Short Sale Success

[MH_Sucker]

Our escrow closed yesterday!!! Here is our story. I am posting for others who may be in similar situations because this site was super helpful to us throughout our process!

We stopped paying in November 08. We were offered a loan mod that put us into a fixed interest rate and normal loan but increased our payments by about $300 a month. The whole reason we stopped paying was due to finances so we did not take the deal.

We put the house on the market in December. I really did not think it stood a chance of selling because we lived in a town with a lot of inventory (foreclosure, short sale, etc.) and we were in a townhome community with HOAs and the difference in price between our attached unit versus a detached single family was not very great so we thought no one would be interested. We were kind of hoping for 90 days on the market with no offers to pursue a deed in lieu.

We received a cash offer of $184,000 (list was $189,000 and we had purchased the home in 2007 for $432,000) in February. It took the bank until May to approve the offer.

We ended up signing a promissory note for $12,000 over 10 years with zero interest. The note was put in place because the loan had PMI on it and the insurance company refused to approve the offer unless we signed.

It was important to us to avoid foreclosure because we would really like to buy again in the future and did not want to wait the 7 years that a foreclosure would have caused.

I have not looked at my credit report for some time now because it was just depressing. I will wait a month or so and check out the total effect on us.

If you are considering a short sale it is possible but it does take patience and persistence with the lender to jump through all the hoops. Good luck!!

[ORNV3]

Thanks MH! Congrats. Did you get the to agree that they will not pursue you in the future?

[HopingtoFind]

Congratulations! Sounds like you have gotten what you were hoping for.

I was wondering... did you try to play hardball with them as far as 12k after all if insurance company refused they would have ended up paying out on a foreclosure and would have lost a lot more... and since your loans are purchase money they would not be able to collect anything..
Also, did you discuss with them as to how this will appear on your credit?

[MH_Sucker]

We did not get anything in writing that stated they would not pursue us in the future but we have all the approval paperwork and signing the promissory note should protect us.

We did try and play hardball but they assured us that they (the insurance) would not approve the sale and it would not happen if we did not pay sign the note. It was more important to us to be able to buy again sooner than 7 years than to just let it go into foreclosure.

We were told that the report to the credit agencies would state that it was settled for less the owed.

[HopingtoFind]

I would highly suggest that you get everything from them in writing... if it is not too late. Signing the promissory note does not protect you from anything unless it explicitly states that this amount will completely satisfy your debt and they will not pursue you in the future.

Definitely consult with an attorney if it is not too late.

I guess it doesn't completely make sense to me that the insurance is the one standing in the way of a short sale. Because insurance co benefits the most from short sale... if the house goes into foreclosure insurance company would stand to loose a lot more.

[MH_Sucker]

It is too late. After I posted about our success, I realize that we probably did not do enough to really protect ourselves. But I can't continue to live this way worrying about everything. I am going to just sit back and let whatever happens, happen. I spoke with the negotiator and was told that our debt would be forgiven when we signed the note. My realtor also recieved the same information. Although we have nothing in writing I am hopeful that they will not pursue us. And if they do, we file for bankruptcy. That is the worst case scenario. I appreciate the feedback and wish everyone luck with their process. Hopefully others are able to get the things they need in writing before they complete their sales.