Mdad26, Home Seller in 21234

If a home depreciates $30K in value and there is $5K equity, what are some options to make up the other $25K? Can this be rolled into future mortgage?

Asked by Mdad26, 21234 Tue May 3, 2011

Our home was purchased at $250,000 4 years ago. Now, similar homes on our street are selling for $220,000. We want to relocate and need options for how to handle the loss. Can it be borrowed? Can it be rolled into another mortgage? Or are we stuck in our house. Please help!

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Marlene Pais…, Agent, Linthicun Heights, MD
Fri Oct 7, 2011
Hi Mdad26. I live in Parkville and love it. Listening to your questions and after reading the replies you've received, here's my suggestion.

I agree that a short sale should be your LAST RESORT. It lowers your credit approx. 200 + points and depending on the loan program you're in, you wouldn't qualify to buy under that program for 2 or more years. (i.e. You currently have a FHA loan and short a FHA loan, the FHA guidelines wouldn't allow another purchase for 2 years. I've heard of some lenders getting underwriting approval sooner. We'd have to ask around to see who does this.)

Let's say when you bought in 2007 your payment was approx. $1,700/ mo x 12= $20,400 x 4years = $81,600, so you'd owe about $168,400...this is a rough estimate, not knowing the first loan amount, etc. If you owed $168,400 and sold for $220,000 with average closing costs totaling 8% of the sales price, that's $17,600 in closing costs, minus your est. payoff above, which leaves $34,000 estimated seller net. Even if your payoff is say $ 30,000 more than my example, you'd still have $4,000 to walk away with. If you've saved monies over the years, it's likely you could sale comfortably. If you haven't SOLD yet, and want a more exact analysis of your needs, call me and I'll walk through some scenarios by phone, no problem.

All My Best,
Maxxum Realtors & Associates Inc.
Marlene Rogers, Realtor
443-538-1631 cell
http://www.maxxumworld.com
http://www.marylandhomes4sale.net
0 votes
Adrian Gaste…, , Portland, OR
Wed May 11, 2011
I think it's not a good idea at all. You're going from a short term credit card to a 30 year term, besides that to refinance your home it will strip you from some equity from the new home and are going to be capped at 80-90% loan to value on the refinance. If that is your plan you better have close to 40% equity in the new home for it to even be possible. I think your options are 1. keep home and rent out then relocate and as long as new job is in same line of work you would be able to qualify for new home as long as debt to income and credit are still good 2. Buy new home and after new home is purchased look into more aggressive ways of getting rid of previous home. 3. If income can support hold onto current and future property considering a home is the best investment ever historically even with the market being corrected and plan for a great retirement.... I think you are too hung up on the negative equity and equity line. Call me and I will walk you through it!
Adrian Gastelum
503-308-0142/602-487-1647
licensed in Multiple states (5)
0 votes
Mdad26, Home Seller, 21234
Wed May 11, 2011
Thanks again to all for your answers. Here is an off the wall idea. Say I first purchase a foreclosed home for well under the "appraised" value prio to selling my old home. I have the new, foreclosed home appraised and take out a home equity line of credit to pay off the loss on the old home? Possible? Or bad idea?
0 votes
If you are planning to take out a loan on a second property while you continue to pay a mortgage on the one you live in, you have to determine if you will be able to qualify for the loan as there are debt to income ratios lenders use to qualify how much someone can borrow. It may still be difficult to "cash out" after rehab, as lenders seem to frowning on these tpes of refinance, regardless of the equity. On the other hand, if you structure your proposed loan with the lender you use to acquire the foreclosure to allow for that pay-off, that might work. But, you still have to be confident you can carry two properties at the same time, with one being vacant while you try to renovate and/or sell the other. In addition, even though TV makes renovation fun and easy, I can tell you from my personal experience that a $30k rehab can become a $45k rehab very easily, even for experienced renovators. Be sure to get a home inspection before purchase.
Flag Tue May 29, 2012
M. Felix, Agent, Covington, GA
Wed May 4, 2011
Considering the difference in the figures, a short sale is not even worth putting your credit in jeopardy. It sounds to me you should either rent your home or just be prepared to bring money to the table to close the transaction.
0 votes
Sherry McGre…, Agent, Murphy, NC
Wed May 4, 2011
Well, if your home were completely paid off, and had no first mortgage or lien on it, you might want to consider possibly owner financing. Owner financing, would allow you to still do a background or credit on the buyers, and charge interest to the buyers, just like your mortgage charges you. There are many pro's and con's regarding owner financing....so be sure and speak with your attorney or Realtor. In some states such as ours, the title actually changes hands and a deed of trust is made, other states can differ drastically. If, this doesn't work for you, try and look for a foreclosure or distressed, or motivated owner in the area you want to move to, that might accept a lower priced offer from you. However, until the market values in your area, return to normal, your loss, is probably still a loss. I am not quite sure why you would want to borrow to cover a loss, and rolling it into another mortgage, just puts more interest on top of it, possibly resulting in negative amortization.
Speak with a good Realtor, and let them run some comps for you to actually ascertain what your market price might be, or possibly suggest a good appraiser. Maybe, hopefully, your home has something the others don't and your value turns out to be better than you think it is. Good luck!
Web Reference:  http://www.timberwoodmtn.com
0 votes
Adrian Gaste…, , Portland, OR
Wed May 4, 2011
You will never see a lender roll the difference into a new mortgage. Besides that most lenders will not be able to approve you after a short sale anyways. Generally speaking the difference gets eaten by the short sale bank and you get 1099 at the end of the year. If you lived in the home for over 2 years and it is that small of a loss your CPA might be able to shield you from paying taxes on that 1099. Different states have different laws so please consult with your CPA and then a Real Estate attorney in your area. Good Luck!
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David Cooper, Agent, Los Angeles, CA
Wed May 4, 2011
The latest figures are that only 42% of short sales succeed. That means you have less than 50% chance of success and I know in Las Vegas you will need to prove hardship, like missing payments, to even be considered for short sale by the bank.

