Anna Kitras, Agent, Las Vegas, NV
Mon Jan 23, 2012
Have you ever thought about renting the property out and buying another property . A short sale may not be the answer even though you are upside down on the property. There are lenders out there that may qualify you for the purchase of another property, even in your current negative equity state. Ruining your credit may not be the answer. A short sale is definitely not a bad thing , but a strategic default may not be the right answer. For more info on Short Sales, please visit http://www.losangelesforeclosuresolutions.com. If you would like to discuss your options about a possible short sale or new home purchase , please contact me for further information.

Anna Maria Kitras, Broker Associate
Certified HAFA Specialist, NAR Short Sale and Foreclosure Resource ,SFR
info@losangelesforeclosuresolutions.com
annamariakitras@newlistingsinthesouthbay.com
0 votes
Michael Ford, Agent,
Sun Jan 15, 2012
relying on Zillow is a BAD idea. they are sometimes very accurate but are frequently off, both high and low. a local agent can zero you in better as to value. there are lots of good ones, if you need a referral i know a guy in Rossmoor who can help you. Or you can call Ms. Lovrich, directly below, whose answer I thumbs upped for its excellent advice. accurate numbers are the first step to a wise decision.

as to the question of stay or go...the honorable thing to do is to pay the debt as agreed, but the reality of your situation is that you are very unlikely to see any light at the end of the tunnel for a long time and the decision comes now to what is best for you. i am late to this question but your profile is unique in that you have several choices and are current. most people are not current and making payments is not an option. it is NOT true that you need a hardship anymore...the banks have loosened their guidelines and 'impending default' is a valid reason. it is my strongest advice that you make payments while you decide exactly what you will do. you can afford to stay and endure the process and the hit to your credit after a short will not have the common 30/60/90 even 180 day late payments hammering you. your credit score will likely recover faster and take a lesser hit for the short sale. i say 'likely' because we are all going off of rumors here. i have a client that we are doing a laboratory on. she had the EXACT same scenario and short-sold four months ago. we pulled credit then and will re-pull in two months to see the comparison.

if you do decide that 'walking' is the wise choice for you look into a deed in lieu of foreclosure.

disregarding any statements prior to mine as to lender recourse you need to get an attorneys opinion as to recourse of the HELOC...get the attorneys opinion on letterhead and do it BEFORE you deliver the extensive financial information the lender will want to consider your short sale. if for some reason the loan is recourse, you might want to walk and you don't want the lender having a full dossier on you if they decide to chase you for the shortfall. be ready for the lender to want a $$ contribution to agree to the short. given the numbers you cited if they will agree to 10-15% you will be getting a good deal and buying your peace and a fresh start. be advised that the longstanding laws on recourse are for purchase money and refer to FORECLOSURE, not short sales. the recent laws enacted by the calif. legislature treat those.

i will disagree with the several posters below advocating sale leasebacks and advise that they may rise to fraud here in california...extreme caution is advised. if the scheme is similar to those peddled in the meltdown of the late 90's they are sure to come back to bite you on the a$$. google 'boston harbor mortgage scam' for a quick dip into the possible illegality of one scam. my guess is that those agents are paid to generate leads for the schemes. be careful and do not sign ANYTHING LIKE A DEED without your LAWYER looking it over! I;ve seen these sort of things go terribly wrong.

if you do decide to list the home just be sure the agent you select has done lots of shorts. the designations with initials are not really meaningful...to obtain the designations takes only a checkbook, not experience.

