Unfortunately events have conspired against me and I find myself upside down on my house and for various reasons needing to get out in the next few months.
I owe 440K, the townhouse is probably worth 425K.
My hardship letter consists of the following:
I won’t be able to make the payments next year because of an impending 30K assessment and my first is adjusting 3 points (1K/month). The market in San Diego is going down right now and there is a good chance the house will be worth even less next spring. Prices in my complex are highest during the summer and lowest in the early spring, so selling now during the summer versus selling early next spring will get the bank the best offer.
I can only afford the mortgage because I rent out 3 of the 4 bedrooms. I have developed chronic fatigue and went on disability for it last fall. I am improved since then but not getting any better. I am in danger of losing my job because I take a lot of sick days. I have seen several doctors and the only cause they can find is stress. Living with strangers to pay the mortgage is a lot of stress (I’ve had 2 alcoholics) and its a lot of work. Therefore, my health requires that I sell this place. I am willing to tolerate roommates for a few more months in order to do a ss. If that doesn’t work, I will move them out and and begin the process of rebuilding my health and will be unable to pay the mortgage without them.
I make 60K a year and have 15K in savings. The question I have is, given my circumstances how do I get the bank to agree to a short sale? Ideally for me they would accept the loss and I would keep my credit? Should I expect this or should I expect to paying back the difference over the next several years?
I am looking at using a local real estate outfit called Ipayone. They will sell between 1% - 3.5%, depending on who finds the buyer. I’m assuming paying 5% to a buyers and sellers agents doesn’t make sense for me.
The real estate agent for IPayone has only done 1 short sale. She knows the process but I’m don’t think she is much of a negotiator. I have found a real estate attorney who has sucessfully negotiated several short sales and saved his clients a lot of money. For instance his last client owed $40K and they settled on him paying back $20K. The laywer told me his credit stayed intact due to the settlement. This lawyer wants $1500 for his services.
Would it be worth it for me to pay the extra $1500 for this experienced negotiator versus only using the agent who is somewhat new to this? Can an experienced negotiator make that much difference in the final outcome? Or can I negotiate this myself?
For instance I need to buy a new car. Should I spend most of my savings on that? Reasons for are 1) buy while credit good and b) make myself look as poor as possible
I don’t understand how IPayone or the lawyer is planning to help you. Like you said, paying not only the 5% but whatever the difference is between the offer and what you owe does not make sense. That could mean coming to the table with $35k ($15k diff. + $20k comm.), which you do not have, nor would I want to spend that to get rid of a property. Normally when someone does a short sale, they are buying the property themselves, or flipping it to one of their own buyers. Their incentive is whatever profit they can make by getting the payoff reduced to a low enough discount. So I’m not sure what the $1500 covers. Is that $1500 whether or not the SS is accepted? If so, you’d be better off having an investor do it themselves because they only make money if the SS goes through.
If you want help with that property, I can try to work the short sale for you. I’m located up in San Jose. I’m in the middle of getting my first SS started right now. So I don’t have the experience, but I’ve read a ton about them and know how to get most of it done, and have most of the paperwork available. My only concern is that it sounds like you are current with the payments. Which, if true, means that the lender probably won’t deal. You usually have to wait until you are 2 or 3 payments behind, at which point it gets moved over to the loss mitigation department. If this is wrong and you are already behind on payments, please correct me.
My email is visible in my profile, so send me an email and we can discuss further. Or if you want to talk on the phone, let me know.
thanks for your comments. I am current with the payments.
Ipayone will save me on commission. This useful if I expect to pay back the difference. If I expect the bank to eat it, then I simply doing more work for the bank and would be better served hiring a full commission broker.
Regarding the lawyer, at the end of the day, a person at the bank is going to look at my financial info and hardship letter, they are going to look at the offer and they are going to decide if its in their best interest to accept the ss. I think the lawyer can help here. Wells Fargo has no policies in place and therefore its going to be up to a person. The lawyer can use his persuasive powers to get the banker to take the deal. I think talking to the banker can have a powerful impact. I would like to pay the lawyer based on his results not a flat fee upfront. I’m not sure if he will accept that.
What I’m trying to figure out is, would be better to have the bank eat the difference and lose my credit, or it would be better to make an agreement with the bank by paying back some or all of the difference. Some people tell me that I can have my credit back in 3 years and therefore it would be best to make the bank eat it. Other people tell me that I will be forever be B credit and the increased cost of future loans will far outweight the 30 or 40k I will be short.
Its a pickle, does anyone have any insight to offer?
Here are my thoughts about you doing your investor thing. You are obviously going to want the property for less than I can get on the open market. Since I am current with the payments, the bank probably won’t go for your offer. I expect they would rather want me to get full market value for the home. If I get to the point where I am missing payments, an investor may be useful.
That’s the way I currently see it. Do you have anything add?
First, stop saying that you want the bank to “eat it.” I’m not too sure that they’ll go for anything if you present them an attitude as such.
Second, do you have a buyer that has an offer yet? If not, then you’ve got nothing for the bank to consider. If you want to try to sell for FMV, then you are going to need the services of a full-time, fully paid REALTOR.
One of the first things that you are going to have to have your agent do is a comparative market analysis (CMA). Banks will call this a Broker’s Price Opinion (BPO). This will let everyone in the deal know what the estimated market price for the property will be. In fact, it may be a good idea to get 2 or more agents do one for you.
IF the estimated value of the property comes back at less than what you owe, then you can go to your lender, so them the the CMA’s and say, I want to sell my house, but I owe more than it will bring, will you work with me?
At that point, if their answer is yes, what they’ll most likely do is determine how much you can pay, like your $15K in savings, and how much they’ll likely have to “eat.” From that point, any and all offers will have to be sent to the bank for approval. If you get one accepted, go with it.
As to a foreclosure and credit. A foreclosure on your credit report is WORSE than a BK. I can get a person one year out of BK 100% financing, but it usually takes SEVEN (7) years if you’ve got a foreclosure on your record to get virtually ANY property financing. If you can get to B credit after a foreclosure, you’re doing GREAT.
There are alot of variables that make your credit score and alot of variables in the short sale process that could affect your score.
If you’re late on payments during a SS, then that will definitely show up. As to a SS showing on your credit, the process itself will not. However, the bank can issue a judgement against you for the balance due, which would show up. They can also report paid but with contigencies(not sure exactly how this is put in, put it is different from paid in full or paid as agreed). This could affect your score. How much or to what extent depends greatly on how your other bills are being paid and how much weight the reporting agency gives to a mortgage over other types of credit.
Still all are better than a full blown foreclosure sitting on your credit. Heck, even a deed in lieu of foreclosure looks better.