Short Sale , Keep Making Payments??

Updated on July 06, 2011
C.W. asks from McKinleyville, CA
14 answers

I am starting the shortsale process in the next couple days on our house. We have tried to sell it and the price is just to high. The market crashed, we are upside down (never borrowed against etc.). I think I am a candidate for shortsale after talking with many poeple/websites etc.

My specific question is: should I continue making the payment through the process? Will it help my credit at all if I continue to make the payment until this is finished? If not I could sure use this money to pay other bills etc. Any experience with this? I want to save my credit the best I can, but also dont want to waste anymore money than neccesary.

Also, any other dos and donts from people who have gone through this nasty process? Words of advice..."wish I did..."...."looking back..." thoughts? Thanks again!

2 moms found this helpful

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S.L.

answers from Dallas on

You need to call a realtor that is knowledgeable on short sales. Most banks will not allow a short sale unless payments on the mortgage have already ceased. I say most but haven't seen any bank to do otherwise.
Good Luck.

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G.S.

answers from New York on

We went thru w/the HAFA program which is somewhat new w/the mtg co's & are hopefully going to close on our house w/in the 30-45 day mark. They did set the original price of the home a little high, however after a few months did agree to lower it & it sold w/in 3 days or so. The HAFA program is as drawn out as the modification program if you went thru that, there are many hoops to jump thru, much paperwork to gather, but worth every bit of it. They even offer the seller money towards the moving expenses/new home, etc. provided things all fall into place. One of the draw backs however was the payments that are expected during the short-sale agreement - our normal mtg payment was $2400 & they wanted $2140, which we couldn't afford so we were told by our negotiator to pay what we could, however because we were in foreclosure the customer service reps wouldn't accept any partial payments and he told us that it was all documented so not to worry. We'll see how all of this pans out on closing day, but the best thing about the HAFA program is that it forgives us the difference of what we owe & what the home is sold for. We had filed Chapter 7 bankrupcy last Oct & our attorney advised us against including the house w/in that so this was our only chance. I would strongly urge you to speak with your mortgage company about this program, it is fairly new and if you do go through with this make certain you find a realtor and a lawyer who are both familiar w/this program because there are so many things going on w/it right now. Our realtor had actually just completed a course on this when we approached him about doing our short sale & he has educated our atty in a big way. Best of luck to you. If you have any other questions, my email is [email protected]____.com of luck to you!

2 moms found this helpful

K.B.

answers from Los Angeles on

A BIG factor is "why" you are requesting to short sale. Also, the banks want to see income/expenses, tax returns, paystubs, mortgage and bank statements...basically PROOF that you are in a genuine hardship! Hopefully you haven't used your debit card on too many Starbucks :) Loss of income/job, health issues in any household member, one income source and you're in the red every month, need for relo and market value is less than sale/list price, etc. They like to see a hardship letter addressing the reasons "why". I have seen successful short sales with great agents managing them... I hope you have a good agent or the process can be longer than necessary due to a lack of experience. expect to hear different things from different agents and people that have experienced a short sale. I would continue to make payments because it WILL help your credit score and show good faith. Also, in the event your short sale is not approved you take the risk of going into foreclosure if you're behind and/or coming up with the balance owed. Good luck, it's good that what is owe is purchase money (as opposed to credit lines for extravagant things).
EDIT: Chase Home Finance likes to see people making payments, it is not good advice when a realtor tells you to stop making your payments. They will also tell you that you have a better chance of getting approval when you "cease" payments...also, not true.

1 mom found this helpful
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S.K.

answers from Sacramento on

If you can, continue to make your payments. That's what we did and the only hit to our credit was from the short sale itself. My credit took a small hit of like 50-80 points (depending on which credit company you look at). If you stop making payments, your credit takes a huge hit every single month you miss. Also, if you stop making payments, if the process of the short sale takes too long the bank could flag you for forclosure and you will have to fight that battle as well as the short sale battle. The only advice I have is to make sure you read your letters from your banks very carefully. Our bank approved our short sale but put dates that we had to close by on them, which we could not possibly meet even though we had a buy as soon as we put it on the market. So they first and second sent us new letters with new dates, but when we got the letter from the second they changed some wording on it (that we almost missed) that said we would be responsible for paying back the loan (when orginally they said we wouldn't). We had to call the bank up and say, hey, what's up? They apologized and fixed it, so it worked out. But they will try to pull a fast one on you, so you have to be very diligent in reading your letters. Make sure you pick a realtor that has experience dealing with short sales, it will make the process that much easier. And you will have to be patient, it is a long process, especially if you happen to have bank of america (and to be honest, if that is the case it could take years). We had Chase and it only took us from start to finish about 6 months. You will also need to come up with a really good hardship letter to convince the bank of why you need to short sell.