for those out of the area there are some really cute homes in Long Beach with tons of character in very desirable neighborhoods. others, not so much. if Lisa's home is in Bixby Knolls or Belmont down along the coast the value is a good bet long term. other areas...$515k is a long way off.
0 votes
Daniel Klein, Agent, Beverly Hills, CA
Wed Jan 11, 2012
Lisa,
This is my speciality. Over 60,000 people each month in LA county face this exact delima. But here are the facts in your situation.
Unlike the past 10 years, home prices will not appreciate at 10-15% anymore. 3% is the historic norm, with a 300 year history. The Case-Shiller Index will show this. This 3% appreciation rate is optimistic, as there are over 1 million homes in "shadow inventory" meaning they are on the books of lenders in California, but have not been marketed. .
If Zillow thinks your property is worth $320,000, it is probably worth $280,000. But to play devils advocate, lets say your property is really worth $320,000. At a 3% appreciation rate, it would take exactly 13 years to have your home worth $469,930. So for 13 years you are effectively renting. A $400,000 loan at 6.25% is $2462 without insurance or taxes, and the $65,000 loan at 8% is $543. So you are paying $3,000 each month for 13 years that will never be recouped. Thats $468,000 in payments you will NEVER EVER see again. Notice that this is what you owe on the property today. This means in 13 years you would have paid off your home but since you have a 30 year mortgage, you wont even be close to finished in 13 years keeping the home.
So lets say you sold your home and rented for 2 years and then purchased again in 2014. Your exact home in 2014 would cost $330-$340k to purchase then. With $34,000 down, this home will be yours. Now, you will gain 11 years of appreciation and after 13 years from today, you will be able to sell your home for $469,000 just like in the previous example, but this time instead of leaving with nothing, you actually walk away with over $100,000. There are also other reasons to sell now besides opportunity cost. THe IRS will not come after you for the deficiency if you do a short sale before the end of 2012, and the bank wont come after you either.
As for you not being able to show hardship, if you have an agent such as our firm, which can prove financial hardship to a lender, your short sale will get approved, even though you could possible continue to pay. We shouw the lender financially that it is in their best interest to let go of this loan now, while incentives for them are best.

1-800-640-8798 if you have any other questions
0 votes
, ,
Wed Jan 11, 2012
We may be able to help you do a short pay refinance. That is where we ask your current mortgage holder to take less than what is owed. In your case that is about $80,000. With today's rates that will really lower your payment and put you in possition to sell the house down the line with out it being a short sale.

my phone is 657-269-5720
0 votes
Minna Reid, Agent, Trumbull, CT
Sun Dec 18, 2011
I couldnt speak for CA state laws regarding deficiencies, but you are $200k upside down, your payment is over 36% of your income, and you cant afford maintenance on the property? Despite all the suggestions I dont see how HARP or any kind of refinance will help you in the long run, unless you can get a$200k principal reduction along with a more manageable payment, and I dont see that happening.
I would cut my losses on this as fast as I could and move on. But thats just MY OPINION. Im sure many of the "moral police" on this board will disagree.
I would say find a very good short sale agent in your area and proceed. You'll recover much faster from a short sale than trying to wait for your $200k to come back eventually.
Web Reference:  http://www.homesbyminna.com
0 votes
BHHS- Don Jo…, Agent, San Antonio, TX
Fri Dec 2, 2011
It baffles me that people seem to think it is OK not to pay a note you signed and stay in your home.
0 votes
, ,
Thu Dec 1, 2011
As you may know, ( It is scary that some of the pros here do not!) that in general you need a hardship in order to modify the terms of your loan, which includes doing a short sale.

GOOD NEWS, appears help is on the way. It appears that soon we will be able to do a short pay refinance and I understand no hardship will be required. That is a part of the bail out program announced by Obama as an effort to stop people from walking away from their homes. Though all of the details are not known, this is how I understand it would work in your case.

As your loan officer, I would call your current lender and negotiate with them to take a discount on your first mortgage. Most likely it would look like this:

1. We would do a new FHA loan to 97.5 of the appraised value at today’s rate (3.75%)

2. Your current lender would forgive the approximately the $80,000 difference.

3. In your case because you have a 2nd, it would have resubordinate. (becase they will be in a stronger position they will most likely agree to this.)

So, you would probably have your house payment go down by about $800 between the lower rate and the $80,000 discount on your mortgage.

Again it is not out yet, contact me if you would like me to put you on a list for when it is available.
0 votes
Larry Brinkl…, Agent, Conway, AR
Sat Nov 19, 2011
First of all zestimates are like a 99 cent bag of chips, mostly air. Call local Realtor and put on Market for $499,000 immediately, that will cost you nothing. Try to negotiate commission as low as possible, this will provide hope until all is clear to you. Curb appeal
0 votes
Lavella Dee…, Agent, Plumas Lake, CA
Fri Nov 18, 2011
Find a realtor that has experience in short sales. Set down with her and see if that would be the best move for you.. A short sale is a smart sale..

Dee Gardner
0 votes
Lillie Missb…, Agent, San Ramon, CA
Fri Nov 18, 2011
Hi,

If you would like to fnd a specalist n your area and need help, don't hestate to call me. I can find you the perfect realtor n your area to start the short sale for you. There was a new law that is now in effect that forgives you of debt of your first and second as long as you don't damage the home on your exit, these wll non-recourse loans. Always pay your HOA if that applies as well. If you need help with findng the rght realto, please call me and I can help you with that as well. You are almost always better off short saling your home verses having a foreclosure. There is a ton of information that I could share with you if you would like.

