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Answers (18)
- Bob Georgiou, "Bob2Sell"
- Contributions:97
I read more of these responses and I will add there is some really bad advice here. The people who are blindly spouting off that California is a non-recourse state, while factually correct, is subject to some limitations.
RIght now there are investors who are buying this debt and are waiting for people like you to get back on your feet financially. These people are attorneys. They will be looking for people who could afford their current mortgages and were underwater and/or had the mans to buy an "investment" only to walk away (or short sale) after puchasing the investment. I repeat, see an attorney.
Right now you are probably wondering, how can they do that? This is how. These predator investors are keeping all the loan documents form this home. Down the road they will file some sort of legal action against them and get the loan docs on the "investment" home. They will be looking for fraud. Since there is no statute of limitations on fraud, even in non-recourse situations, and a civil action will ensue against people who have done the old buy and bail.
It will happen, down the road. It's not if, its when.
See an attorney FIRST!
RIght now there are investors who are buying this debt and are waiting for people like you to get back on your feet financially. These people are attorneys. They will be looking for people who could afford their current mortgages and were underwater and/or had the mans to buy an "investment" only to walk away (or short sale) after puchasing the investment. I repeat, see an attorney.
Right now you are probably wondering, how can they do that? This is how. These predator investors are keeping all the loan documents form this home. Down the road they will file some sort of legal action against them and get the loan docs on the "investment" home. They will be looking for fraud. Since there is no statute of limitations on fraud, even in non-recourse situations, and a civil action will ensue against people who have done the old buy and bail.
It will happen, down the road. It's not if, its when.
See an attorney FIRST!
- Ron Humes, "Ron Humes"
- Contributions:2
We deal quite a bit with Wells Fargo. You better check with Wells Fargo and your state laws about your liability with any deficiency between the amount that a short sale will bring on your property and the amount you owe. You could potentially wind up with a personal lien for the difference.
Good luck.
Good luck.
- Mark LeMenager
- Contributions:1716
I agree with those who gave Mike a thumbs up. A bank will agree to a short sale only if there are no other significant assets to go after. If you have other assets, then they will try and get a slice of them. Pretty straight forward.
- Bob Georgiou, "Bob2Sell"
- Contributions:97
The bank will excessively scrutinize your situation to prevent a "buy and bail". IN order to qualify for the new home, they will look at your cash position and require you to have deep enough cash reserve to cover both mortgage payment less 50% of the rent in addition to cash to cover the negative equity on the current property. THere are enough buyers in this market that the banks are being very selective about who to give loans to.
I advise a consultation with an attorney in order to learn the true facts about whether ot not there will be a risk of deficiency judgements. The comments by others are too flippanly put forth and the consequenses of manking an uninformed decision are very expensive.
- Pasadenan
- Contributions:21466
Obviously Johnny's suggestion assumes that the house will rent at least close to what it is costing you to to pay for it, to insure it, to maintain it and to cover the taxes..., otherwise you would just be subsidizing someone else's living expenses, as well as continuing to lose equity due to the continuing decline in value.
It is probably much easier to walk away, or even get a "short sale" if you have not bought another and are not in the process of buying, but then there are exceptions. You could claim you were forced to move due to your company relocating you, or other forced job change. Then it would be a "hardship" for the existing payments...
Sure, foreclosure would ruin your credit for at least 2 years; but the bubble isn't finished declining, and 2 years is a reasonable time to wait; and it is not hard to rebuild credit quickly when you keep to a reasonable strategy.
Of course Roberto Ribas is correct; California is a "non recourse" state, which means that the "collateral" for the mortgage fully meets the loan obligation. they cannot go after additional assets if the collateral is relinquished.
And those that think you get your money back if you bought at a bubble peak are just dreaming. It can't happen.
It is probably much easier to walk away, or even get a "short sale" if you have not bought another and are not in the process of buying, but then there are exceptions. You could claim you were forced to move due to your company relocating you, or other forced job change. Then it would be a "hardship" for the existing payments...
Sure, foreclosure would ruin your credit for at least 2 years; but the bubble isn't finished declining, and 2 years is a reasonable time to wait; and it is not hard to rebuild credit quickly when you keep to a reasonable strategy.
