Profile picture for user023290

What is the best way to stay in the home I live in that will be going up for a short sale?

The Situation: A friend of mine at work recently moved his family into a larger home. They offered me the opportunity to lease the house they moved from. I agreed and we settled on a 1 year lease (expires this Oct.). We also talked briefly about me buying the house sometime down the road. Without getting into too many details, they are basically losing money (their mortgage vs. my monthly payments) so now they are thinking of doing a short sale. Not the best of news, but as we are friends, we understand each others concerns and are trying to figure out the best way to go.
The Question: What is the best way for me to go about being able to buy the house? I checked the Zestimate on the house and various rates and my mortgage would be roughly $450 cheaper (15yr) or $750 cheaper (30yr) than what my monthly payments are now, so I figure that has to be good. My credit is in the low 700s with steady income. I would also be a first time buyer.My concern is with a short sale, how do I go about getting the best bid? Thanks for your time and help!
  • June 20 2012 - US
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Answers (4)

Profile picture for Lawrie Lawrence
One other thing to think about, if all item qualify (you for a mortage and your friend for a short sale), you'll also be ask to sign an arms length affidavit.

An arms length affidavit basically states that the buyer and seller are acting independently and have no relationship to each other. The concept of an arms length transaction is to ensure that both parties are acting in their own self interest and are not subject to any pressure or duress from the other party.

If you sign, you will be committing fraud, as you do have a prior relationship.

  • June 21 2012
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Profile picture for AmeriHomes
All of the above is stated accurately.
  • June 20 2012
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Profile picture for Ofe Polack
I suggest that you first check to see if your friends qualify for a short sale.  It is a very sensitive matter because, they are supposed to be living in the property, not renting it.  So the bank will ask them where they are and the answer is we are not at the home we owe, it is rented.  In the event that they have not missed any payments and in the event that you qualify to purchase the home, there should be no problems.  But if they have forfeited payments, they need to request a short sale, if that is approved  and you qualify to buy then find yourself a good buyer agent who understands short sales and make an offer.  They should find a listing agent who can do a comparative market analysis do not rely,  please on zestimats, most of the time they are off.
  • June 20 2012
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Will your friend qualify for a short sale on the house? Lenders just don't allow a short sale because the owner owes more than it is worth. There has to be a hardship, little or no money (stock account, savings, retirement account) and you friend would have to show that they are no longer able to make the payments.

Would you be able to make the payments (mortgage, taxes and insurance) if your friend sold you the house for what is owed? If so, would the house appraise for that amount? If the answer to both those questions is yes, than that might be the way to go.

If the house does go for short sale (with bank approval) make a strong offer quickly. Get pre-approved for a mortgage and submit your pre-approval letter with the offer.

Good luck!
  • June 20 2012
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