Lenders are not willing to look at a short sale unless you are already delinquent on your mortgage payments. This came first hand from the lender. So, there is no way to avoid the hit on your credit by multiple delinquencies if you want to do a short sale. It is still a much better alternative and less damaging than a foreclosure.

Ashley, I am not finding that at all. I am seeing short sales done when people are never late.

regards

–Richard

Richard

I found the same thing as Ashley. Century 21 would not work with me until I was two months delinquent. When I started with them I was not in the rear. They held a home equitity loan on the property. The first holder HSBC was very cooperative and willing to work with me. I now have an offer but my credit score is already shot.

Thanks

Don

To do a short sale while you are on time with your payments, find a buyer and put together a purchase agreement. Make sure it says "subject to lender approval." Then get a BPO (like an appraisal) and put your financial info and submit to the lender (or lenders) with a hardship letter.

They will assign this to a negotiator in 3 weeks or so (sometimes sooner or later). In my experience they pay just as much attention to you this way as when you are delinquent.

regards

–Richard

I am working with multiple lenders and have found that if you are not behind they will not consider a short sale, even with a full package in the lenders hands with a purchase agreement ready to go. I am sure some lenders might do it, but the ones I have been working will not.

Wells Fargo won't consider a short sale without missed payments either. If you live in CA, it is true that walking away is a better option than a short sale (this is based on advice from accountants and real estate attorneys). A short sale WILL hurt your credit as much as a foreclosure in any state (unless you can find a way to get the bank to approve it without late payments, as Richard it suggesting); however, if you are in a recourse state, a short sale is better because the lender won't attempt to collect the balance of the loan (that's the whole point of a short sale). In a non-recourse state, there is absolutely no advantage to the seller. In fact, there are severe tax implications with a short sale that don't exist with foreclosure. Unfortunately, all of the foreclosures have negatively impacted home values and even those who can make payments are sometimes forced to stop doing so, if they need to sell and can't afford or simply don't think it is financially wise to take the loss. In that case, walking away can make very good sense. Best of luck to everyone in this situation.

Richard, I am looking to short sale my home I have never been late & have good/excellent credit, my question is I want to look for a different house what should I do? I know I have to be in the new house before I can short sale the other so how do I go about that? Please help my current mortgage is a neg/am loan that matures in March & I'm at least $50,000 upside down. Michelle

Michelle - You need to find a buyer for your old house. I wouldn't buy something new until that was done. Then you submit a short sale package to your lender (or lenders) and they negotiate with them.

–Richard

Hasn't been my experience that you have to be late. They may *say* that but they will accept a package and assign a negotiator to it if it is put together right and you say you are doing a short sale.

Ann, what are the tax consequences of a short sale as opposed to a foreclosure? I am not aware of a difference. Cancellation of debt income is the same whether it is canceled through a voluntary act or an involuntary act.

–Richard

I bought a new home with the intent of having my old house as a rental property. However, my potential renter's sister who lives in another country died and my renter has to take care of family matters just as she was about to move to my rental property. Now I am stuck with 2 house payments and without a renter I can't possibly afford the payments of both houses. I have 2 mortgages on my rental. Is a short sale my best option? I have no equity on my rental property and I wonder if it could still qualify as homeowner occupied property since I wasn't really able to rent it out

No matter what a short sale is better than bankruptcy or foreclosure. One quick response to a comment. A short sale should only be done for a homeowner that is in financial distress as a last resort to avoid foreclosure. It should not be done as a way out of a mortgage or to create enough equity to pay an agent.
Jonathan Christopher of Short Sale Way

I have a house I am trying to sell in Pa. I am to close on Friday the 27th. I am $17,000 upside down and was planning on paying this with some cash at closing at the rest on an access check on a credit card for 0% for 12 months. I recently have learned of a short sale and my lender on my second mortgage approved it. I have never been late and I have good credit. Would it hurt my score more to raise my revolving debt or due a short sale and make payment on the deficiency

If you are strictly concerned about credit score, borrowing money to pay the deficiency will probably hurt your score less than a short sale will. A short sale is generally reported as paid for less than the amount owed. This does lower your credit score at least for awhile. Borrowing will or will not lower your score. Good luck with your closing.

regards

–Richard

Just a heads up to everyone out there; banks/lenders ARE looking at short sales even if the homeowner is not delinquent on payments OR showing financial hardship. I have spoken to several Loss Mitigation departments at different lenders and they have all indicated the same thing: because of the drastic drop in home values they are willing to look at every short sale that comes across their table.

