Seller needing information on Short Sale

**drew2134** · 11-02-2010, 07:56 AM

Hi everyone, first I will start with my situation. I am a 26 year old from Jenison, Michigan. I purchased a condo in July of 2008 for $69,000 (FHA loan). I currently owe $66,000. Other units in the condo association are selling for approx. $50,000. Obviously, I am underwater. I am going to be getting married in July 2011. My fiance already owns a home and we will not be able to afford both properties when we are together. I have a full time job, but have been paying my mortgage out of my savings for the past 10 months, but the money in my savings is now gone.

I have my place listed and my guess is that it will sell between $46-50k, leaving a deficiency of $20k. My realtor says he is an expert in short sales, but did not give me much info on what happens with the deficiency after the sale. Am I responsible for that? Does the bank forgive it? Is there tax on the deficiency if it is forgiven?

Is a short sale my best option? I dont know what to do here...I am just looking for opinions...Or maybe I should go to a different forum? Let me know your thoughts. Thanks!

**Chrisopher Moltisanti** · 11-02-2010, 08:45 AM

If your Realtor's an expert, what did he say?

**markbrian** · 11-02-2010, 10:38 AM

What are similar units renting for? Have you talked with your tax/financial adviser about how renting this unit or doing a short sale will affect you?

**portland real estate** · 11-02-2010, 03:51 PM

I recommend getting advice from a tax accountant and/or attorney if you can. You may qualify for the Mortgage Forgiveness Debt Relief Act which is explained a little more simply here http://taxes.about.com/od/income/qt/canceled_debt.htm or here

**francinebourne** · 11-02-2010, 06:26 PM

I don't think short sale is the best solution to your problem, You should ask Realtor or an agent.They can help you a lot because they know what to do with your problem.

**RAM Realty Group** · 11-04-2010, 09:24 AM

A lot of this depends on the state you're in. Some states, like Texas where I am, are deficiency states meaning they can and most likely will come after you for that money. If your realtor is that good then they can sometimes get that deficiency waived but it all comes down to the negotiations. Also, who is the lender? Some lenders are more forgiving than others.

There are certain factors that you must meet in order to even consider a short sale. 1. you need to have a verifiable hardship (lost job, medical, something) 2. underwater - you clearly are.

If you are indeed able to do a short sale you need to know the ramifications it wil lhave on your credit and tax liability. I'm not an attorney or CPA so you should see them but I know from experience that you might have a tax liability for the amount the bank was shorted. You will have to count it as income at the end of the year. For example - you owe $100k and short the bank at $60k. You may get a tax liability of $40k on top of what your normal wages are.

Depending on the bank and negotiations, the bank may want you to bring money to closing, take an unsecured promissory note for the balance you shorted them, or they may just put a judgment against you.

Again, I agree with the comments about speaking with a tax advisor/attorney.

I say all these things not to scare you away from doing a short sale. In many cases a ss is the best option. I say them to let you know that a lot of it comes down to your Realtor's ability to get these things waived. Make sure he asks the bank for a deficiency waiver. Make sure they request NO cash to closing and no promissory note.

[FONT=Tahoma]Also, if you can - rent the place. Someone else mentioned it and its a perfectly good option if you don't need your credit in order to buy another house. And since your fianc

**Greg** · 11-06-2010, 10:52 AM

I believe Michigan is a recourse sate and the lender can come after you for the deficiency unless you get something in writing from the lender stating otherwise. It may even be possible that they attach a lien to your new wife's house depending on the laws of your state.

I would check with a local real estate attorney because I have seen too many agents claim to be something they are not.

There is a lot of bad information floating around so please get some legal advice before you do anything.

**aion4217** · 11-11-2010, 12:10 AM

its a perfectly good option if you don't need your credit in order to buy another house.

**Richard Balles** · 11-19-2010, 04:13 AM

Hey,

Why don't you ask your realtor, if he has done any short sale in similar situation? If yes , then contact the customer for whom he had did it. You could get the clear idea what happened in there case. This could be a live example for you and you could plan better.

Just like a case study in other cases.

**lvagent** · 11-22-2010, 12:31 AM

1. You will likely receive a 1099 at the end of the short sale. (talk to an accountant)
2. The bank will provide you with a written proposel and it will outline if they will pursue you for the deficiency or not (state specific)
3. If you are not late on payments you may qualify for a streamline refinance from FHA and that will lower your rates and payments to where you may have positive cash flow.
4. if you decide to refinance do the numbers and make sure they work. Shop around for lenders that will do the refinance because some here are able to do it with no charge to you. I don;t know if its possible there. (I'm in Las Vegas).
5. Interviewing previous cases may help but you are unlikely to have the same experience. Your financials are different, and throw into the mix that guidelines are only guides, so you can have ten people at the table where your loan is at and they will give you ten different answers and all within guidelines.
Good luck.