Question: can you get another loan buy a house and then short sale your upside down house. is it legal?
Answer:
This actually happens more often then you would think. Homeowners that are upside down and have negative equity, feel it would be better to just let their home go. Most refer to it as strategic defaulting. There have been ideas floating around to try and combat this action because it happens quite often. But before their credit is bad, they go find another home, sometimes smaller, more affordable, usually at or under market value and lock in the rates, then default on the other property. Their credit goes bad and in some cases may have to file bankruptcy, but it’s like they are starting fresh again and they still own a home that won’t take decades before they have equity again.
I bought a house before I got married and my wife is not on the title for either the first (owing 360,000)or the second (owing 95,000). I estimate the house to be worth around 300-350.
We can’t afford the payments and can’t refinance due to my credit score. My wife doesn’t make enough to qualify for the 460,000 mortgage on her own. I’ve been begging with the loss mitigation people for 9 months for anything and have been told short sale or foreclosure are the only options. We are not past due on the mortgages yet, but likely will be starting in January. The well has run dry.
A relative (who works in the industry) has offered to buy the property at a short sale, then turn around and sell it back to my wife at that reduced price. This has to be illegal. What do you think?
The relative cannot have the same name. Its borderline on ethics…but in this market you have to do what you have to in order to survive. Just make sure you trust the person who is going to buy it. Otherwise they could really cheat you on the deal.
A lot of people actually go this route believe it or not. My question is, if you cant afford the house now, what makes you think you will be able to afford it when the person sells it back? What kind of credit do they have? What type of loan are they planning on getting? If they are not going to live in the property, you wont qualify for a homestead on your taxes, which means you could pay twice the amount in taxes and could again make it unaffordable. Where in the process are you planning on buying it back? Do you know for sure you would be approved? You haven’t talked to your mortgage company about this have you? If you disclose what you plan to do, they will not help you. You may have more options than you realize.