stogie1020

(not for me)

I am trying to wade through a lot of info right now to help out a family member who is not doing well and does not seem to be helping himself much.

He is underwater, but not by a ton (~$20K) and needs out of the house. He does not have the 20K to pay the balance and I don't want to have to put down that cash for him.

Has anyone started a short sale process? How do you even begin?

Homeowner is planning on moving out of the state and then renting. Credit is already pretty low so taking a hit is not an issue.

Any thought on how to get started on this if he goes this route?

juniorbean

iTrader: (5)

How far behind is he on payments? We had a few friends who did that and they really wouldn't even talk to him about a short sale unless he was close to a year behind...

Flipster23

iTrader: (15)

Yea, I bought a short sale and the previous owners if I remember could have been about a year behind.

I have a friend who currently hasn't paid mortgage in 3 years. She asked for a short sale, and the bank said lets do a mortgage modification first.

I did have another friend who was only 8 months behind, and they told him that he couldn't do a short sale, that they will work with him.

stogie1020

Thanks flip, in this case the guy wants to sell, does not want to own anymore... Too much upkeep, needs to be in different part of country.

Flipster23

iTrader: (15)

I believe he has to have a hardship too, lost of job, outrageous medical bills, bankruptcy etc.

stogie1020

Sorry juniorbean, didn't see this on the mobile phone. That's the thing, he ISNT behind. Just underwater. His ONLY other option though is to walk away and do forclosure.

Basically all of the above.

juniorbean

iTrader: (5)

I don't think they'll let you do a short sale just b/c you're underwater.

That said there are gov't plans that can allow him a refinance to align his mortgage based on the new value of his home. The only thing is, I think you need to be behind on payments in order to do that as well.

Has he tried calling the mortgage company? I'm sure if he reached out to them and told them he was underwater and was prepared to walk they may be interested in restructuring the mortgage.

stogie1020

I will ask. pro-activeness is not his strong suit.

Unfortunately, he needs to leave his house in FL in the next 6 months and move to be near family after some medical issues arose for him. Nothing critical, but is would be best for him to be near family who can care for him if he suddenly needs it.

Flipster23

iTrader: (15)

Worst comes to worst, he may just have to walk away from it.

I know that blows though.

juniorbean

iTrader: (5)

Agreed. I'd call the mortgage company, explain to them what it's worth versus what he owes and that he needs to move for medical reasons... then just get the house listed ASAP.

But yeah, like Flipster said... worse case he can just walk. Whether he sells or walks he will not see a penny from the sale, so it's really just about his credit score. The bank would be fools to not help out, especially over $20k... but then again most of these banks are pretty dumb...

NBP04TL4ME

Maybe have a couple of realtors come and do a free market analysis? Maybe he's not really under water?? FSBO??

stogie1020

All good suggestions, thanks guys.

I will need to initiate the call to the lender, he is "overwhelmed" and could only manage to get one realtor to give him an estimate of his home value based on comps.

NBP04TL4ME

Just bear in mind the lender may not talk with you if you aren't on the mortgage.

stogie1020

^good point, 3-way call it will be.

mattg

The criteria for being eligible for a short sale varies quite a bit from bank to bank. But typically he will have to submit all financials, last couple years of taxes and explain the hardship which is causing him to need to do a short sale. In many cases the homeowner will also need to be behind on payments.

Ideally you should find an agent that is experienced with the process and let them take the lead. If you want to try and do some investigating before involving a Realtor, you need to know what lender(s) is involved. Once you know that do a search for their short sale or loss mitigation dept 800#. Call them and tell them you need an authorization form to speak on the homeowners behalf. He will have to provide his loan # and SSN (along with your name) and sign the form, then it will have to be faxed back into them. After that is processed you will be able to call in and talk to someone in that dept that can lay out the requirements of their SS process. If you move forward from that point the home needs to be listed for sale as a SS, and once there is an offer the listing agent will package that up along with whatever else the bank requires to be sent in to them. Then you cross your fingers and hope the process moves forward at a reasonable rate.

Short sales suck balls. I'm glad that they have declined to the point of near non-existence in my area.

stogie1020

Thanks Matt! Great info.

I need to have a frank conversation with the homeowner and also get a few more realtors to give an estimate of the home sale value.

The homeowner is ready and willing to simply walk away from the house, so anything more favorable would be good...

cM3go

Not sure of his timeline but maybe he could do HARP (not sure if its still available) and then sell.

stogie1020

Good thought...

NBP04TL4ME

What's the rental market like there? Could it be rented? Any colleges there? Maybe some grad students need a place to live........

A guy I work with relo'd to my office from FL and was upside down. He has been renting to grad students for 6 years and generating positive cash flow since day one. I know renting has potential issues too, but if someone else can cover his mortgage until he has some equity or at least doesn't loose $$.

Just some other thoughts.

stogie1020

interesting idea, although there would be NO ONE local to watch over the place, fix things, etc.

Truthfully, the place needs a flipper to come along and gut it...

NBP04TL4ME

He has no friends or anyone he could pay a nominal fee to be on call for emergencies? The guy I work with flies down to FL twice a year. If the place needs to be gutted and flipped, how much of a concern is it that no one is there?? I realize your family member may not be in a position to do this. Again it was just another thought.

stogie1020

Personally, I REALLY like the idea!

He is not a "manage things" kind of person, hence this situation...

Long term financial thinking is not a strong suit here.

NBP04TL4ME

Gotcha

Another rental scenario is rent to own, but there are more variables in that scenario.

stogie1020

Just an update, this was my FIL. He kept the house as a rental, makes a profit on the rental (even with the 10% management fee) and is now living in AZ near my and my wife (his daughter). Truthfully, it has worked out better than anticipated (fingers crossed).

I really appreciate all the advice in here, it helped a lot.

thoiboi

Glad to hear all worked out in the end Stogs! In laws are tough :/ well people in general.. especially those that don't want to help themselves..