Short Sale

Not sure if this is something that would work for you but have you thought of renting out your house (to cover your mortgage) and then renting or buying another house? That way, you save yourself any credit issues and still are able to get a bigger place.

We JUST completed a short sale in january. We had to stop payment LAST August. The bank would NOT consider helping us out until we did show the hard-ship. We moved out of our 5 yr old home, in Canton, & were building a house Up North while renting. Talk about Hard-Ship. It took the realtors & bankers TOO long to get this task accomplished, but we were drowning. Make sure you find someone who knows PLENTY about short-sales. You need someone who is willing to help you, otherwise you'll get a realtor that doesn't care & it'll take too long. My hubby's credit did take a hit, but nothing too drastic (like bankruptcy). I think you also need to have your house on the market for at least 6 mos. before they'll consider a short-sale. That's what we had to do-AUGH. THis housing market is AWFUL. Our house sold for almost 80K less than we owed-isn't that a shame?? In a newer neighborhood, a 1500 sq. ft. new home. NOT fair.
Do your homework on the short-sale ppl in your area, and good luck.

my husband and i are currently going through the process and we have a great agent with HELP U SELL he is out of grand blanc. we have had to transfer from pontiac, mi to auburn indy. we had to submit a ton of paperwork. but our agent has been ontop of everything. the banks will drag their feet so you will need to get help. and the nice thing about a short sell is you dont pay the agent they are paid by the bank. as for your credit its 2 years and up to 100 points on your credit. we are renting down in indy and we are fine with that. we have no worries about things needing to be fixed. so good luck if you would like our agents name please feel free to send me a privite message and i will give you his name.

I haven't done a short sale but I do have some information. Depending on where your loan is will determine the criteria for them to approve a short sale, you could start by calling and asking them what your options are. I've approved short sales that were paid current through the date of sale, never a late. I have also approved short sales on delinquent mortgages.

Having a short sale on your credit shows you did everything you could and that you didn't just "walk away" . It will hurt your credit some but not as bad as a foreclosure. You could do a deed in lieu of as stated below but that means you gave your house back and walked away. The only difference between a deed in lieu of and a foreclosure is you are saving the bank the costs and hassles of going through the foreclosure process because you willingly gave the house back.

You will still be able to rent a home with a short sale or foreclosure. Landlords are more forgiving of mortgage credit issues these days. Especially if the rest your credit is good.

I couldn't imagine living in that small of a house with 3 kids. I'd be seriously considering a short sale too so you could get into something bigger for your family. Good luck.

Each bank has different criteria regarding short sales, so the best place to start is probably your bank and find out what their policies are. Depending on whether or not you have to be "behind" will determine how much your credit gets "dinged" and since you don't know the bank short sale policy, it is impossible to say how this will affect you in the future. A couple of things to share, though:

If you have more than one mortgage on the property (even if it is held by the same bank), the first mortgage holder can agree to whatever number they want, but the second mortgage holder is going to get nothing and will hold you liable for the deficiency.

There is also something called a "deed in lieu of foreclosure". Basically, you hand your house back over to the bank and move out. Again, each bank has it's own criteria regarding this process, and you may or may not have to be behind on the payments to qualify, but it may be an option. However, if there is a second mortgage on the property, you will likely be held responsible for the deficiency.

Loan modification - you will have to check with the lender to see if you qualify, but I have seen people get an adjusted interest rate that is rock bottom for a fixed period of time to help them get ahead a bit on their house. I know it is too small for you, but might be an option until the market turns around and the house gains a little more value.

Foreclosure - I don't deal with your state, so you need to do some checking, but my understand is that it would take about 1 year to foreclose on your home. So, if you stopped making mortgage payments today and put them in a savings account, you could possibly live "rent free" for one year. Your credit is going to be in tough shape, but you will have one heck of a down on a different place which is likely going to overcome that issue. Again, if there is a 2nd mortgage on the property, they are going to hold your responsible for the deficiency.

Rental - if the property is small, it may appeal to a different family that is willing to rent. Make sure that you do background checks, do your legal legwork on lease agreements, and follow all the rules regarding holding deposits if you decide to rent it out.

Good luck!

