I have a theoretical question. Suppose your house is under water, and you have negative equity. You have a

Asked by Airahcaz, Glen Rock, NJ Wed Aug 13, 2008

buyer at the lower amount, but you'll need a loan to make up the difference. For example, mortgage amount is 200K, house selling for 100K at market value. Could there be an arrangement where the buyer would loan you the money in order to close and you would pay that pack to him or her with interest like a regular loan, or could a third party or the existing mortgage company do so?

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Mack McCoy, Agent, Seattle, WA
Tue Feb 9, 2010
Certainly, if a seller can bring money to the table and avoid a short sale, that would be ideal.

The two best candidates are, in fact, the buyer and a "third party," the existing mortgage company will tell you to go to Helen Waite.

These would, of course, be unsecured loans, meaning that the lender was taking it on faith that the once-underwater Seller would make good on the note.

The thing to note is that it's not a "short sale" just because the Seller owes more than the buyer's willing to pay. If the Seller can bring money to the table, there's no need for bank approval, it's a straight-up deal.
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Robin Silver…, Mortgage Broker Or Lender, Garden City, NY
Tue Feb 9, 2010
I am not sure why everyone keeps saying that a short sale is better for your credit than foreclosure. That all depends on how far down you are on your mortgage. Most people who have decided to do a short sale stop paying their mortgage. Once that happens, and the loan becomes 120 or more past due, it really is the same thing as far as credit is concerned. Banks look at it the same way.
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Kevin O'Shea, Agent, White Plains, NY
Tue Feb 9, 2010

A short sale has less negative impact on the Seller than a foreclosure would.

I would recommend that you consult an attorney experienced in short sales to expedite the transaction. A loan of the type you are suggesting would be unsecured, so in my opinion very unlikely.

I would strongly recommend hiring experienced professionals for these types of transactions. The attorney and or Realtor can help a lot with paperwork and advice. The Realtor is usually compensated by the bank.

Let me know if I can help with any questions that you may have.

All the best!

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Chris L. Chr…, , New York
Wed Aug 13, 2008
Sorry but none of these options are acceptable to the lenders. Current practice is a "short sale". The lender would have to agree. Under the Fed laws just past, the lenders are a little more receptive to short sales. They know what the market value is and they may accept a bid from a well qualified buyer, if they can settle near the market value. It is not easy and only a short sale expert should be used.
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Joe Kidd, Home Buyer, San Francisco, CA
Wed Aug 13, 2008
I don't see why you couldn't do it. I haven't heard about anyone doing exactly that but I wouldn't be surprised considering the large scale depreciation we've seen if that is becoming more common. Sellers provide financing for buyers all the time, so I don't know why it can't work the other way around. Though I am not by any means a real estate or finance specialist.
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Airahcaz, Home Owner, Glen Rock, NJ
Wed Aug 13, 2008
sorry to add more to this, I suppose my theory is that a lender would rather make the personal loan as to avoid short sale or foreclosure, and with the personal loan for the seller to bring to closing, the lender would still have an obligation from the seller to pay those funds back, although now it would not be collateralized by the house. make sense? anyone hear of this?
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