David Cooper. Las Vegas Foreclosure Investor in Bank Owned REOs with Cash Flow. email or call for FREE daily list +1-7024997037 not a real estate agent
0 votes
Karen Parsons…, Agent, Laguna Beach, CA
Wed May 4, 2011
Hi Mdad26,

A short sale is going to affect your credit.. please don't think otherwise. Most lenders won't consider a short sale (and if they do it isn't with favorable terms) for those who are current on their loan. Before you consider this you need to talk to an attorney (and possibly a CPA) and get some solid legal advice.

That being said, I have seen about a 200 pt drop in FICO and less than that if nothing else is late. It just depends.

If you have to move....then this might be a good consideration, you might also decide to pay the extra cost (if you can). Talk to someone in your area and see what you can work out....and I wish you good luck.

Karen
0 votes
brent mendel…, Mortgage Broker Or Lender, Bethesda, MD
Wed May 4, 2011
IF you have to move and IF you are never late on the mortgage and IF you can talk the lender into accepting a short sale with no lates than MAYBE you could buy something FHA in the near future. I don't like all the exceptions and can almost guarantee something goes wrong. Again this is why it should be a last resort. One thing you need to do is talk to your current lender and see what they can/will do for you. I have heard that in rare occasions they perhaps would take a partial note takeback. So you basically sell the house and pay the difference off over a set period of time. I have no idea if they would accept this but it doesn't hurt to ask but as the lender they will not want to do this and it will take some time to arrange. I hope this has helped and isn't making it more confusing for you. I just don't want you to short sale until you explore all the options. Please let me know if you have any other questions.
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Gene Drubets…, , Baltimore, MD
Tue May 3, 2011
It is all about how the short sale is negotiated and what the lender will put on your credit report. Its all in the agreement. I used Vlad Kats for 4 short sales and he was great. Below is his site

http://www.mdshortsaleexpert.com/about-vladimir-kats/

If you are relocating because of reasons you can’t control and the realtor does proper negotiation you will be able to qualify to buy after you move. I have seen people have 700 scores soon after short sales.

