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Asked by RachelNicole, 92882 Wed Jul 13, 2011

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Emily Knell, Agent, Huntington Beach, CA
Wed Jul 13, 2011
******* It is possible for you to do a short sale WITHOUT EVER MISSING A PAYMENT. The short sale alone is not an enormous hit on your credit. What really screws up people's credit is when they're 4-8mos or more behind on payments.

I short sold a man's home 11mos ago in Riverside without him ever missing a payment & now we're house hunting again, he's approved for financing!!

It is possible to purchase again immediately after doing a short sale, there ARE investors willing to lend in situations like this.

***** I've read through all 24 answers you've received & didn't see anyone else talking about this. I've closed 100% of the short sale listings I've taken in CA. It may also be possible to do a lease back from the new owner, while you're looking for a rental OR another property to purchase.

Feel free to email me directly or give me a call, I'd be happy to talk to you about this some more. I won't look back on this same Trulia posting for new answers, if I do that my email inbox fills up with other agents answering after me.
562-430-3053 c
Realtor Since 1996
Short Sale Expert
1 vote
charles butt…, Agent, san jose, CA
Thu Jul 14, 2011
Even though you bought this property as a foreclosure sale, the contractor who did the unpermitted work may have some liability.

It is against California law for a contractor to fail to get the proper permits. The contractor's liability for failure to get the proper permits does not end with the sale or the foreclosure of the house.

I recommend that you talk with some Real Estate Attorneys about the possible liability of the contractor or contractors that did the unpermitted work.
0 votes
blaison samu…, Agent, Santa Clara, CA
Thu Jul 14, 2011

It seems like, it is not a disclosure issue rather financial issue to keep the house, then short sale might be a good option or loan mod if you want to keep the house.

If you qualify for HAFA then you get 3,000 as a relocation expenses for doing short sale, so there are options to avoid foreclosure. Consult with attorney and short sale is the option for you then talk to an experienced short sale realtor to help you to sell the house.

Let me know if there's anything I can assist you, if your house is in San Jose then I can assist you if you are thinking about short sale.

Blaison Samuel
0 votes
Mitchell Pea…, Agent, San Jose, CA
Thu Jul 14, 2011

Now that I see you bought this home from a bank after it foreclosed, I think you may be wasting your time if you march off to an attorney over the non-disclosure issues. Banks and their realtors have little to no duty to disclose the condition of the house because neither has ever lived in it. It appears that all previous answers, including mine, were assuming you bought the house in a short sale or regular transaction.

It is not uncommon that people find problems in a house when they start remodeling and repairing it. This was the norm for me when I did this professionally years ago. My favorite was peeling off wallpaper and watching the plaster underneath fall off because it was so cracked up from earthquakes that it had been the the wallpaper holding it all together!

You've found out what most people find out when they first get into buying a fixer upper in foreclosure. There are always hidden surprises. Yes you are struggling, but eventually, if you stick to it, you can end up with a nice home. If you are making the payments and you can see the light at the end of the tunnel is not a vehicle barreling toward you but the light of a hard job completed, I suggest you push forward. Short sales do hit your credit and even though Emily claims she is able to get her people financing, she is not mentioning that her client is paying more for his financing as a result of the short sale. Buying a new home after this one, or moving into a rental also has its moving costs, down payments costs etc.

Sometimes a vacation is all that is needed to get a fresh perspective and re-energized to tackle a task that seemed overwhelming before the vacation.

Best of luck to you,

Mitchell Pearce
0 votes
RachelNicole, Home Owner, 92882
Wed Jul 13, 2011
Thank you to everyone for your responses, I truly do appreciate getting some really good feedback from the pros as I'm pretty clueless to a lot of things. @ Blaison: this house originally didn't need that much work, windows and maybe new tile for the living room/Kitchen but nothing we thought we couldn't handle in 30years, but a lot of things came out afterward. The house was a foreclosure, my agent did not know about the non permitted areas until a week before we closed. In any event, yes it has affected us greatly to the tune of 3 years but we are going for a change. @David, I can tell you that the mortgage payment is half of my husbands monthly take home income and the value of the home has dropped about 55,000 from the original purchase price. We have not missed a payment, EVER, but the fact is, on top of our other monthly bills it is a constant struggle not to miss a payment. I didn't realize my question above had not posted completely but what I was trying to say was that we have no AC or heater, this was a FHA loan house, and yes it was approved with all it's flaws, but with 4 children and only one income in the house, we're running out of options, but I will be contacting someone to go over my options and avoid the worst. Thank you again to everyone for taking the time out of your busy schedules to help me out:)
0 votes
David Sciplin, Agent, San Jose, CA
Wed Jul 13, 2011
Hi Rachel Nicole,

