EDITED
I am not an expert but seems that, if you have the banks accept short sale… means that, you have to get a new financing … and mortgagee’s obligation to the existing mortgage is over and that should reflect in their credit report as well that, paid in full!
Judd, that is a good question. I thought that instead of a foreclosure in their credit, it will show up as a settlement. It wouldn’t show up as paid in full, because a short sale is not paying in full. Can someone else confirm this.
The HO can agree to a short sale, but the bank has final approval whether to do a short sale. The benefit of a short sale to the homeowner is that his credit report does not show any foreclosure remarks. It may still show that he was late on payments though.
Not sure what you mean by remaining balance stays on their credit.
A short sale is the forgiving of a mortgage. There’s alot of info online and elsewhere if you care to read about it.
You said:
“A short sale is the forgiving of a mortgage. There’s alot of info online and elsewhere if you care to read about it.”
WRONG,WRONG,WRONG!!! A short sale is NOT forgiving of a mortgage! It is a sale where the sale price does not pay off the mortgage.
The owner will have to work with the bank to get a waiver of difenciency judgement. It is not automatic.
Jan
The HO can be held responsible for the the amount between the SS and the true balance, and the lender will most likely issue a 1099 reflecting this. They can also seek a deficiency judgement, and like any other judgement it will land on their credit report.
These things can happen whether the lender accepts the SS or they complete the foreclosure process, if the sale results in them getting less than the balance.
A really good CPA or Tax Accountant can be instrumental in assisting the HO with the tax implications. The HO should be encouraged to have a serious consultation with a Tax Professional.
Also, the investor can negotiate that the lender waive the deficiency as a contingency to the sale.
HTH.
I think it really depends on the type of loan that you are working with. If it’s a FHA loan PMI will cover the difference. If it’s a VA the comp. claim payment from VA will cover it. A CONV loan normally is not really a short sale. It’s a short payoff of the loan and the lender eats the rest of the money. I am pretty sure that the homeowner will not have to cover any differences. That’s the way I do it otherwise why would the homeowner do this? Not just for credit reasons…lol
I asked this question a couple of months ago and never got a complete answer.
I think Judd is asking if he has a HO who is willing to sell their $250k property to him for say $100k, would it be legal. Could the mortgage company prevent the sale even though the owner knows that they will be on the line for $150k
I still have a person who says that he does not care about his credit, if I can give him $8k cash he will sign over a building that that he owes $300k on. Actual value $270k.
There will still be a second lien on the property…and why would you even consider doing that anyway??? makes no sense to but a house that’s upside down…?? Short sale it or find something else to help him…just don’t pay him for it and then get a house that’s $30,000 upside down…and YES the mortgage company can still foreclosure… They still have a lien on the property otherwise he can’t sell it to you…