Youâ€™re kidding right? You think you can just Short Sale a property and buy another one with no issues? Everything is all peachy creamy? When the short sale is over and property sells, the bank will tell you donâ€™t worry about the 125% or $100K you owe them? OK hereâ€™s the real deal. Listen to me or the used car salesman. Sorry if I sound rude. At least Iâ€™m honest and truthful.
You tell a lender your short selling a house and at same time buy another? If that Short Sale sells, the bank will come after you for the 125% covers the debt that is owed. So get ready for that unless you fall through the cracks and get away from this robbery you pulled. In the mean time you will be surrounded by yes men from the mortgage lenders. They will give you phone numbers, websites, HARP info leading to nowhere at the end. When this info hits the underwriter desk, they will laugh for about 4 minutes and toss application in the shredder.
Iâ€™m sorry. Youâ€™re screwed. Accept it donâ€™t get mad at me. Youâ€™re stuck with the 125% under water property. Short Sale it FICO is in the crapper for 2-5 years. FICO will rise but you will have a record of the short sale. When you apply for another loan mortgage reps will see this and will hit you with higher interest rate because now youâ€™re a risk.
For now stay in the house as long as possible. When that interest only expires and the payments skyrocket up, try your best to pay or pay something. If not let them kick you out. Can maybe stay in house 6 months up to 2 years paying zero mortgages. In the mean time bank all your money.
You might be saved if you live in Arizona. Bank may not come after you for the difference; Arizona has an "anti deficiency" law (ARS 33-814) that gives protection against the foreclosing lender (but not the second mortgage holder, if there is one) when the house is foreclosed on. Many attorneys read 33-814 and case law to include short sales as well, some caution that 33-814 does not specifically say it applies to short sales.
Within the next few years, you are likely to get a 1099 from the lender reporting the "forgiveness" of your debt as income to you when they write it off: currently the federal 2007 Mortgage Forgiveness Debt Relief Act protects you from paying tax on that "forgiveness" if you qualify. It will sunset in 2012 unless Congress renews it.
Hereâ€™s a blog to read. Read the first sentence.
Good luck out there,