Hardship Short Sale

bleighMarch 14, 2011

Anyone have any experience with a hardship short sale? We are finding ourselves considering going this route, but it's painful and very scary. Painful because it would be hard to just pack up and walk away from our home. Scary because what happens to us financially? Definitely not taking this lightly and do plan on speaking with an attorney in the near future, but in the meantime my mind is full of "what ifs."

The reason for the short sale...we've been on the market for over six months. Our decision to sell is almost solely based on my husband's deteriorated eyesight. His commute is about 55 miles one way through Atlanta and can spend anywhere from 2-4 hours commuting a day. He has a disease of the cornea that has progressively worsened over the last year and the contacts that gave him great vision have been rejected (which now makes him a candidate for cornea transplants). So now he's barely legal to drive in the state of GA with his current lenses and has severe eye strain by the time he's commuting home. He doesn't know this, but I've noticed his depth perception seems really off too especially at night. Bottom line, it's not safe for him to be in this commuting situation for much longer.

We just lowered our asking price by 10K which is our absolute rock bottom. We can't go any lower. Looking at house prices in the area I'm not confident we can get a full price offer. We just had a short sale close in our neighborhood for $110,ooo (we're listed at $139,900). While we have put alot into this house and it looks great, it still needs a new roof, has some Louisiana Pacific siding left, new windows and HVAC. While these items are still functional they will be an issue for most buyers. I've given a rough estimate of about $15-20K of work that still needs to be done. We are already under our purchase price by more than 5K...not to mention the several thousand we've already put in. At this point we're just throwing away money on anything we do to this house. Which would be ok if we were able to stay here for a few more years.

I did talk with our mortgage lender (Wells Fargo), but still can't believe the advice I was given. The rep was very nice and sympathized with my husband's situation. She said his safety comes first and what we would need to do is just move. Move right on out of our house and into one closer to his work, get a month behind on our payments and then file for a hardship short sale. I forgot to ask her if they would come after us for the difference and how long this would affect our future ability to buy another house. Thankfully we're planning on renting for at least a couple of years.

Neither of us is excited about doing a short sale. We can afford our house and my husband is really having a hard time coming to terms of walking away. I admit I am more concerned with keeping him safe and getting him out of the commute. I think my biggest fear is the bank coming for the difference. The credit hit or our buying ability does not scare me too much.

I know this is a long story about my situation. I guess I'm hoping someone has been through a similar situation and can share their experience. Appreciate any advice.

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Billl

I'm sorry to hear about your husbands condition, but glad to see you thinking proactively about how to handle the financial end of it.

I think you need to check out the National Foundation of Credit Counselors website and find an expert in your area. They'll be able to direct you to a certified counselor - not one of those late night TV come-ons. That counselor will know the laws in your state about whether the bank can come after you for any shortfall or not. They will be able to help you set up a plan of action and help you deal with your lender.

In the meantime, don't listen to Wells Fargo phone rep. That is the advice they give to everyone. Unfortunately, many people stop paying and then find out that lender isn't nearly as willing to work with them as the customer service rep implied.

Here is a link that might be useful: NFCC

    Bookmark   March 14, 2011 at 9:26AM
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randy427

I'd go and sit down with a mortgage rep at a Wells Fargo office. With the numbers of problem mortgages out there now, lenders are becoming easier to work with in order to simplify the process for themselves. Some are even writing off moderate shortfalls with no impact on the borrower's credit rating. If you default first, though, they won't be as understanding or easy to work with.

    Bookmark   March 14, 2011 at 5:46PM
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sushipup1

Is your house listed with a real estate agent? Be sure that your agent has special training in short sales. The bank won't talk to you without a sales offer in hand, so don't bother. If the agent you have doesn't have the special training, get another agent.

    Bookmark   March 14, 2011 at 7:53PM
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bleigh

Thanks for the responses. Will take the advice. I did post in the real estate forum as well...hoping maybe someone over there has had some experience to share as well. We're working on obtaining an attorney and I'm checking with my agent on her experience selling short sales.

    Bookmark   March 16, 2011 at 12:35PM
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mike_kaiser_gw

A short sale is essentially the bank (mortgage company) agreeing to take less than what you owe on the house. That will most definitely impact your credit although probably not as bad foreclosure or bankruptcy. Assuming it's your primary residence and you sell it by 2012, there's no Federal tax implications but there may (although pretty unlikely) some state tax implications. You should check with an attorney or CPA just to be sure.

Probably the most important thing to understand is that the bank doesn't have to agree to this and that they are always going to work in their best interest (despite any assurances they make you).

Have you considered any other options, like keeping the house as a rental or perhaps renting a small apartment close to where you husband works? I know it's not the most exciting prospect but he could stay there during the work week and come home on the weekends? Depending on your financial situation that might be a better option that loosing the house and destroying your credit.

    Bookmark   March 16, 2011 at 5:48PM
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bleigh

Mike, good advice about checking into the state tax info. I'll add that to my list of questions for the lawyer.

We've thought about renting something closer to his job and being here on the weekends, but even a small apartment in a decent area is pretty expensive. Also, our youngest daughter has severe asthma and carpeted spaces (which most apartments have) are terrible for her. We have considered renting out our house, but after seeing what other family members have gone through as landlords it's not an option we want to explore.

    Bookmark   March 16, 2011 at 7:46PM
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