I'm going to go in a little different direction. I totally understand you situation. In your explanation you didn't mention if you could afford the home loan payments. It's really difficult to give adequate advice since the solution may be in other details. Questions I have include what's your current mortgage? What's the current value of your home and the estimated value once the repairs and upgrades are complete? Who is your lender, etc. I'm not sure if you want to have you financial details all over the Internet. Feel free to email me if you'd like. I work with major lenders who have programs that may be able to assist you. The role I have with my clients is to offer options. The last thing you want is to have your kids in an unsafe situation. You also don't need the constant stress.

Everyone has give you good advice. Short Sale may not be your only solution.

David Sciplin
Real Estate Counselor
Better Homes and Gardens Real Estate
0 votes
blaison samu…, Agent, Santa Clara, CA
Wed Jul 13, 2011

I'm sorry to hear that you bought this house in 2008 and you are still fixing the house for the last 3 years, just wondering whether you bought it as a fixer upper with lot of repairs or all these happened after you bought this house. I hope you didn't buy this house as-is without any inspections and you did see the house before buying this house. The seller should have given all the disclosures, if not then you should have contacted even after closing the transaction and shouldn't wait this long to get things worse!

As other realtor's mentioned, if it is the disclosure issue, then contact an attorney and see what you can do before walking away because just walking away will not solve your problem, it will make your situation more worse, so consult with an attorney and check what option is best for you. Short sale or loan modification is not the right choice for all the situation, so again my suggestion would be to consult with an attorney before you do anything. Good luck with everything.

Blaison Samuel
Certified Short Sale Specialist
0 votes
Mitchell Pea…, Agent, San Jose, CA
Wed Jul 13, 2011
Rachel Nicole:
First question, was your mortgage only to buy your house? I assume so from your answer, in which case that mortgage is a no-recourse loan. This is important for protecting you from the tax man because you cannot be taxed on debt forgiven in a non-recourse loan. If you are insolvent, meaning what you owe is more than what you have, then you also are not taxed on debt forgiveness. That all said, it sounds like your house is worth less than when you bought it, so you won't have capital gains. Even if you did though, the fact that you have lived in it for 3 years means you are exempt from $500,000 in capital gains on the house, which sounds like it has not occurred anyway. So if my above assumption about your situation are correct, the only real issues for you is how to recover from the disaster that is your house, and how to protect your credit.

As to the second concern, you should try either to modify the loan if you want to stay there, or attempt a short sale on the house. Believe me, you can short sale this house if the agent you get knows what he is doing. The bank will see the condition of the house when it gets it appraised (formally with an appraiser or informally with another realtor). If your agent is trying to sell the house for about that amount and succeeds, then you will have a paid less than outstanding balance as agreed on your credit. This will hurt your score more than 50 points but less a foreclosure. If you have not been late on your payments, then you won't have much damage. the issue though is that seldom will the lender give you the time of day let alone agree to a short sale until you are late on your payments. (How late you have to be to qualify for a short sale depends on who is the investor holding your loan. A HAFA certified realtor should have the experience and knowledge to guide you on that one. Follow his or her advice. It is the late payments that hurt your credit score. If you make your payments on time after being late enough to qualify for a short sale, then your credit score damage will be less. If you decide to live in the home payment free till it sells, then your credit score will be much more severely damaged.
As to the second issue, you may, and I mean may, not do, have legal recourse against the seller and his agent over the non-disclosure of permits and the presence of undisclosed molds. You need to give all the facts to a real estate attorney and let him analyze your situation. He or she can guide you as to whether you have recourse through the courts or through arbitration or no recourse at all. The devil is in the details and the paperwork from your purchase. So gather up all your paperwork including any notes of discussions with your agent, and everyone else.
It sounds like you did not have a home or termite inspection before you bought the home. Whether you did or note will be a big fact that will have influence on how your situation turns out.
0 votes
charles butt…, Agent, san jose, CA
Wed Jul 13, 2011
I am very sorry to read what hasppened to you.