I have found the same thing to a point. Depends on the mortgage lender. And one hand doesn't know what the other is doing. Indymac bless them was proactively contacting 60 day late pays and making them aware of the short sale option, hooking them up with brokers and so forth. But then when people would call in, they got a different group of folks with a different story.

regards

–Richard

We currently live in FL and are looking to move to CA. My husband has found a job out there however, we are about $40-50 thousand dollars upside down in our home. We were not those people that bought a house we could not afford, we tried selling our house before things got to bad but nothing came of it. (Obviously) We were looking into doing a short sale. Is this something we should do or should we wait out the market until things turn around. HELP!! We are ready to move we just do not know where to go from here.

I would investigate doing a short sale. I have a video on short sales here on the site.

regards

–Richard

i was wondering if you happen to know if Suntrust is one of the lenders who might accept a short sale without being delinquent on payments?

It's always worth trying. I don't know that lenders as a rule have a policy. If you bring in a purchase agreement and your paperwork and BPO, and it is all properly presented, my experience is they will assign it to a negotiator. And that is the step you need in order to get their approval. Being late in payments is almost always necessary for a loan mod but not for a short sale. It does make it easier though.

warmly

–Richard

Hello,

I bought a 1/1 condo in FL that is currently being rented by my older sister. My husband and I own a home, that we bought together 3 years ago.

The condo association does not allow renters, so the only way around this is to have a family member rent from me without the association finding out. They believe that she is a single mother just staying at my property. I had to provide them with proof that she was related to me. My sister recently lost her job and has plans of moving out. My husband and I cannot afford both mortgages and HOA fees.

The condo is extremely outdated and the surrounding condominiums are newly build and very modern. I'm upside down and just received a newsletter that one of the newer high-rise condominiums just built went bankrupt and are selling 1/1 for 90K. I owe 120K on my condo, which it literally down the street. The difference in look is outlandish. I’ve been fighting with the association to paint the place, possibly pressure clean the stairs, anything…to help modernize the building.

I need some guidance on how to proceed with this issue. I have excellent credit and would hate to lose this property but I’m concerned that might be my only option beside fighting with the HOA and that would entail court fees.

Best Regards,

Tasha

Tasha

Richard, I'm hoping you can help me out. My husband lost his job in November. We've paid or mortgage on time so far, but our money has run out. We will not be able to make the Feb. 1st payment and seriously need to sell our house. We bought it two years ago when the market was fantastic here in middle TN and we now owe more than it is worth. We did an 80/20 mortgage when we bough it so we have two lenders to deal with. I don't know how to start the process. We have decent/good credit right now, but i'm afraid that is all about to go downhill. I am realtor myself, but have never done a short sale. We bought our house for $274,000 and can probably sell it for around $240,000/$250,000. How do we deal with both lenders? Please help us know how to go all about this. Thanks!

Thank you for your question. I answered it in my daily email. The way to start is to get the property sold. Then you put together the Broker's Price Opinion (BPO), financial information on you and your spouse, hardship letter, pre-closing HUD-1 and a few other goodies and submit them to the lenders. Work with both lenders but focus on the first as they will kick some money to the second, who has no real choice in the matter. The second will often work a deal where you can pay back a vastly reduced amount over many years, as they have no equity and little ability to bargain.

warmly

–Richard

I purchased my home approx. four years ago for 95K on an ARM loan. When the interest rates jumped after two years I was unable to meet the expenses. We immediately filed for a loan modification but went into forclosure while waiting on the modification papers to be approved because it took them 8 months to do so and while in the process they would not accept payments. Since then we recv'd the approval and the forclosure process has stopped. As terms of the new loan we now owe 97K instead of 95K and they only dropped the interest by approx 1% fixed for three years and then it goes variable again, but we have been making all payments on time since then (approx. 5 months). Due to the drop in the housing market our home is now only valued at approx. 70-75K and to make matters worse during the last six months or so we have seen a rapid decline in the safety of our neighborhood. A close family member has offered me 2 acres of land (to be put in my name), which we would like to have a home put on. In your opinion would we be better of to try and do a short sale or is forclosure our best bet. In either case can they come after the land that I have been given to cover costs. We are currently living in Florida. Any advise would be greatly appreciated.
Thanks-

I have never been late on my payments and I would like to do a short sale. However I am concerned with how it will affect my credit. I believe that my lender will work with me, even though my payments have been on time. So again, my concern is how the short sale will impact my credit score.

