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When does it make sense to attempt a short sales?

My Zestimate is the lowest it has been since the economic meltdown began. I owe $190k on my home and today's Zestimate is $117k. I am chained to this house and it looks like things are continuing to worsen. When is the right time to attempt a short sale?
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May 20 2013 - Glenham-Belford
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Answers (13)

1.  Don't rely on Zillow.  Very inaccurate
2.  Have you talked to your lender about doing a loan modification?  The process can be grueling, but monthly payments can be reduced substantially.  Or just getting a refinance if you can qualify
3.  Talk to your lender about how they handle short sales... and continue to get advice as you try and figure out what will be your best options.
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May 23 2013
Sorry to hear you're in this difficult situation. As many of the above posters have already said, ignore the Zestimate and have a true CMA done to assess the actual market value of your property. Remember that your lender may have insurance to help mitigate their paper loss of allowing a short sale. Erase any image you have of someone scoffing at the difference between your loan balance and perceived home value and refusing a short sale approval. Your difference is actually quite small compared to what I've seen elsewhere.

Also, in many cases it's in the lender's best interest to take a loss now on the short sale instead of risking future non-payment, expensive legal fees, possible owner bankruptcy and ultimately having to take back the property which they'll have to sell again anyway. Banks are in the business of lending money, not owning houses.

If you have a true hardship, then there's no reason not to begin a short sale if you deem it the best avenue going forward. Don't forget to explore other possibilities, though, like a loan modification.

Here in Hawaii, I buy short sales (hot link deleted by Zillow moderator. Please see our Good Neighbor Policy) among other distressed properties (I'm an investor buyer, not an agent) and quite often the owners try loan mods first but are ultimately unsuccessful and the need to sell. But for some people, a loan mod works out and lets them stay in their home. Look into it.

Best wishes,
Michael
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May 22 2013
If you are upside in your home, and you want to get out from underneath the mortgage, then its the right time.  Its really a personal decision.  Hardships are varied from person to person.  Not all short sales get approved so you need to be prepared for the consequences if it does not go thru. 
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May 22 2013
Contact a financial advisor and an attorney for legal advice and get all your options before proceeding..
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May 22 2013
Profile picture for user9719131
Thanks for all of the responses. I was curious to know if anyone had a formula that could be applied, prior to attempting a short sale, explicitly from a financial perspective, i.e. structured default.

Current mortgage balance $190k - real property value $117k = $73k loss.

Current mortgage payment $1850/mo. - rental value $1300/mo. = $550/mo. loss. (not factoring in 10% property management fees monthly let alone the one month rent charged each time a tenant is placed)

Take either the $73k lump sum or $550/mo. and invest that over 5-10 years, which is less time than it will take this mess to correct itself, and where does that leave one financially, compared to holding on to the property so it can be sold in 2023 for the same price it was sold for in 2007. In this scenario, one's credit, whether impacted for 7-10 years due to foreclosure, or impacted for 2-3 years due to a short sale, really has no significant impact on the individual... provided they are able to maintain or increase their current level of income.

I have no problem paying the mortgage but I am trapped in Baltimore now because of my house. It's unfortunate that thoroughly corrupt individuals within the financial institution and government sector are allowed to devastate the lives of so many and simply walk away.

The only option that I see is to (morally :)) acquire a bigger piece of the pie!
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May 20 2013
The only time it makes sense to do a short sale is when you have a financial hardship and can't keep up with the mortgage payments and basic living expenses, unfortunately you can't just decide to sell your house just because you're upside down.

In the case you qualify for a short sale is a good start after you recover from it and qualify to buy a home again but, have you think about how long its going to take you to recover and how much are houses going to be then? every case its unique and even if you're upside down you might still have other choices like maybe rent the house?

I don't know how long have you had the house but at one point its going to be paid off and can be a good retirement option by just renting it if rent covers the payment.There are several more options, here in California most banks are now working with homeowners to modify payments that should be your first start before considering short sale, there are also other programs here in California to help home owners for principal reduction and second forgiveness for qualifying borrowers, I don't know about your state but you should ask your bank, also contact BK and real estate attorney's, local real estate agents can definitely help you to find out the value of your house interview and consult with a few of them to see what options you have.

Every case its unique I would also advise you to contact a local housing department expert to help you make the best decision, take into account that you must qualify for every program and short sale and all banks have their own guidelines.
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May 20 2013
Zestimates are notoriously inaccurate. Could be high or low but rarely on the money. A local Realtor will be able to tell you what your home is worth?

If it is worth less than you owe, should you attempt a short sale? Only if you need to, in my opinion. If you are happy in your home and you can afford the mortgage payments, why think about selling?

A short sale is a good idea if you are in financial difficulty and can't afford the payments or if you have to sell because of job relocation or a change in your life circumstances, such as a divorce. Even then, considering the implications on your credit, you may consider bringing sufficient money to the table to ensure a "break even" sale.
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May 20 2013
FIRST, I would speak with your financial advisor before considering a Short Sale. 90% of our Real Estate transactions are Short Sales so we completely understand the burdens home owners are under right now. Short Sales are just one of the options that are available to you in liquidating your property or to eventually avoid a foreclosure.
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May 20 2013
First of all, it is always best to have a Realtor conduct a CMA (Comparative Market Analysis) to determine what the current value of your home is. From there, we can determine if you have potential for needing to short sale your home. 

When considering a short sale, there are a few things that you need to keep in mind. 1) every short sale is different in how they work. There are many factors involved, but the main factor is the lender that holds your mortgage in terms of how easy they are to work with. 2) DO NOT BE AFRAID! Selling your home in a short sale is MUCH better than letting your home go through a foreclosure. Your credit will still take a hit, but not nearly as bad if you let your home go into foreclosure. 3) Be sure that you choose a qualified agent with a PROVEN track record of successful short sales.

The bottom line is this... Don't let the term short sale scare you. This is something that you can recover from. The most important decision that you will make is by choosing a qualified Realtor to handle the whole process. 
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May 20 2013
It may not be as bad as things seem. Contact a local real estate professional for a free market analysis. Then you'll know for sure what your property is worth. In many areas of the country, the housing market is HOT!
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May 20 2013
To attempt a short-sale you first need to prove hardship in making your payment on your home or that a career move is happening also.  Another good thing to know is that you DO NOT need to be behind on your payments in order to have a short-sale.  Also, the best most accurate way to find out the value of your home is to call a Realtor in your town.

I hope all goes well.
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May 20 2013
If you know you owe more in your mortgage than the property is worth, you may be able to do a short sale. So contact a qualified Real Estate Sales Associate in your market area and ask them for a Comparative Market Analysis(CMA). This way you can be sure of approx. value of the home. Then, speak with a real estate attorney. Not everyone is eligible to do a short sale. If there's a hardship involved, there's a good possibility that you can! If you need the names of agents or attorneys in the Allendale/ Bergen County area, please contact me. I'm here to help!
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May 20 2013
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When you need to. Any paper loss is just that, a paper loss. Gains or losses are not "locked in" until the property is actually sold.

Also, short-sales are not really a "choice". Most lenders will only allow a short-sale under specific hardships - and being upside-down isn't one of the typically allowed hardships.
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May 20 2013
 
Related Questions
When does it make sense to attempt a short sales?
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