Should I Foreclose or Short Sale My Home?
Question: Should I foreclose or short sale. Here is the situation. I bought a condo in Tampa, Florida in September 2005. This was my first real estate purchase and my primary residence until I transferred to Maryland for my job in July 2008. I have a first mortgage for $150k and a HELOC for $25k. The property has been short sale approved and there is a buyer that is going to purchase it for the price of $60k. We are ready to close but I need to pay all the delinquent HOA fees, late fees and attorney fees that have mounted up. I can not afford to pay the $3000 in late HOA fees to close on the short sale. Now, I am facing foreclosure. I have asked the HOA to waive the late fees and attorney fees so I can do a short sale but they are refusing.
Is it worth it to borrow the money from friends and family or should I foreclose or short sale?
Answer: – This is a great question. My first though is, yeah, a short sale is always a better solution than a foreclosure. However, you need to make sure if you do borrow the money, that the bank, especially the second, agrees to a satisfaction and not a release of lien. If you are going to come out of pocket, you want to be sure no deficiency judgment can be filled against you. A satisfaction ensures this doesn’t happen.
By paying off the attorney’s and HOA fees, you are saving yourself money in the long run. There are a ton of things that are tied to your credit. The better your credit, the better interest rates you have, lower premiums, and more purchasing or leveraging power. Yes, a short sale will and has already hurt your credit, but can be fixed within a few years. A foreclosure on the other hand will stay there for several years. This means you will pay higher rates and more money if you ever finance anything. So if at all possible, avoid the auction.
Now, if you are married and plan on just using your spouses credit because the home was just in your name, or plan to buy everything with cash, then good for you. You found an alternative. If not, yeah it’s better to settle that debt. Just the fact of a possible judgment is worth the settlement because if the second files for a $25,000 judgment, then you’d be forced to file bankruptcy or borrow even more to settle.
Here is something to consider. With a short sale, no proceeds can go to the homeowner. I’m sure you know that. However, whomever is buying this property for $60k, sounds like they are getting a great deal. I mean you are in this home $175,000. Unless you took a HUGE hit when the market shifted or have a ton or repairs, this buyer is getting a great deal on this property. Even a 40% drop in value puts your home at $105,000.
I would be willing to bet that this buyer does not want to let this property go. If he does, I’d be interested in looking at it. Let the buyer know your situation and that you can’t afford the $3000 and have no choice but to foreclose. Or tell them you’ve got a few personal belongings he can purchase for $3000 which would allow the short sale to through. Whatever you are selling him doesn’t have to be worth $3000 either. It’s just worth $3000 to him. My hunch is that your buyer, because of the price he’s picking it up for, will be glad to help out.
So in response to your question, should I foreclose or short sale, you should definitely short sale as long as it’s a satisfaction.
Hope this has helped you and others who might be in a similar situation.