I have been told various things. I have been told that my credit score will not be impacted if my payments have been on time, I have read that with a short sale my credit score will drop 80-100 points (but I am not sure if this is for people who have stopped making payments) and I have been told that the impact from a foreclosure and a short sale is about the same.

I have recently accepted a new job in another state and cannot afford to keep the home. I tried renting the home, but had a very negative experience that has ended in eviction. Because the home is not my primary residence, I cannot benefit from the Obama plan, I can't do a loan modification through my lender, so my only option is to find another renter or do a short sale (foreclosure is not an option). Please let me know if I continue to make payments, how a short sale will affect my credit and if there are any other liabilities (i.e. the tax implication).

Thank you!

Hello, I'm in a very bad position and I don't know what to do. I've been very stressed about this and it's affecting my health at this point. I bought my home in 2006 for $172k. It is an 80/20 loan with a fixed rate for 2 years, adjustable after that. My rate began to adjust recently. - I applied for a modification last year and was denied. - I then tried to refinance and was denied due to declining home values. - I tried to modifty again after the refi attempt, and again I was denied. - I tried a short pay refi and my first lender AGREED to accept $72k, but my second lender denied it. - I then tried to get approval for a principal reduction modification and I was denied for that too. I don't know what to do. Values in my area have dropped to scary lows, and there are houses that are sitting on the market in my neighborhood for 6 months to 1.5 years with crazy low prices - one was listed for $65k and sat on the market for 10 months at that price! I bought my house for $172k!! I dont know what to do. My husband lost his job in March, our rate has adjusted, and we're not going to be able to make these payments for much longer. So far we are current on our payments. What should I do? Is there a way to get these lenders to agree to help me so that I'm not forced into foreclosure? My first lender is SPS and my second is First Franklin, who has been completely unwilling to help me. I'm afraid that even if I DO try to short sell my house, that it will take a year for it to sell, and I don't think I could ever hold on that long. I'd like to get out of this house and buy a cheaper one that I can afford, but I wont be able to do that if I ruin my credit. I'm in such a bad position and I dont know what to do. Any suggestions for me?? PLEASE I need help

What was the reason they turned you down for a mod? Usual reason is lack of income. Is there income you did not include, like income from renting a room, or perhaps tax refund that you normally get, where you could reduce the amount withheld from tax to increase take-home pay?

A short sale is a reasonable option for you. Interview three agents who claim they specialize in short sales and find out who has done at least 20 successfully in the past 6 or 9 months. That is the person you want. You will price the house low enough for it to sell quickly. The lenders will accept this because if they don't, you will walk away.

This will be okay, this situation.

warmly

–Richard

Thank you for your comment!
The reason that they turned down the Mod is they SAY that I make enough money to cover the payments, but this is COMPLETELY untrue! I sent them an expense list which shows that we're upside down in bills, and also let them know that the loan was obtained under my income as well as my husbands…but now he's unemployed AND our rate has adjusted!! I just don't understand how they can be so unwilling to help. This all just makes no sense to me

If I do a short sale on my home, will any lenders out there consider me for a new loan on a new purchase, or will this ruin my credit? I'm afraid that I wont be able to buy something else after a short sale, and I cant really go and rent anything because I help out an animal shelter in the area and I am fostering animals. I doubt that I would be able to bring them all with me to a rental, and I don't want them to be homeless as well This is so horrible

