Profile picture for skimokid

New Advice on Home purchase after relocation - can i short sale my old home??

About 1 year ago I got a job promotion in California.  I relocated from Minnesota and have a home in Minnesota.  I currently rent my house in Minnesota, no profit, pretty much a wash with my mortgage payment.
Shortly after my relocation, my home in Minnesota was damaged by a tornado, to the tune of 65k in repair costs, insurance paid for that.
My fiance and I would like to purchase a home in California.  Which we should be able to do, however there are more repairs needed at the house in Minnesota, and the renters are not taking care of the house.  Some repairs that are needed could have been prevented if they had contacted us sooner.. I digress.

So here we have a home (in my name) in Minneapolis, want to buy a home in California.  The home in Minneapolis is just a drain at this point, we want to get new renters in but now have to clean and repair the home. And there is no equity in the home, it is now worth less than we owe.

Can we short sale and buy another home. I hate renting and of course would rather own.  With all the things that has happened to our other home, it is losing us money.

HELP, what would you do.. or what is a good option?
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November 23 2012 - Bay Point
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Answers (10)

Yes, it is possible to buy another home THEN short sale.  I doubt you would immediately be able to qualify for a mortgage to buy another home AFTER a short sale.
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January 01 2013
As others have said, there are many maybes involved. I am always somewhat amazed at how owners just assume that because they owe more than the house is worth that they can just unload it on the lender holding the mortgage. Our country has become so irresponsible that  thinking of a short sale is paramount. "Stick it to someone just as long as I come out OK". Your bank might not allow the sort sale, they don't look forward to losing money when a borrower defaults on their promise. You, as a borrower, can't decide to short sell and assume the lender will allow it. They might, but your case screams They Won't since I don't see the hardship required for them to.
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January 01 2013
Profile picture for BonnieJohn
Don't do it at your own. The best option is to ask some professional cosultant [Promotion and hotlink removed by Zillow moderator.Please see our Good Neighbor Policy.] 
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January 01 2013
Profile picture for maryaitken
Yes we did it but used an attorney to guide us through every step of the way. I wouldn't suggest doing it on your own.
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December 26 2012
Two issues in your question. First one - I wrote a blog on short sales here:  [deleted by Zillow moderator. Please see our Good Neighbor Policy for posting guidelines] Second question most folks are not addressing - Are you using a Property manager to help with your house in Minnesota? My lease is very specific about who pays for repairs, etc.  My tenants always contact me and I have it all taken care of quickly.  The market is turning around in many parts of the country - so before you write off your house where you used to live, you might want to see if onsite management can help you maintain its value until the market there recovers.
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November 26 2012
You might wish to consult with an attorney to see what the ramifications would be on your credit if you surrendered the keys and deed to your house in Minnesota. The proper term would be deed in lieu of foreclosure. You might want to consider your options soon as there may be a tax imposed on owners who short sell a property after the first of the year. The tax would be on the difference of what the property sold for, from what was owed.
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November 23 2012
Profile picture for wetdawgs
If your spouse qualifies for a loan, she can only use your income if you also qualify for a loan.   Another approach you may wish to take is to talk with a couple of lenders to learn the way to minimize the impact of a short sale (i.e. minimize time between short selling and being able to get a mortgage).     If you qualify for a short sale, perhaps it is better to do it sooner than later (without skipping payments) and then purchase when eligible again.

If the fleeting thought went through your mind "maybe we should buy, then bail", be aware the lenders have a lot of safe guards in place to prevent that from happening.

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November 23 2012
Profile picture for skimokid
If we could sell the house, we would lose probably 30-40k and we cant pay the difference. There would be 2 of us trying for a new mortgage, my spouse would be a first time home buyer and her credit is better than mine, except I make double than what she does. Our combined income is great, it is just this house in Minnesota. So far our plumbing and contractor bills are $2800 bucks. The house we have in Minnesota is not in a great neighborhood so home values have dropped even more since that neighborhood was hit by the tornado. If my spouse qualifies for a loan can she use my income as well?
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November 23 2012
This is a very interesting question.  I  agree with what wetdawgs says, in addition, there are a couple of facts I like to point it out.

If you are qualified to shortsale your house, your credit is ruined by 2-3 years compare to foreclosure (7 yrs.)

You mentioned the house is in your name, and if you plan to buy in California, is it going to be other people's name (such as your spouse?) or still going to be your name?   The lender now days look at your credit history and everything else with a magnify glass.  So if you have a shortsale on your credit, you probably won't get loans.

Lastly, do you have an estimate of how much it will cost you to clean and fix the house?  If you do the regular sale, how much would you lose (money wise)?

thanks
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November 23 2012
Profile picture for wetdawgs
Can you sell short and then buy immediately?   There are lots of "it depends" in a short sale, including qualifying hardships.  (Here's a good link related to qualifying for short sales.)    Simply being under water isn't sufficient hardship, being forced to relocate for employment may qualify.     Selling the house and bringing the difference to closing to fully pay off the mortgage is the simplest to guarantee that you can purchase again immediately.   Ultimately it is the lender who makes the decision, but getting in touch with  agents with experience in short sales may be a useful step.

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November 23 2012
 
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