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I.J.

answers from San Francisco on

Hello, I am a Realtor and I am certified by both HAFA (a goverment program) and CDPE (Dertified Distressed Properties Expert).

You need to speak with both an attorney and tax professional at this time; they can best advise you based on your individual situation. Be careful there is a lot of erroneous information out there, look to work with people who have experience. And you need to work with a Realtor who has experience and will fight for you.

Regarding your credit typically there will be some damage to your credit but many creditors dod not see a short sale as being as 'bad' as a foreclosure.

I have a website that explains some of your options.

www.IreneCanHelp.com

If you'd just like to chat about this please feel free to call me.
You can contact me, I. Jacobson at ###-###-####

My email is [email protected]____.com

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C.V.

answers from San Francisco on

I did a short sale over 2 years ago. It took about 6 months. It was a very easy process. We stopped making payments as soon as we decided to do it. Your credit score will take a hit but with a short sale its not a long recovery. Dont worry just do it! Best thing we ever did.

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C.T.

answers from San Francisco on

I jsut recently went thru this and had some friends that "tried" to do it and didn't have any luck...lots of people are doing this. First call your lender and see what they can "do" for you - many of them require that you speak with them first and go over other possibilities first before you even work with an attorney or realator - Wells Fargo is one of these. Some have a checklist or worksheet you have to fill out letting them know your situation, trying to see if they can get your numbers down to be affordable without losing the house (you will have to give proof of income, BANK STATEMENTS, living expenses, insurance expenses) . All of them however require that you are in hardship - loss of job, medical emergency that is in the millions of $$, if not you will probably be denied (if you are denied, the only further option is forclosure). Once you talk to them, then find a reputable realator that has tons of experience in shortsales and is an awesome realator - like get the best in your area!!! In order to get your house to sell quickly, making your bank be more willing to quickly approve the deal, your realator has to price it aggressively, prep your house, be an awesome seller. Your realtor will recommend a good lawyer to get you thru the process, don't find one on your own! You have to be minimum 30 days past due but more towards 90 days when you finally get an offer from a buyer and file the paperwork - we were 60 days past due when we listed our home, got an offer the first viewing but didn't get approved for another 60 days. Once you list your house don't pay your mortgage unless your lawyer suggests you do, they normally only suggest you pay something after 90 days and only if they are going to slap a forclosure on you - that is why you have to get your house sold asap after you list. SO, you do have to clean up your carpets and home, declutter, fix a few things so that your house sells fast - this is a "as is" sale, BUT someone has to WANT to buy your home first! Whether you pay your motgage or not will not help your credit. It is better that you do not default on all your other bills, just this one!!! IF there is any chunk of money in your bank accounts or investments (not including 401K and retirement) they may ask you to give that money towards closing costs, realtor fees etc. SO, you may want to slowly withdraw that money now without looking suspicious (a lot of people get large severances!).
When the shortsale is over, make sure you get in writing from your lender that you owe them nothing, the mortgage is paid of by the shortsale - some have come back after people 10 years down the road. It will be up to them if they want to 10-99 you in the future and you will have to count the difference of the selling price and the total of the loan as income on your taxes - and it doesn't have to be the year after shortsale - it could be a year later or sometimes up to 10 years later depending on state law. Since we were able to keep all our bills up to date, only default on the house, our credit score only went down 70 points, check your credit 3 months after the short sale is final to make sure the lender reported the sale correctly and doesn't leave it as past due. Good luck!

F.H.

answers from Phoenix on

Actually, you need to call your mortgage company. You shouldn't be talking to "people/websites", they are the ones who basically own your home so they will tell you the process and what steps you need to take. You can't start anything without going thru them and generally they won't do anything unless you are at least 3 months behind in your payment. Good luck.