I am curiuos as to how this works. My husband and I bought a home in AZ in 2007, quikly learned that AZ was not the place for us and moved back to WA. We originally planned to sell the house in AZ, had it listed, but after 90 and the market headed south fast, we decided to rent it out and buy a home in WA. All has been okay for almost a year and now my renter for 2 months straight has not paid on time. This is the 11th and I have no money to pay the first on the rental. I am tired of the stress…what to do!!! I have no equity about 15k under and no money. Also note my credit is squiky clean. The renter is giving my no choice.
HELP!!!!

i have a 80/20 loan and in the process of going through a short sale. is it true that i only have 60 days from the day the bank approves as a short sale, to find a buyer. if i do not find a buyer, does it go into foreclosure after the 60 days is up? also, does both lenders have to accept for the short sale to go through, or only the first lender has to accept? the second lender is saying the first bank is not giving them enough, so i have to negotiate and come up with the rest to save myself? do you think that is a wise idea, or are they just scaring me?

i have home loan with INDMAC ,tryied to get a modifcation, did`nt happen,house in forclosure now sale date is 1-6-2010, I`ve have an offer for a short sale, my lender still wont work with me . Only if cash offer . I need HELP NOW, I have 5 kid`s no where else to go!

Five years ago I bought a home for 220K. I cosigned with my parents who helped and put 20K down, so I financed 200K. We did a conv. 100% 5/1 arm, due in Oct 2010. My brother agreed to live with me to pay the mortgage, so we added him to the title. Five years later, homes in the neighborhood are going at auction and/or short sale for about 95K. We owe 185K. I'm about to get married, and my fiance doesn't want to live there anymore, nor does my brother who is ready to move on. I don't want to ruin my credit nor my parents perfect credit. I'm getting married in October 2010, so its time to make some tough choices. My brother wont live with us after we are married, and me and my fiance could make the payments (although it would leave us with no extra money), and we wouldn't be essentially unable to refinance for a long time, and being almost 100K underwater, it doesn't seem like staying and paying makes sense on something that is so badly valued, and which could also go up in monthly payment as we are on an adjustable rate. Honestly, even if we missed payments, not sure they would do a modification as my parents make enough money to not show a hardship even though they don't live there, the bank probably won't deal as they are on the hook with me for the mortgage. I guess ideally what we would like to do is try a short sale without missing payments, lender is wells fargo, so we shall see. Any advice?

I'm trying to figure out which way to go with my house ($140k under water), but I keep reading conflicting arguments. Many say a short sale and a foreclosure are essentially the same in terms of credit impacts. Others say a short sale is the way to go as long as you can stay current on payments while doing so to lessen the credit score hit. Fact is, my job has been transfered out of town (found out last week) and I will be starting work 300 miles away in 3 months. Not much time for a short sale, let alone staying current, due to the fact that I will need to rent a house for my family. As soon as I start paying rent in June, I will have to stop mortgage payments. A foreclosure seems like a lot less hassle than a short sale, and possibly the smart choice given comparable credit score impacts. What do you think?

Just left the comment above, but wanted you to know that I am in CA in case that makes a difference in your response. On a foreclosure, can they chase me for unpaid debt? What about taxes? I know on the short sale you can be held responsible for paying taxes on the difference between sale amount and amount owed on the loan, since they view that as income. Thanks for your help.

Hello Richard
Can the lender come after my other assets, bank account, 401k, etc?

my wife was kinda forced to quit her job cause of health reasons a yr ago n has been denied twice so far for dissabilty.. so she was takin care of the bills n decided to hide them from me because she was simply noy paying them.. then when i came across 1 and noticed it was way behind i then found out when i so now im waitin to see called my morgage company my house went into forecloser 2 days ago and im4,400 behind and now owe for forecloser fees also plus have all my other bills behind. I DONT HAVE THE MONEY.. so now im waitin to see if i qualify for a special loan..and if i dont they will help mr sell… i live in wisc. n some people are sayin my credit is soooo bad now that i should just let them foreclose.??? help please

I'm concerned if I'm doing the right thing! Due to my high risk pregnancy I'm not able to work so i haven't been able to pay my mortgage, we put it on short sale and I'm not sure if that's the best thing to do? I don't know how much it will affect my credit, will i ever be able to buy another house? Ive considered maybe just putting it for rent instead of short sale to save my credit?

Whats the best thing to do?