You can call me on my cell 925-628-9100

Best regards,

Lillie Missbrenner
Better Homes and Garden
Cell.925-628-9100
0 votes
Mike Linkena…, Agent, Jacksonville, FL
Fri Nov 18, 2011
Whether you are underwater or not typically will not qualify you for a short sale. Having a housing expense ration of over 31% typically WILL qualify you. The first step is to contact a local short sale specialist to offer no cost assistance.

Speak to a local short sale expert. Check out -
0 votes
David Black, , Laguna Niguel, CA
Thu Nov 17, 2011
With the passing of Senate Bill 458 you should be fine. Your 1st and 2nd loans are non-recourse since it was used as purchase money 1st and 2nd when you purchased the house. Find a Certified Short Sales Specialist Realtor and consult your CPA and Attorney to verify what is best for your specific situation.
0 votes
John Walin, Agent, Libertyville, IL
Thu Nov 17, 2011
Lisa
You have to live somewhere, the question is do you want to be opportunistic and get out from under this house and buy another home for cheaper. The new HAFA is great and as mentioned, you can make this current house affordable with subsizied rate and stay put. You now have zero equity and from what you described, never had equity from date of purchase, all in first and 2nd mortgage. So think of this situation as deferred down payment on a house that is worth less than you paid. Would you want to stay put if your payment was $1500 per month through the govt assistance program?
0 votes
Sally English, Agent, Atlanta, GA
Thu Nov 17, 2011
GEORGIA RESIDENTS:
Unfortunately, second mortgages (and first mortgages for that matter) in the state of Georgia are full recourse. ie Bank can come after you for a deficiency after closing, even in a short sale. Special language needed to protect you from this. See a real estate attorney for sound advice!!!!!.
Web Reference:  http://englishteam.com
0 votes
Justin Ruzic…, Agent, Greenville, SC
Wed Nov 16, 2011
short sale. it is a good option CA is a great state for short sales, dozens of highly qualified agents out there to help, if you can't find one I am happy to refer one of the many in your area, who are part of the large network of short sales experts. You will get through this.

Good blog on short sales: http://wp.me/P1MLJl-54

best of luck.
0 votes
Johnny Huang,…, Agent, Walnut Creek, CA
Tue Nov 15, 2011
If you got a Fannie or Freddie loan, wait for HARP. If you don't have it, then HARP is useless.

Guidelines are in the web reference.
0 votes
Mary Lou Sko…, Agent, Newport Beach, CA
Tue Nov 15, 2011
Hi Lisa,
Your 2nd loan is also non-recourse even though it was a line of credit, it was used as purchase money when you purchased the house. Follow the direction of your Certified Short Sales Specialist Realtor and be prepared with providing all of your financial information with updating your bank statements and income statements each month.
It's a good time to do a short sale. Good Luck Lisa.
Web Reference:  http://www.agentmarylou.com
0 votes
Gilbert Ramos, Agent, San Diego, CA
Tue Nov 15, 2011
Hi Lisa!

The NEW AND IMPROVED HARP PROGRAM WILL BE HERE IN 2 DAYS!! The greatly anticipated changes to this program will allow you to stay in your home no matter how upside down you are in the loan/value of your home. I already have over 20 people that are waiting to have the bank approve their loan applications and trust me, they will get their approval.

Email me for more details. There are some requirements to qualify for the program, but to know for sure, youll need the facts!
0 votes
Mac Rogers, Agent, Alamo, CA
Tue Nov 15, 2011
I've heard and talked to a lot of financial people regarding situation like yours. Most if not all of them will advise you to either do a short sale or walk away. From a financial stand point it doesn't make sense at all.
0 votes
, ,
Tue Nov 15, 2011
An easy way to do that is to work out something with someone who cannot buy on their own. There are risks. I am familaiar with Long Beach, Zillow can be real wrong about your value. Feel free to contact me. I would be happy to help. I am actually a lender , no charge.
0 votes
Eric Baskett, Agent, Torrance, CA
Tue Nov 15, 2011
Hello Lisa,