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S.S.

answers from Chicago on

If you stop making payments after an amount of time passes. Usually it is about 6 months the bank will start the foreclosure proceedings. It can take anywhere from 9 or 10 months to 18 months for a foreclosure to happen from start to finish. We tried to sell our house back in February of 2008. It didn't sell. In April we stopped making payments (I had cancer and hubby hurt himself requiring 4 surgeries to put back together) no money coming in to make payments. In may we received the first note saying your late. in june the same thing. in july first note saying your seriously behind etc and let us help you. However they would not let us refinance and or do the modification thing etc. In August we moved out and into a rental house. We didn't know how long a foreclosure took and didn't want to come home to be locked out of the house. Turns out the actual foreclosure proceedings didn't really even start until the following february (09) and didn't end in a judgement of forclosure until september of 09. The house sat vacant all that time and new owners didn't buy it until december of 2010. We could have lived there rent free until november so a total of about 16 months payment free and saved the money to move but instead we moved out. if you move out and the property is vacant when you stop paying they can speed that up. if you let it go to foreclosure you will have to file a bankruptcy and put the house in it otherwise the bank can come after you for the difference of what you owed and what it sells for. we bought a house this spring and are staying well under what my husbands income says we can afford. never going thru this again.

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L.A.

answers from San Francisco on

My friend Irene Jacobson is a realtor who also happens to be an expert in short sales and foreclosures. She is extremely honest and ethical in all her dealings. She may be a good resource for you since she'll be able to give you your options and explain in detail what they are and how they'll affect you.
Her contact information is:
[email protected]____.com
###-###-####
www.IreneCanHelp.com
Good luck!

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D.D.

answers from Detroit on

Here's my 2 cents... Definitely talk to your lender and find out what they require for a short sale, take what they say with a large dose of salt - it is quite possible you will get different answers on different days. Generally, they won't approve a short sale unless you are already in arrears - they want to keep getting payments from you, as long as you are making payments they don't want to get involved in anything that will stop you from making them.

Many banks will not approve any offers unless they are really close to what you owe. Most of them are insured against foreclosures and will receive up to 95% of what you owe in the event of a foreclosure and then they can sell your home and get even more money. In a short sale situation they generally get less money than they would if they foreclose on you.

If the bank does accept a short-sale offer they may require you to make up the difference, you can refuse and they will refuse or renegotiate the offer. Check to see if CA is a non-recourse state. In non-recourse states the banks cannot come after you for the difference between what they get and what you owe (double check this info). Also, in the past, the IRS could charge you taxes on any debt that is forgiven (if your owe $180k and sell for $150k you are being forgiven $30k which is taxable), there is a tax moritorium on this until the end of 2012 - so make sure you do what you need to do before 12/31/12 in order to not to pay additional taxes.

It may also be prudent to talk to a property lawyer in your state to make sure you are doing the right thing (prob @ $300 for a couple hours consult). The game has been changed by the bank and they keep changing the rules arm yourself with as much info as poss (hold on tight, keep your hands and feet inside the ride at all times and occassionally throw up your arms and scream). Look up your lender online under "lender name"sucks.com you will find out a lot about how they handle the process from other people who have posted.

Good luck - it can be a very stressful situation but it's not your fault. You are the one who is losing any equity you used to have (including your downpayment, improvements, addtl payments) the banks created the situation and don't lose much if any money and will be as difficult to deal with as they possibly can.

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A.B.

answers from Sacramento on

I just completed a Short Sale on my house do to my layoff. I also never borrowed against. I spoke with two different real estate agents and the both told me to stop making payments and not throw away the money. The short sale process is crazy long and a lot of work. But it is the right thing to do. We found out that since my husband was not on the loan that he could purchase another home. That what we did. Our new payments are $1,145 less a month and we have a much larger home.

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B.S.

answers from San Francisco on

This is definitely a tough decision to make. When we tried to do a short sale on our house, we continued with payments for several months to try to save our credit. But the mortgage company finally let us know that they couldn't consider short sale unless we had defaulted! We wish we would have saved our money for those months because our credit ended up going downhill fast anyway. And because we had a double mortgage, the second mortgage company screwed us around and still wouldn't accept the short sale offer. Thus, we're going to be going through foreclosure soon. Not something we ever thought would happen to us. Before this, our credit was impeccable. Aaaaarrrggghh! Very frustrating. So I'd say, save your $$.

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M.K.

answers from Chico on

There's a difference between a "Short Sale" and selling it for below what you paid for it. The best for your credit is to keep making the payments and stay in your house or pay off your loan with the sale of the house. To the best of my (not expert) knowledge, you HAVE to stop making payments because of hardship before the bank will consider a short sale. Definitely talk to your mortgage holder.

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