Anna Brocco, the agent from New Your had an excellent recomendation, and that is to talk with an Attorney who has a great deal of successful experience with Real Estate Law.

I fact I will go one step further and this is recommend that you interview at least 3 or 4 local Attorneys who have a great deal of successful experience with Real Estate Law. Then hire the Attorney that you think is best for your case.

There is not excuse for the seller to fail to disclose the lack of permits for the remodeling.

It sounds to me as if the added expenses to you as a result of the lack of permits is the primary cause of your financial problems. .

I recommend that you talk to the Attorneys first before you go the short sale route or the foreclosure route.

I suspect that the Attorneys will identify one or more legal remedies available to you that will permit you to avoid a Short Sale or a foreclosure.
0 votes
RachelNicole, Home Owner, 92882
Wed Jul 13, 2011
Thank you all for your answers. I didn't realize my question had not posted completed, but the rest was that we do not have an AC or Heater, have 4 children and only he works. We don't think a short sale would work given the condition of the house which is why we considered walking away. The lot is almost 9,000 sqf, the house itself is about 1800 sqft, the rest is front and back yard...neither of which has grass. It is all dirt. Have gotten estimates into the thousands to fix. The stucco is coming off, one of our bathrooms is bare because there was mold growing and we had to demolish that too, the carpet in the living room had to be torn out, there is only cement there, and the living room wall which connected to the room we had to demolish, has no wall, only a wooden word. I'm taking the time to explain my frustrating housing details to show that no one, unless an investor with plenty of money to remodel, will buy the house in a short sale.
0 votes
Anna M Brocco, Agent, Williston Park, NY
Wed Jul 13, 2011
Before considering a foreclosure or a short sale, do protect yourself and consider consulting with an attorney who specializes in real estate...
0 votes
April Tavares, Agent, Campbell, CA
Wed Jul 13, 2011
Hi Rachel,

I am sorry to hear of your struggles. It sounds like things have been very difficult.

Here are a couple of differences between a short sale and a foreclosure and how it may affect your Credit Score. Please keep in mind that these are just general guidelines and much depends on your overall credit and financial situation. You may want to find a REALTOR who specializes in short sales in your area to help you understand more of the details or perhaps speak with an attorney or financial planner who specializes in short sale transactions.

A Short Sale’s effect on your credit score can be as brief as 12 to 18 months and only late payments on the mortgage will show. This can lower your score as little as 50 points, but it really depends on your overall credit picture.

A foreclosure will affect your credit score for over 3 years and can lower your score between 250 to 300 points, depending on your overall credit picture.

Credit History: A Short Sale may NOT be reported on a person’s credit history.
A Foreclosure will stay on a person’s credit history for 10 years or more.

All the best,

April Tavares, GRI, ASP
Realtor®, DRE License #01742179
Montalvo Realty
Direct: 408-309-5471
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0 votes
Terri Vellios, Agent, Campbell, CA
Wed Jul 13, 2011
Both Foreclosure and Short sale will be hits on your credit. You have some options;
1) Call your lender to see if they would modify your loan
2) Short sale is an option and you will want to talk with a local agent familiar with handling that. No fee is paid by you for a short sale or loan modification
3) Deed in Lieu of Foreclosure. This you hand your keys over, also known as Cash for Keys
4) Foreclosure where they bank takes the property back after auction and then resales it
5) Bankruptcy

With all these options, it is best to schedule a meeting with a local expert. That person will go over the details of your loan(s) and give you an idea of what you can expect.

The questions you should ask is about deficiency judgment vs non-recourse loan.

Understand, you are not alone in this, many people are in the same situation. If it is a short sale you do not need to make repairs, simply disclose with honesty the house issues.

All the best to you.
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