Can I cancel a short sale while in the proces of buyers putting an offer. My lender is offering us a modification which might qualify us .

Asked by Ab, 89134 Thu Aug 2, 2012

Our listing agent said that we are in vioation of the contract.

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Michael Parks, Agent, Las Vegas, NV
Thu Aug 9, 2012
I agree with Ray & Michelle. Keep in mind the mortgage companies send the same loan modification letters/offers to nearly all of their homeowners who are behind on payments (and even some who are current). Granted, the programs have gotten better over the years, but the reality is that only a small percentage of homeowners will qualify. They often paint a picture of a best-case scenario and provide the homeowners a false sense of hope. Most of the loan modifications that actually go through are only going to lower your monthly payment, not your principle balance, so you're still responsible for the full negative balance. The mortgage companies often catch people in a fragile state where they are only focused on the monthly payment and completely over look how far negative their value to loan ratio is. If you happen to have a bank that is offering a principle reduction to current market value then you might want to consider a loan modification. However, if you're like most homeowners you will likely end up with a low monthly payment, but still stuck with a loan amount that's far greater than market value, and most likely extended into a 40 year mortgage. For most homeowners, the sooner they can get out of their under-water property, the sooner they can recover and become homeowners again (next time with a home they can actually afford).

Another added consideration is that the 2007 Mortgage Forgiveness Act is scheduled to expire by the end of 2012. So if you accept a loan modification now and realize a year from now that you were better off doing a short sale; you may be liable to the IRS for the full negative balance if you short sale or become foreclosed on after 2012. This is a huge motivator for many homeowners who are uncertain of their ability to hang on to their property in the years to come. Remember, you cannot include income taxes in a bankruptcy either, so take a really good look at your overall situation before you decide because you may not get a second chance relieve your negative debt.

Michael Parks
1 vote
Becky Zisk, Agent, Henderson, NV
Tue Aug 14, 2012
Yes, you can cancel your short sale, however, before doing so, you need to have the "Loan Modification" in hand! Do not take just someone's word for it because 9 out of 10 people today are not gettting their modifications. BZ
0 votes
Michelle Gon…, Agent, Los Alamitos, CA
Thu Aug 2, 2012
Read your contract or ask your agent to point out where it states that. I noticed in your question you said your lender is offering you a modification which you "might" qualify. Before you put all of your hope into a loan modification you will need to ask yourself the following questions. Is there a notice of default on your property? Are you working? Have you tried a loan modification in the past and been deinied? Can you afford to keep the home? Just as Ray said below, most loan modifications are not very appealing to the homeowners.
0 votes
Ray Wright, Agent, Riverside, CA
Thu Aug 2, 2012
You need to check your listing contract. And it depends upon how far along you are in the short sale.

I just placed a short sale on hold because the bank, Wells Fargo, recontacted my clients advising them they had a "new" loan modification program they thought the clients would qualify for. The clients had already been denied two previous loan modifications. After 2 weeks, as typical with many loan mod products, it was found that the loan mod Wells was offering was not at all helpful to the client. So, we're back on with the short sale. I put in every listing contract a clause that states that the client can place the listing on hold if they accept a loan modification. I do this for 2 reasons, 1) I want to assist the homeowner in keeping their home if there is any way to do so, and, 2) I know that most loan modifications are not appealing at all to the client and those that are, rarely go thru.

I suggest you set an appointment with the agent and their broker and go over the contract to see what can be done. Good luck.
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