Of course Roberto Ribas is correct; California is a "non recourse" state, which means that the "collateral" for the mortgage fully meets the loan obligation. they cannot go after additional assets if the collateral is relinquished.
And those that think you get your money back if you bought at a bubble peak are just dreaming. It can't happen.
- Johnny James, "Palmdale Mortgage"
- Contributions:406
buy the second home and rent the first one out or lease it with option to purchase
- Greg Cook, "Greg Cook"
- Contributions:119
eenie, I'll try to get this back on track. If you currently own a home that is underwater, to buy your new home you would have to qualify with both payments.For most people that is a "hardship". In California there is no deficiency judgement for a home that is your primary residence, if you buy another home, your original home is no longer a primary. Real world says that banks almost never pursue that because it's too expensive.
You have a lot of land mines in front of you and any one of them could blow up your plan.
You have a lot of land mines in front of you and any one of them could blow up your plan.
- Tristan Celayeta, "Tristan Celayeta"
- Contributions:400
Currently you are upside down with your mortgage vs. value but you have the resources to purchase another property. Obviously you are not suffering hardship so short sale can't happen. It seems you're victims of the bubble and your best bet is probably to hang in there. If you want to relocate you'll need to face the undervalue, from your perspective, and decide to rent or sell based on the numbers.
I don't understand your last sentence since it seems foreclosed and pre-foreclosed homes are a large part of best values in the current market. Here's a paper explaining the foreclosure process, it's part of an excellent real estate primer that you'll find empowering - bookmark it.
Home many agents spout off without knowing anything on here?
Pathetic and sad...
Jason, "the bank may come after your assets" and various other quotes such as. "That note makes you personally liable if your house is foreclosed on for the balance due after what the home receives at auction"
WRONG WRONG WRONG!
Google the terms "california" and "anti deficiency" and "foreclosure"
While a bank might not agree to a short sale after you purchase another home, if you go into foreclosure you have protections in California law. Purchase money loans do not allow a deficiency judgment on a personal residence in california, arizona, and many other states.
Pathetic and sad...
Jason, "the bank may come after your assets" and various other quotes such as. "That note makes you personally liable if your house is foreclosed on for the balance due after what the home receives at auction"
WRONG WRONG WRONG!
Google the terms "california" and "anti deficiency" and "foreclosure"
While a bank might not agree to a short sale after you purchase another home, if you go into foreclosure you have protections in California law. Purchase money loans do not allow a deficiency judgment on a personal residence in california, arizona, and many other states.
- Jason Bonas, "Jason Bonas"
- Contributions:214
I doubt that you can do that. I am pretty sure that you signed a note with your mortgage (check your docs). That note makes you personally liable if your house is foreclosed on for the balance due after what the home receives at auction. I am aware you want to do a short sale BUT, you have to prove financial hardship for the bank to accept it. If you are in a position to buy another home the bank may very well come after your assets... Many times when a home is foreclosed on the bank does not come after you based on the assumption that you have nothing to come after (if you buy a home they probably will attempt to collect what they are owed).
as I tell plenty of people if it were a viable option to just walk away from your old payment and pick up a property at todays price don't you think that everyone would be doing it???
if you bought a home for the long haul and not just as a quick "pseudo investment" then over the YEARS you will be fine the values will return. this is a market correction
- CORONA NICK
- Contributions:2218
Why buy now, walk, wait a couple years and then rebuy... why buy in when there is SO much uncertainty in the market. Next year will most likely have HIGHER RATES, HIGH UNEMPLOYMENT, and HIGH FORECLOSURES....
- Cindy LaPeer ABR, e-PRO,SFR, Cdrs, "Houston Metro Pro"
- Contributions:2239
I agree w/Mike. There are no free rides. Don't clog the system and make it harder for the people who legitimately need to short sale their homes.
Kamal and Erica - these posts are not for self-promotion.
doesn't sound good. Look at the legal aspects of what you're suggesting
- sunnyview
- Contributions:25139
I would not rely on a realtor that you contact to advise you about short selling your underwater condo after buying a new house. It is just too scary. You are asking a question with specific legal implications. Mr. Emery is right, your bank may attach/lien your new home or depending on the situation or you could be accused of bank fraud with trying to arrange the short sale. I do not want to see you get into trouble. You have honest questions, but the answers really depend on the law in California and how banks are handling these situations in your state.
