Wednesday, December 5, 2007

Can't Sell for Loan Amount, Countrywide Lender; Short sale?

Question:
Frank,I hope that your day is well. I have a mortage with with Countrywide and I am trying to sell my home in Warrenton, Va.
Countrywide stated that if I find a buyer who is able to take over my loan then things could be done for them to take it over, or they would have to pay the full payoff value which is more than the assest value of the home.
  1. Is there a way to get any lender to agree to see the home at the assest value of the home?

I did have the home on the market back in the summer but the buyer wanted me to pay the closing cost which I did not have. I am trying to find a way to sell the house without me having to come up with closing cost. Any information regarding this will be helpful. Thanks Alex

Alex

Answer to Alex,

First of all, we need to clear up some technicalities in your question. The problem wasn't the buyer asking for closing costs that you didn't have, the problem was the NET (sales price minus closing costs and Realtor fees) was too low. In other words, if the offer was $30,000 higher, I'm sure you would have been able to pay the closing costs.

So the closing costs isn't the issue. The issue is not being able to get an offer that has no closing costs, the issue is getting a NET offer above your loan amount. Otherwise you have bring money to the table to sell your house (literally a check).

Many people in this market want to break even. I even suggested at one point that we have a Break-Even Party! I so frequently hear, "Well, I'd be fine if I just broke even." Geez, you'll settle for not making a profit? How kind of you! Tons of people are losing $10,000 to $50,000 and you'd be happy breaking even?

So the question is actually, "How do I get the bank to allow me to break even?"

It is called a SHORT SALE.

A Short Sale is when the bank allows you to sell a property for less than your loan amount. They take the loss. But keep in mind you have to pay taxes on that loss via a 1099, unless congress passes the Mortgage Cancellation Tax Relief Act, H.R. 3648

But the problem with Short Sales is they aren't getting to closing. Only about 1 in 20 short sale listings close. Sign up for my main blog at blog.FrankyRealty.com as I have an upcoming post on Short Sales being fake. The bank sees the offer and say "Nah, we'd rather see if you will really foreclose." They bank that a certain percent of the owners will find a way to pay and not foreclose. The others that do foreclose, sometimes it is BETTER for the banks vs a Short Sale.

But to do a short sale, you have to prove to the bank that you are broke and facing foreclosure. Sometimes the bank will say, "Maybe, only if you keep making your payments." Then they ignore your calls for 2 months. Why? To get another $3,000 out of you!

So there is no magic bullet to pass your burden onto the bank. You can obviously foreclose. If you are going to do that, you might consider STOPPING payments immediately, save that money and go get a rental before the bankruptcy shows up on your credit report. Please consult a lawyer, as I don't know if there is any legality around doing that.

Best of luck,

Frank Borges LL0SA Broker FranklyRealty.com

(please report typos)