As long as you never pulled money out on that 2nd loan after the purchase your clear. You can either walkaway or do a short sale. Short sale will be the least damaging to your credit and you can buy in 2 years. Check out the webpage on my site so you can see the difference between a loan mod and short sale. http://www.ericbaskett.com/two-brothers/
0 votes
Joseph Hasti…, Agent, Bayside, NY
Sun Nov 13, 2011
Hi Lisa. I know I'm coming late to this party but, I'm here. I'm also not local to your area. I just read through the response thread and found the responses interesting to say the least. It is a difficult situation, no doubt. I am surprised at the price you paid for one bathroom. Might I assume two bedrooms? at 1000sf it seems small but like I said, I'm not local. I'm more interested to know what the outcome was since we are now in November. I know it may be a moot (not mute) point now but I'm curious.
0 votes
Pamela Stewa…, Agent, Aliso Viejo, CA
Sun Nov 13, 2011
Hi Lisa,
Let's answer your question directly and not have the sales pitch attached. I have been doing modificatiions and HAFA short sales for the past 5 years and feel that I have the correct and current answers to your question. The 2nd is also non-recourse as it was a purchase money 2nd. That being said, the 2nd could not come back to you with a deficiency judgment as it was used to purchase the home as you stated above. This is all a mute point currently as current legislation was just passed not allowing deficiency judgements on any 2nds, recourse or non-recourse through 2012 up to $2,000,000 on any primary residence. In light of this fact, you have nothing to fear as far as recourse on the 2nd as you are covered both ways. Please verify this information with a real estate attorney but I believe you will find it accurate.
You are smart to see that this home is not helping your financial future. You are so upside down that it would take at least 10-15 years to MAYBE be at a break even point and this is stifling your financial future as you head for retirement. My suggestion is to cut your losses now, take a small hit on your credit and start fresh where you can plan for your future.
If I can be of any assistance to you in the future, please do not hesitate to contact me.
Good Luck with whatever you decide to do.
Sincerely,

Pamela Stewart
True Vision Realty
pamela.stewart9@gmail.com
0 votes
Luis S. Munoz, Both Buyer And Seller, Indialantic, FL
Sun Nov 13, 2011
There is a way to FORCE the banks to cometo you and offer a reduction on the principal. I specialize in stopping foreclosures and the same system can be used to get the banks to come to you. In essence you will be suing the bank for the way they processed your loan. Contact me at :munozmelbourne@yahoo.com and I will give you a preview of what you can do to deal with the banks.
Luis S
0 votes
Keith Rockma…, Agent, San Francisco, CA
Sat Nov 12, 2011
Hi Lisa

You could try a different strategy. You may want to kill your 2nd. Depending on your bank, hardship, etc it may be a way to keep your home, save a bunch of $ and not do a short sale. I would need to know a few items before determining if it is possible. It's not for everyone. However for those who fit it can be a great option.

Keith
BayAreaResource.com -
Web Reference:  http://bayarearesource.com
0 votes
Kerry Robert…, , Minneapolis, MN
Sun Oct 9, 2011
Lisa,
A short sale is obviously the first choice, however short sales rarely allow that second debt to be forgiven. So, even if you get out of the mortgage, the second lien holder can and most likely will come after you for the balance. Getting in contact with an experienced short sale agent, as well as a real estate attorney would be advised if you decide to go that route.

There is another option to consider if you stay in the home. Residential Lease Buy Back program. Here's how it works:

It's a simple two-step process:

1. Sell your house for what you owe, then lease it back with a monthly payment typically 40% to 60% lower than your current mortgage payment!

2. After the lease ends, you can purchase the home at 90% of the appraised value at that time, with owner financing if necessary. Owner financing is 1% over prime on a 30 year fixed.

3. 60% of your lease payments are credited to the buy back of the home in 3 years.

While this option is not for everyone, its definitely something to look into if you would like to stay in your home.

Kerry Robertson
Realty Funding Partners
Team Leader 2.0
763-381-2208 Direct

http://commercialfundingsolutions.realtyfundingpartners.com/…
0 votes
Mfanisi Norm…, Agent, Long Beach, CA
Wed Oct 5, 2011
Hey Lisa,

Reading the other answers I wanted to repeat a very good fact that was originally stated by Dot, there needs to be a True Hardship.

Secondly, although I agree with Craig that you should get an appraisal as apposed to a CMA, I dont agree that you should goto an attorney or CPA. My ex-wife is an attorney in California. I cant practice law and she can sell or transfer homes. The biggest difference is speaking to my ex-wife; she will cost you $500 per hour and she will refer you to me, a realtor. I or another realtor will speak to you free of charge AND we can actually help you with your short sale. LOL.

