short sale?

Question

my friend owns a house, and is behind on her mortgage the bank
kept asking her if she wants to do a short sale and if she is selling the house? how does what should she say to them, and what is the best letter to write for the hardship letter, what are they looking to hear.

Answer 1

Be very careful. Most of the time the lender will be able to obtain a judgement for the amount of the difference between what is owed and what is actually paid off (after closing fees, real estate fees etc.) The lenders have been succesful at even obtaining wage garnishment. In order sell and get a short sale approved, a hardship letter is required. The lender is wanting actual details as to why your friend could make the payments before and now can't. Just be honest. Your friend will have to sign the short sale agreement- look to see if they will still be responsible for the short amount. Seek the advice of an attourney or real estate professional.

Answer 2

Ummm, let me correct another poster's answer. But to do that, let's be clear on some definitions...

A short sale is where the lender allows the owner to sell a home for less than the loan amount, but then usually forgives the remaining balance. The lender does this because they lose less than if the property were to go into foreclosure. There are fewer legal costs with an arranged short sale.

Another poster indicated the bank would allow a short sale because they want the house, but in a short sale, the lender specifically does not get the house. They avoid getting the house. And a short sale, while it does hurt a person's credit, does not hurt as much as a foreclosure. It may be the best way out of a bad situation.

The advice above to see a debt counselor is sound. The debt counselor may be able to work with the lender on another solution for getting your friend current. And a housemate paying rent is also a good idea.

Answer 3

A short sale is basically the sales of the house for roughly what is owed. Forget fair market value or getting any of the equity back. It is usually done in an effort to maintain some credit and avoid foreclosure.

Many years ago you could talk to bankers. Today, it is pretty much all business, no person. To try and write a letter requesting a grace period on payments due to temporary hardship is almost pointless (but try, it may work). The bank doesn't want to foreclose because it costs them money and time and they end up with a property. They are in the money business, not real estate business. All they want is timely payments on their loan.

Your best bet would be to have your friend either speak with a debt consolidaion/credit counselling company to help free up some cash, negotiate with the bank and get back on track; or, if she wants to keep some credit in tact and is willing to get out of the house, speak with local real estate investors about buying the property for the value of the existing mortgage (or more if possible). Ideally, if desired, the real estate investor might rent the home to your friend for a while so she does not have to get right out.

Answer 4

Can your friend find some house shearing mates? If there is any way that the income can be raised so that the payments can be made current over time, don't sell. If you know someone that would be willing to buy your property by taking over the payments at the bank and paying your moving costs ($3,500). Work through the mortgage holder, they will be glad to work out a change such as this with out fees that are normal in the transaction.

Selling short, I assume that the mortgage company wants the property,because they think that they can sell it for more. Your friend need to sell it, at a price that is fair market value and state up front that the property need work so a buyer should make an offer that accounts for repairs that they would want in the property. (Most people would ask for twice the amount of money that the repairs would cost) Your friend need to know, DO NOT SELL AT ANY PRICE THAT DOES NOT LEAVE ENOUGH MONEY FOR THEM TO CONTINUE WITH LIFE, after the mortgage is paid.

Answer 5

If her house is worth less than what she bought it for then a short sale might be an advantage if the bank forgives her of her debt after the house is sold. It will also save her credit not to have a foreclosure on her record. If she has a lot of equity she could get a hard money loan to catch up on her mortgage however the interest rate will be less than favorable.