Posts Tagged ‘short sale’

Question:  In Florida. Lots of stuff going on and now the MI says today they need a take it or leave it answer with no negotiation by close of business Friday. Son no longer lives in house that has mortgage insurance on it that the lender has accepted a short sale contract on and forwarded to the MI. He has purchased another house and just stopped making payments on the other in September. The MI says that they want 42000 over ten years 0% interest starting 2/12 or they will foreclose. (Doesn’t the lender do that?) He has some cash but has a baby due at Christmas that requires 20000 out of pocket at least, assuming no emegencies, because of crappy insurance. He made less this year than last but more last year than in 2009. The short sale contract and the appraisal are 89000 and the mortgage is in the high 150s give or take a few thousand. Not sure what the least expensive thing is to do but 42k is a lot more than he will have in the bank after the baby comes and no one wants to pay an extra $350 a month for 10 years to compensate them for a mutually bad investment. I am thinking ask the lender to do a deed in lieu so there is no deficiency and then file a 982 I think it’s called to get around that. If they don’t take the deed in lieu, then file for bankruptcy to get out of the deficiency but since I have little experience with this I need some advice that may help resolve this better than my solutions.

Answer:  - The least expensive thing to do is file bankruptcy. It will cost him $1500 and he can start over from scratch. A lot of lenders, when you tell them you are going to file, will work with you to find a solution. A better option might be to get an attorney or good real estate agent / short sale negotiator to help you push the short sale through with a full satisfaction meaning they can’t ask for any money to be paid back. The loan would be paid in full. Your son would receive a 1099 which would be negated with form 982 as mentioned. Don’t let the bank push you around… unfortunately they deal with homeowners a lot differently than an attorney or 3rd party negotiator because they automatically assume the homeowner doesn’t know what they are doing.

Question:  We are moving and our home will have to be a short sale. We have perfect credit and have never been late on a payment. The short sale will need to be on the second mortgage only. We owe $150,000 on the second and the short sale will probably be $75,000 of that. We are purchasing a lot where we are moving to and I want to make sure they will not be able to put a lien on it for the difference. In other words what assets will they come after for the difference.

Answer:  - Well, technically they can come after you for whatever is not satisfied. If the short sale is approved and successful, the individual doing the short sale will need to make sure it “satisfies” the loan in which you will receive a 1099-c. If they don’t satisfy the loan, then the bank retains the right to come after you for the deficient amount.

There is actually another option, similar to a short sale, but takes half the time, allows you to stay in the home or (be able to actually sell it in this case) for a profit. We basically get rid of the $150,000 second mortgage by offering a settlement with the lender. The loan is completely satisfied and it never shows up on your credit like a short sale does. Just another option out there for you to think about.

Question:  My mortgage company, PNC, has accepted a short sale offer on my house. I owe approximately $149,000 and the accepted offer is for $115,000. Coinciding with my application for short sale, PNC moved forward with foreclosure. The court, in Pennsylvania, granted judgement in foreclosure for the owed mortgage balance plus legal fees. Based on what I have read, because I do not have a second mortgage, HELOC and have not refinanced I am at low risk of being sued for the deficient balance after short sale. My concern is that PNC will, however, pursue me for legal fees involved with the foreclosure even though the short sale was accepted post hoc. Can you provide any insight or advice?

Answer:  - Most of the time banks won’t come after you for just legal fees, if they come after you, they will file a judgment for the amount they lost because it costs them a great deal more to pursue someone for a deficiency. So unless they are confident you can pay, they typically will 1099 the homeowner instead. And if you’re like most homeowners, the debt relief act will counteract the 1099 or you could claim insolvency. Best to talk to you accountant if you have specific questions.

Question: What is a Deed in Lieu? Which is better, short sale or deed in lieu? I am in So. California.
MS

Answer: – We explain what a Deed in Lieu of Foreclosure is in our free reports section. With a deed in lieu foreclosure you are giving the home back to the bank. By giving or deeding it back to the bank, the deed is considered full payment of the mortgage loan, so there cannot be a deficiency judgment. However, there are certain restrictions like all junior lien holders must be satisfied and there must be clear title. Although you’ll be avoiding a deficiency judgment, the bank will 1099 you for the deficient amount. This deficient amount is calculated by taking the difference between the fair market value (FMV) and the outstanding debt. As far as credit issues, a deed in lieu of foreclosure shows up as “Acquisition or Abandonment of Secured Property” and is very similar to an actual foreclosure.

A short sale on the other hand has fewer restrictions but is very similar in avoiding a deficiency judgment. You can ask the bank to satisfy the loan so it’s paid in full. You will be 1099 for the deficient amount. And for your credit, a short sale shows up as a “settled debt” which is very similar, however most credit experts believe a short sale is better on your credit report than a foreclosure or deed in lieu of foreclosure. I would have to agree…but it’s not by much. Any way you go, it’s going to be bad on your credit.

Question: Looking at short-sale, foreclosure, or bankruptcy… only is Social Security Disability, VA Disability (100%), and disability insurance monthly payment… what should I do? can they come after any of my income in a deficiency judgement? will they even come after me? how will bankruptcy affect me… I currently have NO assets at all except for about 15,000 dollars in savings. thanks Tom from FLORIDA

Answer: -Tom, I have to make the assumption that you’re planning on or you’ve already stopped making payments on your home or you wouldn’t be asking these questions.  A short sale in my opinion is by far the best option if you can’t sell your home for what’s owed, rent it out or can’t work out something with the bank like a forbearance or loan modification.  A short sale will affect your credit but will eliminate a foreclosure on it.  If done properly will also eliminate the possibility of a  deficiency judgment.  If a short sale is not accepted an ultimately your home ends up at the foreclosure auction, then you will either receive a 1099 or they will file a deficiency judgment against you.  If they file a deficiency judgment and you can’t pay, they can garnish wages.  Depending on the amount of the judgment, this forces most people to file bankruptcy to eliminate the judgment.