short sale or forclosure in arizona

[jaskoo]

I am first time on this forum. i am confused what would be best to do in my situation. more I research more i get confused. we own 2 houses, one to expensieve for us. Market value maybe 1.2m.
We have first loan for 1.1mil( fred&mac) and HELOC of 250K. the house was built by my husband two years ego. we took HELOCK in 2008. With this market in Arizona we could not sell it. Now we got offer for 900K. Now I do not know if it is better for us to present this offer to the bank( M&I) because is so low, or let the house go to foreclosure. With our income is not possible to pay all bills. we would need 5 more paychecks a month to continue paying what is not possible. my husband construction business is dead. my income is just enough to feed family of 4 and roof over our heads.
we live in our old house with 60K equity in. we would like to keep this house because is afordable for our income. the expensieve house was built to stay in for 2 years and sell it with some profit. it was my husband's dream job. but dream is over now and we are dilling with bad real estate market in Arizona. how to get out of this nightmare???

[The Professor]

Your situation is all too common here in my area of Northern California and was created as the result of a tax avoidance technique utilized by many contractors here. That is they would construct a home for the ultimate purpose of living in it for two years, and be able to avoid potential taxes (either in the form of capital gains or income) on its sale. A great way to make up to $250K tax free ($500K in the case of a married taxpayer).

The gravy train ended once the market reversed its direction and you are facing the consequences. My sense is that the lender on your first loan will ultimately end up foreclosing, given an unlikely willingness to provide little benefit to the second lender as the result of a sale. After all, if you present them with this short sale offer you are effectively requesting that they take a $200K hit as the result of the short sale. That leads them to the choice of either a non-judicial or judicial foreclosure, and I'd be willing to bet that they take the non-judicial foreclosure path and leave you facing the second lender who is not going to give up relative to recovery of their $250K debt.

I believe it important that you seek the advice and counsel of a bankruptcy lawyer. Your situation is simply too challenging, and the dollar figures owed to large, to present a simple solution.

Daniel

[jaskoo]

Thanks for your answer.
does it make any difference that both loans are with same bank? can we negotiate second loan in short sale process?

[The Professor]

It might make a difference if the two loans are still owned by the same bank. Often loans (particularly first loans) are sold on the secondary market with your original lender retaining servicing. This loan sale complicates the situation.

Daniel

[jaskoo]

I am now confused. What am I facing if I present short sale to the bank, or let foreclose (for 700k less or more)? first loan is purchase money and is noted as primary residence (on contract). Lender doesn't know which is prime. thanks

[The Professor]

The first loan isn't your problem. Actually it is hard to say whether it is purchase money (given the fact that it was likely a "takeout" loan following the completion of construction. But that doesn't matter because your lender will likely resort to non-judicial foreclosure as a remedy on it. Your problem is that "HELOC of 250K". From what I am reading it isn't purchase money and something you may end up owing after you no longer own the home.

Daniel

[jaskoo]

I send all documents from list for short sale with offer included. When is the time for negotiation on second? Can second take some action before short sale complete (knowing there is nothing for them), or they will tray to work out solution? I am assuming they will satisfied first loan and ask for $260k on second (that I don't have) I had consultation with couple lawyers in my area and
is waste of time and money and most of them don't see stake for them and they are not interesting. Do I am in better position if I let property foreclose (negotiations wise dealing with second) or in short sale. First is purchase money loan and in AZ is protected. What em I facing if they decide for judicial foreclosure? I am so glad that I found this forum it is very helpful. thanks

[HopingtoFind]

I think... and it is just an opinion, in your case I would go the short sale route especially considering you already have an offer. I am assuming you still do since you posted a while ago.

The problem in your case as Professor mentioned is $250k loan which will pursue you personally. In a short sale situation you have a chance to settle with them. My understanding is that if both of your loans are with the same bank the 1st will payoff 2nd (give them a certain amount) to close the deal, because it is in the best interest of both to complete the short sale rather then foreclose. Why not present them with an offer and start negotiations...
You can always decide later on to continue with foreclosure if short sale doesn't work out.

[HopingtoFind]

Also... I would get someone experienced with short sale negotiations to negotiate this short sale for you. Lender pays for that anyway.

[jaskoo]

Thanks for your respond. I have realestate agent that is not experienced with short sale but he bring a buyer (offer) and I am stuck with him. I send papers for short sale ten days a go and they contacted me with info who is handling my case. My main
concern is now that second will sale loan to collectors before short sale go trough. Second just call me today and ask for lis one payment (march $770) and I am thinking make a payment to keep them around. I don't know is that good idea or just save the money for negotiation.

[HopingtoFind]

Your questions are exactly the reason you should seek help from experienced short sales negotiator. Both Realtor's commisions and negotiator fees are paid by lender... that means you don't have to save money for negotiator... just because you have a Realtor doesn't mean you cannot get a negotiator to help out especially considering your Realtor doesn't have experience with this.

Also, fax your offer to the 2nd lender and let them know that you're trying to do a short sale, that should keep them around.

[jaskoo]

Yesterday received NOD from my second. What is that ? I promised to make a payment for March $770. I am only 60. days behind. When I receive NOD is that beginning of foreclosure process. why from HELOC. Somebody inspect house from bank last Friday (they start short sale process).

[HopingtoFind]

NOD = Notice of Default... yes it is a start of foreclosure process.

You should call your 2nd (Heloc) and let them know that your're working on a short sale.. they might not be aware.

[jaskoo]

I am only 60 behind. It's same bank for first and second. Why second? I promise them check for $770 this coming Sat. Is that just waste of money or that will slow down, allowing me to complete short sale. thanks

[mrbarker]

If it were me I would short sell it. You are going to lose the house anyway. If you make an effort to put some money into your lender's pockets it is a sign of good faith. They are less likely to come after you for a deficiency. If they do you have a defensible position that you tried to put their interests before your own.

My own personal experience with Countrywide is that I had a buyer with great credit who could put 50% cash down and they still took so long to deal with him that the buyer got disgusted and left.

If you do the short sale you MUST have an aggressive agent who will hound your lender. If your agent is not aggressive then keep on top of him/her and make them accountable. If necessary ask to speak to his/her supervisor. all your lender yourself and nudge the sale along.

I am not quite clear why you got an N.O.D. from your second and not from your first. Maybe I missed something? How on earth can your second attempt to foreclose on you if your first has not issued an N.O.D. But then, I'm not an attorney.

In terms of your dream home. Dreams tend to renew themselves. Get rid of the stress and keep the house that is currently your home and that you can afford.

[knownick]

I'm wondering if you actually received an official NOD or if it was just one of the many letters lenders send to scare you.

Actual notices of default are recorded with your county of residence. Most have an online records search - you should confirm there that an actual notice has been filed.