Richard, I have an unusual situation. Can you help? My Dad died in 2004, leaving my Mom with a mortgage and no cash. My brother and I took out an equity LOC to help subsidize payments, and Florida housing market was booming, and we wanted to keep Mom in the house. Mom now has Alzheimer's and lives with me in Colorado. Housing market crashed and we owe almost $600K on the property. Had an offer at $525 and turned it down… should've taken it. Basically, we'll be upside-down $70K - $100K. Mom is the only one on the primary note, and I no longer care about her credit as she's completely dependent on us. However, I am on the equity line with her (circa $110K). If we do a short sale, will my credit get hit as much as if I'm on the primary note? Any creative ways around this to preserve my score (I've got a 750 right now)?

My mortage company are offering me a 17% reduction on my account. I have never missed a payment, have good equity in the house and it appraises for more than the balance owed on it. I think this is called a short refinance. What are the consequences on me taking their offer? Will it change my credit score. Good idea or bad? Thank you.

My boyfriend and his ex-girlfriend bought a house together a few years ago before the market crashed. They did not end up working out and split up almost 2 years ago. He still, to this day, has been paying half the mortgage, even though he is not living there at all anymore. He doesn't know what to do to get his name off the mortgage or stop paying on the house because his ex cannot afford it by herself. His ex is afraid to do a short sale because it would affect her credit. What options do they both have to get out of this situation when they both can not afford it on their own and want to move on from this?

My home is currently worth $54,000, I owe $137,000 on it. I live in southeast Michigan and I had a big drop in salary at my job. I have exhausted my savings and refuse to tap into my 401K. I have good credit; however I need to get out of this home. Should I consider walking away and saving my money for 12-15 months before they make me and my family leave or do a short sale and pay an attorney money I do not have. Please anyone with some advice please let me know.

OK I'm sorry but I have to make my comment because we have been through this all and know very well the truth.

First I want to say VERY good article. Thank you for helping to get the truth out and hopefully sway people to check into their own situation more before listening to others (a lot of greedy Agents) like some of the comments here. It's flat out disturbing. I can't beleive the harmful information being given out.

Do not believe these supposed educated Agents demanding you can not do short sales with out missing payments. It's not always true. We are doing one right now. We went through many Realtors claiming this and also trying to get us to see an attorney (the same attorney they where all getting kick backs from) that we didn't even need. We had Agents sitting on our couch talking us into not making payments and how great it is to just pocket that money. "DO NOT make anymore payments, not one more, please sign here!" Wrong wrong and wrong. It can be done and it's much better for most people, their credit, future home purchases and even how you look by banks.

After 4 Agents who were (pardon my rudeness) either greedy or stupid we finally found a wonderful Agent who cared, put us through to her short sale agent who is handling everything for us and we are not only doing a short sale with out missing any payments but because we are doing so it's giving us the advantage of selling the house for a higher price which gets the bank more money in turn made it so they where more willing to short sale. In turn our credit will have little damage. We will be buying another home right after in a better situation for us. Agents are not all the same. They do not all care, they do not all know everything. You need to keep looking. Find what is right for you, they are out there.

It's sad as ours said most people come to her when they are 6 months behind and in desperate need of a bad short sale on the verge of forcloser due to listening to agents to them to not make payments and sit. Now they are in trouble. There are some (very few) loans that do not allow it but all that needs to be investigated on a each person basis. Why not see first before diving into a bad situation?

Again I'll note that we did a lot of research and went through a year of bad agents. We learned you stop making payments, dump money into lawyers to threaten the banks it only hurts you, your credit and puts money in the pockets of greedy people and lawyers while the bank and you are left in the wind. Do what's best for you but do research to find what that is.

We just made our March payment and we are in the middle of short selling with an agent and bank who is all in agreement with what we want. It's a wonderful feeling to know in the end of this we are going to be ok. We feel safe now, so please any agent who claims "IT CAN'T BE DONE" with out delving into every inch of your situation or even attempting to talk to the bank needs to be kicked right out the door.

Ann,

Wells Fargo is our lender and they did a short sale with us all because we are keeping up on our payments and doing so until the house sells. In fact they are known as one of the better banks for doing short sales while making payments. We have never been late. They where more willing to do so, it depends on the each individual situation.