I know it seems crazy to pay an extra $2k for a house that SEEMS to be underwater, but here is the overwhelming disadvantage to renting...No Tax Benefit. So, in essence if you do the math, it may cost you more money per month by entering into the rental market for 2 to 3 years.

Think about that. :)
0 votes
Mfanisi Norm…, Agent, Long Beach, CA
Tue Oct 4, 2011
Hello Lisa,

The first thing I would recommend that you do is contact a licensed appraiser to find the true value of your property. Although Zillow is a great website, it does not take into consideration the condition of YOUR home which is one of the primary considerations of property appraisals.

Secondly, I didn’t see any indication that you don’t like your area or your home. In fact, it seems to me that you are more concerned about the VALUE of your home. Surprisingly, prior to me taking a short sale listing I ask the homeowner, who has not missed a payment, whether or not they actually want to keep their home or stay in the area. If your only reservation or concern is property value, I strongly suggest pause and consideration. Both of your loans have fixed interest rates so you have no need to rush to a decision.

To answer your question directly, the best exit strategy is a Short Sale prior to January 2013. Currently, you can contract a qualified realtor to sell your home and negotiate your short sale free of charge. The realtor will negotiate the sale of your home with a new buyer and both of your banks. This process will take 1 to 6 months depending on the bank. The best reasons for a short sale is that the banks are allowing the sale of your home at its current market value and after the sale you will not be taxed on the difference by the State of California or the IRS as long as you finalize the process by December 31, 2012.
0 votes
Lauryn Eadie, Agent, Reston, VA
Thu Sep 1, 2011
Lisa,

I have seen many of my colleagues below mention that your loans should be "non-recourse". This is great!

EXCEPT! that does not mean that there will be no consequences to you! If you foreclose on your home you will have an upward hike up a steep hill. Just because the banks will not come after you for the deficiency does not mean that there are not other problems created from the foreclosure. Once your credit report is updated with a foreclosure, all other debts that you have with other creditors can be adjusted and or cancelled. Your credit cards can increase their APR or close your account altogether. If you have a car loan, you will need to check those documents as they might have the same guidelines. It can be extremely difficult to open up new lines of credit. And even companies like Verizon and utilities check your credit these days.

If you work for the government or have a security clearance this could be jeopardized as a result of the foreclosure as well.

If this is something that you are considering seriously, you need to make sure you speak with someone to get answers before doing so: advisably: an attorney, tax accountant and maybe a bankrutpcy attorney as well.

Best of luck!
0 votes
Shel-lee Dav…, Agent, Rolling Hills Estates, CA
Wed Aug 31, 2011
Lisa:

You received a bunch of responses to your question yesterday and the overwhelming majority recommended that you do a short sale. I have to admit, with the new laws in California preventing junior lien holders from pursuing a deficiency on a short sale, they have become a much more attractive way to maintain control over the process of divesting yourself from your home.

One caution, there is not a "one size fits all" solution to your problem. Each individual's situation is different and believe it or not there are a couple of instances in which NOT choosing a short sale could be preferable. If you would like to explore this further, please feel free to contact me either via telephone or e-mail (both are included below in the signature block).

There is no charge or obligation for making this call. You will, however, gain additional insight specific to your situation and perhaps be able to make a more informed decision. You know, even without thinking that when your house and your finances are concerned, having more facts upon which to base your final decision is definitely preferable. Dare to Dream.

Shel-lee Davis, QSC®
Certified Distressed Property Expert – CDPE®
Short Sale & Foreclosure Resource – SFR®
Certified HAFA Specialist – CHS®
SSG Pro®
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
424-2HELP12 (424-243-5712)
myrealestateanswers@gmail.com
http://shel-lee.listingbook.com
0 votes
Cindy Hanson…, Agent, Eden Prairie, MN
Tue Aug 30, 2011
Hello Foreclosure in 90807. That's a frustrating situation to be in, definately. There are options for you, from laon modifications to short sales and deed in lieus... I would suggest finding a realtor that specializes in distressed sales, but who also will market your home to the largest audience of buyers. Look for those that have educated themselves around these sort of sales and have designations such as the CDPE and SFR. We network with a database of trained professionals in this area if you would like us to help you with your search. Best of luck to you!
Web Reference:  http://www.JoeAndCindy.com
0 votes
Eli Givoni-S…, , Boca Raton, FL
Tue Aug 30, 2011
Hi Lisa,

You can do a short sale and keep foreclosure off your credit. We will negotiate with your lenders and try to get you off the hook for the second, as well. Please give us a call, and we can explain the process to you.

