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Short selling an investment property

I own a condo that I converted to a rental property appx 18 months ago when my wife and I bought a house.

The monthly rent I collect is just enough to pay the mortgage, so I'm losing appx $1300/M between HOA,Taxes, Depreciation on the property.

Because of this negative cash flow, I'm looking to sell the property on a short sale as its only worth about $225K while my outstanding balance on the place is $265K.

I've already talked to my CPA and I'm confident from a tax perspective that I should not be in too bad of shape because I've already booked a substantial amount of passive losses against the property.

What I'm concerned about is that my mortgage on my primary residence is with the same bank as my investment property that I'm looking to try and set up a short sale with.  My wife and I also do our banking with this bank.

Could the bank try and come after my primary residence to get the amount forgiven on the short sale?  Could they take the money out of my checking/savings/IRA accounts?

I'm trying to determine if it would behoove me to move my primary mortgage and banking to another institution to help give me leverage in negotiating a short sale as well as protecting my assets from the bank.

 

 


 

 

 


 
  • March 06 2010 - Alamitos Heights
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Answers (7)

The lender will be unable to come after your other assets or otherwise attach liens on your assets IF you pre-negotiate a short sale with the lender and the lender provides you IN WRITING that the debt is forgiven.

If you are planning on doing a short sale without the cooperation of the lender you risk owing them the difference between the mortgage and the sale price.

How can you get a lender to cooperate? If they own the mortgages on both your home and the investment property, they would be smart to take a modest loss on the condominium rather than risk default on both properties (and subsequently losing a lot more money). Whether you bring that fact to their attention is entirely up to you.
  • March 06 2010
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If you have equity in your primary residence, you will not be able to do a short sale. . the lender will ask you to refi and use the money to help you keep afloat.  is difficult but it can be done under the right circumstances .
  • July 23 2010
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work with an agent who really works short sales, there are issues that have to be address and delt with but it an be done... email me if you need ...
  • November 18 2010
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In Florida, it is rare that a bank will agree to short sale an investment property...particularly since your rental is covering the mortage which is the bulk of the debt.

You also have to prove that you cannot afford the payment....banks do not care about your property "depreciating"...everybody's property is.

It is good that you have discussed with your CPA, now counsel with a real estate attorney that can give you ACCURATE advice that applies to your particular situation.

Erika in Orlando
  • November 18 2010
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Short sales are done on a "case to case" basis, there is no way to know it the bank will or will not approve a short sale on an investment property, I did a Short Sale on an investment property, was approved and sold and the seller did not get any deficiency judgment whatsoever. You need to prove that you are not rich, that your primary residence is the only asset you have and of course you do not have much equity on it, then if your agent can get a reasonable offer for your investment property a short sale can be negotiated and acomplished.

  • November 18 2010
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Often...I found it depends on who has the loan on the properties.  Some lenders will wzant you to come up with money if you have money in the bank, or equity in a home, while some will let it slide.
  • November 18 2010
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Lenders can't come after retirement assets by law.  They can however come after you for the difference on the sales price and what's due on the mortgage for the investment piece.  The only time a bank gives a forgiveness in a short sale is for the primary mortgage on your primary home.  Everything else is technically collectible. 
  • November 22 2010
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