The Mortgage Go To Guy!!

I’ve done a few posts on Short Sales in Florida recently because everyone seems interested in them whether they are a buyer or a seller…

From the calls and email I receive, though…it just doesn’t seem like whoever is telling you how to do a short sale is telling you the real consequences.  Be it your bank, your realtor, your financial advisor… there are stiff consequences

I don’t like being the person that brings bad news but really that’s part of my job.  In this market and with these economic problems that we are all facing, someone has to at least be straight with you instead of just telling you a bunch of lies.

Short Sale defined:

A Short Sale is when a financially distressed Homeowner negotiates with the bank in order to be able to sell a home at less than the cumulative debt on the property.  The bank will agree to cancel the debt owed above the sales price net of commissions and expenses and the homeowner will walk away from the home.

Simple enough? you already understood that part?

OK … well here is where people are advised improperly…

When you walk away from the house and let the lender charge off the rest of your debt, they are going to report that to the credit bureaus.  Currently, a Short Sale will hurt your credit around 200-250 points - about the same as a Foreclosure.  There will be derogatories (bad comments) placed on your Credit File under the mortgage category and those are the worst kind.

So… now your ‘advisor’ tells you that you can go buy another house??  Wait a minute… that isn’t going to happen!!!

Just think back to when you were a kid and a good friend begged and pleaded until you lent him $1 to go buy candy.  You did it and for weeks you asked him for his money back.  Eventually you got mad about it and your friendship was spoiled.  You never lent that person money again… but you also told your other friends about that kid that borrows and never returns the money right??

That’s what banks do!

So which bank is going to trust someone with a $100,000 or more loan who fell behind on their mortgage and just told the bank to forget about it and take the loss?  None of them!  They’re losing their shirts as it is thanks to this mess they made!

No… FHA won’t do it either.  FHA is not Credit Score driven - but they are Credit Driven.  One mortgage late can make it nearly impossible to get an FHA loan…but a Short Sale??  I just don’t understand the people who would tell someone such wrong information…

Truth be told… a person just out of a Short Sale is going to have trouble renting another place if they pull credit!!  Which landlord is going to believe that they will pay the rent if times get tough??

Car Loan?  Credit Cards?…hmmm… see where I am going

Look…I’m not saying it is all your fault and go away… not in the least bit.  If you got into a mess, that’s awful but think of it from that kid’s perspective…

Things to do to HELP yourself with a Short Sale:

• Don’t JUMP!! and don’t Panic… that never helps.  Find someone competent and maybe the best method is someone you don’t know but comes referred by someone you trust.
• Get an attorney.  It may be hard to afford right now but really is this something you want to screw up?  Get the representation to fight for you.  The bank doesn’t care that you’re scared of Attorneys…they want their money and they have a huge team of attorneys willing to fight you for it. Why go in unarmed?? (I’m telling you … get an attorney… you need one!)
• Get a Realtor referral from that Attorney! Many Realtors just won’t take Short Sale listings… they are hard to do and even a full price, cash offer can be rejected. 
• See if there is any chance to get a raise! believe it or not many people I have spoken to are simply not making enough money to cover their debt!  On top of that they have not had even a cost of living raise in years!  Sometimes the only way to get a raise is to get a part time job…but your boss could help if you are a good employee and NEED it.  They really don’t want to lose you and have the expense of hiring and training someone to do your job.
• Don’t try to sell it yourself… For Sale By Owners get little enough traffic - why try to pull off a complicated real estate transaction solo?
• Immediately start working on the other debt you have.  Get it paid off completely before you try for another loan.  The "recovery" period may be shortened… and if not, the rate on the other end of the tunnel will definitely benefit from having a clean bill of credit health!
• Stay current on everything else!
• Stop listening to friends and family… if they haven’t been through it and they’re not professionals in the field then their advice could be blatantly WRONG.
• Stop listening to Bank Employees!!!  They are not trained to help you with this. They might be well intentioned… but especially the ones on the PHONE are not any help… you need at least 3 levels up and another department in the bank to get someone who can actually affect change and they are hard to reach.  … and no matter what they say EVERY bank has a Loss Mitigation and Loan Modification department!

More Florida Real Estate Industry News You Can Use from
David A. Podgursky, MBA
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