Eli Givoni, Director
Short Sale Department, LLC
561-361-1909
info@shortsaledept.com
http://www.shortsaledepartment.com
Serving all 50 states

MARS Disclosure for General Commercial Communications
IMPORTANT NOTICE:
Short Sale Department, LLC is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit.
0 votes
Julia King, , Long Beach, CA
Tue Aug 30, 2011
VERY well said Dot...and I'll 2nd that!


Julia King CDPE, SFR
Certified Distressed Property Expert, Short Sale Foreclosure Resource
RE/MAX College Park Realty
T: 562.972.5464 (KING)
F: 562.684.4737
E: Julia@HomesByJulia.com
DRE License #01181726
Web Reference:  http://www.HomesByJulia.com
0 votes
Gina King, Agent, San Juan Capistrano, CA
Tue Aug 30, 2011
This is best answered "offline" ... Maybe over a glass of wine at Georges Greek on 2nd?

LongBeachCoastalTeam (at) gmail.com

TheRECoach
0 votes
Jolanta Jonu…, Agent, Los Angeles, CA
Tue Aug 30, 2011
Hello Lisa
The best option for you is to do a Short Sale in this scenario . Please don't let your property go to foreclosure. Foreclosure will bring you more problems in the future. Please visit this link
http://realtorjolanta.blogspot.com/2011/05/foreclosure-or-sh…
Use Short Sale Realtor to do your short sale (make sure they have an experience is Short sales)
Don't trust Zillow. Actually realtor can evaluate your property for free and it is no need to hire an appraisal
Let me guide you through this process
Call me 323-316-3300 to discuss further.or email me
0 votes
Emily Knell, Agent, Huntington Beach, CA
Tue Aug 30, 2011
Regarding the 2nd lien. If it is an equity loan. You took cash out & bought whatever with it, the lender will want a certain % for a payout, I can get the 1st lien holder to pay for some of this & the buyer to pay for the rest in most cases. I would rather you email me & I can give you some better advice vs. taking a shot in the dark with my answer regarding the 2nd here on Trulia.
0 votes
Michael Magaw, Agent, Torrance, CA
Tue Aug 30, 2011
Lisa,

As you can see, there are several variables that we need to consider, before giving advice. Based on your comments, your "hardship" is that you have negative equity. Please be advised that the banks do not consider this to be a qualifying hardship. They are looking for reduced wages, increased expenses, increased interest rate, medical hardship, etc. They do not want to see "Strategic Defaults", meaning you can afford your home, but want to dump the burden and negative equity.

Have you considered all of your foreclosure prevention options? Loan Modification?

If you want a personal consultation, I would be happy to sit down with you and share with you my knowledge and experience.

Michael Magaw
Web Reference:  http://www.nhlbrokers.com
0 votes
Emily Knell, Agent, Huntington Beach, CA
Tue Aug 30, 2011
Well everyone is telling you to do a short sale. I do agree.

However I also want to let you know why you should consider doing the short sale & what I'm telling my own clients this year who are in your situation.

Do it sooner than later. The Mortgage Debt Forgiveness Act of 2007 expires at the end of 2012. It can take a while to do a short sale & you want to give yourself a good cushion of time for the short sale in case a 1st or 2nd buyer walks & this does happen. I can give you examples when I talk to you more about it.

After the end of 2012 it's not going to matter if this is your primary residence or if it's an investment property, you WILL GET HIT from the IRS for what they will consider to be "income" on the negative balance. As of today & your opinion of value the IRS will look at you & say, "you just made $195K in income & we want to tax you on that forgiveness of debt".

It Is possible to do a short sale & not miss a payment. What hurts credit scores the most is compounded late payments. It is possible for you to get yourself in a position to be able to purchase again in under 2yrs, take advantage of the down prices & build your equity back up from the bottom.

Please email or call me directly, I have a lot of experience with short sales, I know I can help you too. I won't look back on this same Trulia thread for answers after mine.

EmilyKnell1@yahoo.com
562-430-3053 c
Realtor Since 1996
Main Street Realtors
Short Sale Expert
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