My husband and I just went through a short sale in Ohio. As I read your post, I TOTALLY related. Our house was 700 sq ft. We have a teenager a toddler, one on the way and a dog lol!! We tried selling for 1.5 yrs, then my husband was laid off and we were approved for the short sale. I am not sure if you need to show hardship or not, there are different laws everywhere. Either way, you need to call your bank and ask them what it entails. If you are current with your mortgage and not in "hardship" status, they may not approve you. Or if they do, you could be responsible for the remainder of the loan after it sells. Example, if you owe $120,000 on your house and they accept an offer of $90k, and you agree they can hold you responsible for the remaining $30k. Since we were a hardship case they did waive what we owed. And they did knock the hell out of our credit, even though we told we would "probably" be forgiven. My best advice to you is be very well informed, and DOCUMENT everything any employee of your bank says to you, including the day/date , time you call and WHO YOU SPEAK WITH. They are great at acting as if they have no idea "who told you that" With that said, I don't regret it because it was the ONLY way we were ever getting out of the house. Our mortgage was way too high to ever rent it out, and we were falling into an ARM loan. So really we had no choice. If you can rent it out, I'd say try that route first. Even rent to own. Good luck, I completely understand your frusturation first hand!

K.,
Before trying a short sale check out other alternatives. Look into house swapping sometimes you can find a older couple who is looking for a smaller house their house may be paid off or close to it but they may be willing to do a contract where you move to their home and make the payments on your home. Make sure the contract is written that they do the up keep on your home and you do it on the theirs home. Or look into renting your house out and getting into a larger one by either buying it with a conventional mortgage or land contract (yes land contracts are legal in Michigan my mortgage broker has one). Try these alternatives first before going for the credit killer. Check www.craiglist.com for individual looking for a home or to sell. But get a credit check on a air tight contract.
I got divorced a few years ago and was unable to sell the house and unable to live in it I bought another home and ended up letting the marital home go back to the bank unfortunately it was a HUD insured loan and now I am unable to get any type of federal insured loan for 3 years. I was trying to move to more land now that is nixed because of the credit score being lowered due to the foreclosure. Short sales depending on the area do not always work you could find yourself in the arena where you credit is suffering and you home is still not selling. Unless a real estate agent you REALLY TRUST tells you that a short sale will sell your home I would be extremely careful with that. I have seen homes in many areas end up in foreclosure and sold at a 1/4 of the price people owed on them due to the economy right now. Also with laws and rules changing everyday you never know what the repercussion may be today nothing in a month you could be held libel for all the difference. Especially if there is no actual hardship other than you need more room.
Good luck and talk to a lawyer or trustworthy real estate agent/mortgage broker (I would go with a small company that has been around for a while not a larger in your face company)

P.

We were in the exact same situation you are in. We tried to do a short sale without stopping our payments but the mortgage company wouldn't accept it.
So, we had to buy a new place and then stop making payments on ours. It sucked because it goes against all of our beliefs but the mortgage company didn't give us a choice. We ended up closing on our short sale in February. You want to have a really good realtor who specializes in short sales. That is all my realtor does. If you want her name let me know. She is based out of Canton. She works very closely with a realtor lawyer so she is up to date on the laws.

Good Luck!!!!

I live in Florida so I'm not sure of the laws in your state...
In Florida my friend did a short sale... She did the type of short sale where they continued to pay there mortgage as they were short saling (that way there credit wasn't hurt THAT bad and for THAT long).. We were told that it effects 50-100 points of your credit. That could also depend on your bank and state again..
If your showing hardship with paying your mortgage (IE: they want to see paystubs, you have to write a hardship letter, fill out a financial worksheet,etc).. During the short sale the bank has to approve the price that's being offered to them.. It took my friends about 4 months once they got a buyer to complete the short sale.. It's NOT a quick process... Once they knew the short sale was going through they rented another place before it hit there credit.. (Remember, they also paid there mortgage during the short sale so they weren't showing delinquent until AFTER the short sale papers were signed).
My husband and I are in the process of doing a loan modification but we want to keep our home so it's different than what you want.. A loan modification is for people that WANT to stay in there house..I've been working on this since last October and still going through it so that is also a VERY long process...
Good luck to you!

If your mortgage is with Bank of America, you will have to be 3 months in arrears to be approved for a short sale. The bank will not tell you this, they will do whatever it takes to keep you paying. If you get an offer and the bank accepts it but states you must pay the difference, you have the right to refuse (it may mean your house ends up in foreclosure instead). If the outstanding debt is forgiven (owe 100k, sell for 70k = 30k forgiven) the IRS typically has considered that 30k as income and taxes accordingly. If this is your primary residence, the IRS has put this practice on hold through 2012. Get a realtor who is familiar with short sales. Make sure any documentation you sign from the bank does not state you still owe the difference, unless you have already agreed to pay it - sometimes they will tell you they will write off the difference but have you sign a document that states you still owe it - they then have 5 years to decide if they are going to try to collect.

I am trying to get a short sale in my out of state property, unfortunately, interested buyers are not able to get a loan (it's a condo). So I haven't gone through a MI short sale and have not yet completed my own short sale.

Talk to a real estate lawyer (should cost about $300) talk to your accountant if you have one, get an expereinced short sale realtor, and try not to feel bad about the situation - you didn't cause it.

Good luck.