Richard,

I purchased a condo in 2005 at the peak of the market. The csot was 800K, the loan is for 700K, whick is an option arm . Comparable sales are at 450K, additionally 27 units that the developer did not sell were forclosed on this past weekend by the Bank.

I don't believe I will ever see or realize the 800K value for many many years if ever.

Any advice?

Richard,

My situation:

Purchased my home for $422,000, 3 yrs ago
I owe $370,000
Appraised at $405,000.

Current divorce has caused an extreme financial hardship, I am current on all my mortgage/taxes, but this is at the expense of other bills/debts. I run a negative balance on my net income each month and my savings will be gone in 30 days.

Would a short sale be advised? How will this affect my credit? Do I need a buyer?

Any advise would be appreciated

Help please!

I suppose different lenders are different but Richard seems to be correct, at least for my scenario,
I have never been late on a payment on my rental property. Tenants moved and I put it up for sale, closing day disaster and major water damage, insurance will not cover as it had a 60 day vacancy clause and no coverage for water. So we are out 12k to ServPro for dry out and now need 10k more to rehab. We were going to break even on the house but now it is worth half the value and we cannot afford to rehab it for selling so I called mortgage and got short sale packet, they never even mentioned needing to be late.
I am just trying to get an accurate assessment of how bad it will hurt my credit? I have 4 mortgages, never late and need my credit to be good for my work as I am a contractor and have background checks every time I change jobs (2 times a year sometimes).

We have owned our home for 4 years and just found out that the builder is building our exact house two streets over for 200K less. We have kept current on our payments but want to look at a short sale. How do we start the process?

Why would the opposing lawyer call mine and say "she is off the mortgage note".

Background:
Trying to enforce marriage settlement agreement.
(1)
She wants me to sell the house (at a loss of 50%).
(2)
I want her to pay (Appendix A) the funds due to me. (the money to be used to refiance the house).

Clearly, her father, a real estate agent for over 20 years, knows that while you can remove a name from the mortgage, you can not remove a name from the promisary note without refinancing.

So what game is her lawyer up to?

Hello
I live in NY and both my husband I lost our jobs in 2008. We tried working with wells fargo on temp loan modification they did it for 3 months then they made the payment so high we could not afford the modification payment. We did file bankruptcy listing the home to I assume protect us if we cant afford it. We did plan on keeping it but with no change in the job status almost impossible. To protect us we listed it with a realtor and are tying to short sale but my understanding at this point that we are not protected from a foreclosure. Time is all we are after.
My question is does it make sense for us to even be bothered with a short sale?
Will this hit my credit again? My tax adviser told me they can't tax me on the balance ( I hope he is correct) We had an equity loan too but when they call me about the actual mortgage they always say they don't know what is doing on with that loan ..yet it is part of Wells fargo/ Wachovia take over I can't get a straight answer from the bank

I sold my home in January 2011 through a short sale. I was never late on my payments, but BofA allowed the short sale because my job was forcing me to relocate to another city. The only thing that shows on my credit report is a notation that says, "account settled for less than full amount." My question is how long will this notation remain on my credit report? When I was working with my realtor, she indicated this notation would stay on my report for three years. I am trying to find out if that is true? I was also told it's possible to purchase another home after two years, is that true? Surprisingly my credit score only dropped 48 points after the short sale, but it's been 9 months and no increase in score has happened. Can you please advise me if the information I received is correct? Thanks.

I just bought a home 7 months ago…I thought I liked the location but its too far away from my job/family etc. Also I'm going thru a possible divorce and my income has been lowered due to child support. Do I short sale with a good credit score or walk away? I live in Georgia if that makes a difference. Thanks DL

Is there help for under water loans on investment property(unimproved lots within a new development) when there is no possibility to do a short sale? Too much inventory is currently on the market in the location and there hasn't been any movement for at least two years and very little for the past 4 years. An example of the problem is one of the lots (which we have several) has a loan of $120K is currently valued at $11K. The bank will not do a short sale, deed in lieu of. principle reduction or reduced rates. We recently refinanced one of the loans and they doubled the rate and required significant money to buy down the principle. No sure foreclosure or BK aren't the only options at this time.