Good luck and I know how you feel. Both as a homebuyer who was upside-down on investments and a mortgage banker. Feel free to call me anytime
Web Reference:  http://www.GeneDru.com
0 votes
Mdad26, Home Seller, 21234
Tue May 3, 2011
Thanks to all who offered their advice. How exactly would a short sale affect my credit? I have excellent credit at the moment...not certain of the exact number, but well above 700. Would a short sale ruin me? And if so, how long after that would I qualify to purchase another house?
0 votes
brent mendel…, Mortgage Broker Or Lender, Bethesda, MD
Tue May 3, 2011
IMO a short sale should be your last option. If you have more questions let me know. You may qualify for a refinance but it may not be worth it. If you do go the short sale route and would like the name of a few excellent realtors to interview just let me know. Hope this helped and didn't feel like one big sales pitch from most.
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Marney Kirk, Agent, Towson, MD
Tue May 3, 2011
Mdad26, depending on your situation, you can either bring money to the closing, for example, borrowing from family or friends, to try to avoid a short sale.
If that is not possible, you may qualify for a short sale, also depending on your situation. If you are relocating due to a job, that often can qualify you.
It does generally affect your credit, so be aware that after a short sale, you most likely would not be able to buy something in the area where you are moving to, but you may be able to rent something in the meantime.
If you'd like to discuss more about your options, I would love to have the opportunity to speak with you.
Thank you & good luck!
Sincerely,
Marney Kirk
Keller Williams Excellence Realty
Web Reference:  http://www.realtormarney.com
0 votes
Eli Givoni-S…, , Boca Raton, FL
Tue May 3, 2011
You can do a short sale. We are a professional short sale service and would be happy to explain the process to you. Please call us directly to discuss your specific situation. Our services are FREE to homeowners. We look forward to hearing from 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
Gene Drubets…, , Baltimore, MD
Tue May 3, 2011
YOU CAN TRY A SHORT SALE. talk to a realtor who specializes in short sales.
0 votes
Nnaemeka Chi…, Agent, Owings Mills, MD
Tue May 3, 2011
It's a very challenging time. A lot of folks are going through exactly this situation. As far as I'm aware it won't be possible to roll in the difference into another mortgage. In order to sell you'll have to bring the difference owed as cash to settlement.
All the best,
N. Chima
Web Reference:  http://www.chimagroup.com
0 votes
brent mendel…, Mortgage Broker Or Lender, Bethesda, MD
Tue May 3, 2011
Mdad26,

No this would never be alllowed. At least as a secured real estate loan. Not if you have no equity. Wish I didn't have such bad news for you but to get a line of credit on your home you would need at least 10% equity. Actually more because the line of credit would take you to 90% so you would have to start at say 80%.
Those are the main options I have up my sleeve, someone else may have something better but I kinda doubt it. Failry cut and dry. Hope it helped.
0 votes
Mdad26, Home Seller, 21234
Tue May 3, 2011
Is there any way to obtain a loan or a line of credit, allowing us to bring money to the table and then pay it back monthly, similar to a credit card?
0 votes
brent mendel…, Mortgage Broker Or Lender, Bethesda, MD
Tue May 3, 2011
Sorry you are in this boat but hardly the only one. If you really have to sell you have a few options as far as I know. I am not a realtor but a lender so have a different perspective. It can't be rolled into a new mortgage, it just would never be allowed.
You can borrow it or take from retirement to cover the shortage at closing.
You could rent it out and wait for the market to rebound. <this is what I would do BUT you must make sure that doing this fits into your current plans> For example if you are buying another home you would have to qualify for the new mortgage carrying both mortgages with NO rental income used to offset expenses.
Other restrictions apply.
You can also short sale but IMO this should be a last resort. One reason is if you short sale you can't turn around and buy another home in the near future. Hope this helps, let me know if there is anything else I can do for you. If you would like to speak to a realtor or two I can arrange that as well. If you decide the short sale route is for you.
0 votes
David Cooper, Agent, Los Angeles, CA
Tue May 3, 2011
What is the mortgage on your house. If similar houses are selling for $220,000 and you have a mortgage of $215,000, the $5000 equity will NOT cover selling costs, and you will have to bring cash to the table to close out the previos mortgage.

David Cooper. Las Vegas Foreclosure Investor in Bank Owned REOs with Cash Flow. email or call for FREE daily list +1-7024997037 not a real estate agent
0 votes
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