Please get advice before you decide what to do. Some realtors are experienced with these situations, but in the end they are not attorneys. You are talking about 100K decision, it is worth paying an expert a couple hundred dollars to answer this question. Most attorneys will consult for the first half hour for free or at a reduced rate. You have a specific question, get the 100% right answer or you could be stepping into trouble.
Please get advice before you decide what to do. Some realtors are experienced with these situations, but in the end they are not attorneys. You are talking about 100K decision, it is worth paying an expert a couple hundred dollars to answer this question. Most attorneys will consult for the first half hour for free or at a reduced rate. You have a specific question, get the 100% right answer or you could be stepping into trouble.
- Michael Emery, "MikeEmery"
- Contributions:7298
If you have the ability to buy another property (meaning cash and credit) and then expect your lender to cover you in the event of a short sale, you might be in for an expensive surprise.
There is nothing to prevent the lender from attaching a judgment against the new property to recover the loss from the first property. And short sales where the lender covers the loss are only done when a homeowner can prove hardship. Obviously if you have a downpayment for a condo (which can often be higher than the standard 3.5 percent) your lender will expect you to cover a portion of their loss.
There is no free lunch.
There is nothing to prevent the lender from attaching a judgment against the new property to recover the loss from the first property. And short sales where the lender covers the loss are only done when a homeowner can prove hardship. Obviously if you have a downpayment for a condo (which can often be higher than the standard 3.5 percent) your lender will expect you to cover a portion of their loss.
There is no free lunch.
- wetdawgs
- Contributions:26842
Buying before you sell suggests that you have the financial ability to pay your mortgage, and two mortgages. If you can afford the payments, you are not qualified for a short sale because clearly the mortgage isn't causing hardship.
You may (will) find that if you chose this course, you will either have to bring cash to closing or will have a deficiency judgment against you for the difference between the sales price and the amount owed on the mortgage.
You may (will) find that if you chose this course, you will either have to bring cash to closing or will have a deficiency judgment against you for the difference between the sales price and the amount owed on the mortgage.
- Kamal Randhawa, "krandhawa333"
- Contributions:79
Hello Eenie,
I actually am doing a short sale on a condo there right now on Reflections. My clients are going through exactly the same issues you are facing. However, if you can afford to make the payments, the banks will not allow a short sale. There may be other options which I would be happy to discuss with you. Please feel free to call or email me anytime. Good luck!
Kamal Randhawa
Broker
[content removed by moderator due to self-promotion]
I actually am doing a short sale on a condo there right now on Reflections. My clients are going through exactly the same issues you are facing. However, if you can afford to make the payments, the banks will not allow a short sale. There may be other options which I would be happy to discuss with you. Please feel free to call or email me anytime. Good luck!
Kamal Randhawa
Broker
[content removed by moderator due to self-promotion]
- Erica Starkey, "Ericajs"
- Contributions:8
eenie531,
What I would say is that there are a lot of factors to consider. First talk to a short sale expert, in your situation it's critical. You have to be very careful when considering this path and if you are working with someone who isn't experienced with short sales it could open you up to potential liability and risk. In addition, I would talk to a lender to find out where you stand in terms of qualifying for a loan. We are short sale specialists and work directly with a number of different banks. I would be happy to talk to you about your different options as well as give you the names of some great lenders. Please feel free to email me or call me directly, I would love to help you through this transition.
Best,
Erica Starkey
[content removed by moderator due to self-promotion]
Should we buy a new house and then short sale?
We bought our 2 bed/2bath condo in San Ramon in 2007 for ~$400k and since then the average selling price has been below $300k (due to foreclosures and/or short sales). We are current on our mortgage but are upside down. Wells Fargo rejected our Loan Modification request and the cost of refi is probably not worth it (currently 5/1, right now at 6.375%). We are wondering if we should buy a new house (potentially a foreclosure) and then would we be able to short sale our condo?
Thank You
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