Help with short sale as part of strategic default

[seabuyer]

Hi folks,
I'm looking for some guidance on the following scenario:
Essentially I decided to walk way for all the reasons you are well familiar with. Basically I'm well under water. But instead of just letting my home go through foreclosure I'm trying to short sell and have an offer.
For the bank, it's a lot more viable to approve the short sale and get this over with than a foreclosure. The problem is that the bank is asking for a lot of papers that include proof of financial hardship, which is not the case here. So I cannot prove it.
Are you aware of any way of convincing the bank to approve the short sale in this case? Or will they play hard ball (be idiots!) and let me go through foreclosure, losing a lot more money?

Thanks in advance.

[Haybaler]

SeaBuyer,

First, keep in mind that Short Sales rarely work out for those who are, in fact, financially stressed so unlikely to work out for somebody with income and other substantial assets.

I've come to the belief that lenders assumes that the borrower can pay....after all, the borrower spent a good amount of effort justifying ability to pay at inception of the mortgage.

Why would the bank release a borrower from liability just because the collateral is insufficient? Rational behavior would be to demand payment of the amount due in full. In addition, the lending industry has become aware of scams pulled by borrowers and instituted systems to avoid giving away the store.

I'm aware of several instances of lenders declining short sale offers, foreclosing, and then reselling at a much lower price than was offered in the short offer. So, if your purchaser wants the property they just need to wait to buy at an even lower price. Why would you care, because you aren't making any money on the deal?

If you purchased your home using an 80/20 type product then you may be better off filing a chapter 13 bk and stripping the second off of your home, .....keep the home and not be so far underwater.( If that is the case I hope your home was very expensive and the second is very large.)

[jillayne]

If you're not in financial distress, then hire a real estate attorney for an hour or so and have the attorney lay out all the possible legal consequences of the short sale v. foreclosure.

If you have no financial distress event that's triggered the need to sell and you have assets to repay the shortfall, the bank will not approve your short sale.

Your real estate broker (hopefully you hired an experienced short sale Realtor but it sounds like that's not the case) would have explained all this to you before the home was listed.

Here is some free info from the WA Dept of Licensing specifically for short-selling homeowners.

http://www.dol.wa.gov/business/realesta ... sumers.pdf

[davidlosh]

Hello Jillayne!

I really appreciate your online presence. You offer so much for what I hope is a great return. This Department of Licensing letter is just one example. Your last few posts on Rain City Guide are another.

What's unfortunate is that bank policy, and procedure hasn't caught up with today's reality. Banks made the loans based on value they had absolute control over. The underwriter took the appraisal, the underwriter determined the ability to pay, and banks are a part of financial institutions that are in the business of tracking economic trends. The reality is banks lent more than properties are worth, and now want every one else, including the government to fix their losses.

What I have seen done, in the past, is to agree to a deficiency. You borrowed the money, you made the purchase of an over priced property, you are responsible for the debt. All of Real Estate is a negotiation.

If you were transferred, and had to sell, or if you worked a government job and had to sell, there are policies at the bank for that. Banks don't want to be seen as being unreasonable.

You can make an offer to sign an unsecured Note, or Note secured by other assets. You might file for bankruptcy after, but in many cases people will pay. This can be a minor ding to your credit or it can improve your credit by paying debt as promised.

You may not like the idea, but there are policies at some banks that apply to ever contingency.