Short Sell a Second House

[pleasehe]

We have a second house that we have been trying to sell for 1.5 years. We have reduced the price drastically but have not gotten any bites thus far. I talked to my real estate agent about doing a short sale and he said because I have two mortgages on the house, it would be near impossible. Just trying to figure out on what to do. We bought the house five years ago and was going to rent it out in the summer to help pay the mortgage. Since then, the township passed an ordinance to stop vacation rentals (we went to court over this) and we now cannot afford the mortgage. I am at a loss of what to do. We have always been current on payments, are not experiencing any hardships, so I don't even know what our options are. This mortgage of our second home is taking all of our money away and I'm not sure what to do. I feel like I cannot wait much longer for the house to sell.

[MargaretC]

Where is the house? you can let it go into foreclosure if you don't mind taking the credit hit. theoretically, depending on whether you live in recourse or non-recourse state, banks could come after you. I don't think that is happening much, but don't know for sure. We are letting our current residence go into foreclosuren and are currently ignoring collection attempts on 2nd.

[pleasehe]

It is in Michigan, which I think it is a non-recourse state. We bought it in 2007 for $385,000 and Zillow estimates it at $265,000 right now.

[Evan Bedard]

The realtor is correct that it is usually quite difficult to achieve a short sale when two mortgages are involved, also you must be able to prove a financial hardship to qualify for a short sale.. Foreclosure in MI can be handled through the non-judicial or judicial foreclosur eprocess, but it seems to be very rare for them to pursue foreclosure going the judicial route..

Michigan Foreclosure Law

[megganinMI]

Could the change in ordinance be your hardship? Since you can no longer rent it out due to the change in ordinance and it's hard for you to make the payment. I have a great realtor here in Michigan that is helping us with our short sale (we are just waiting on appraisal and then it will be over! Hopefully!). I'm not sure where you are located in MI or if I am allowed to put names on here, but I will give you more info if you are interested.

Also, our realtor did say in Michigan they (banks) have 10 years to come back after you if you foreclose. Then I guess they can file an extension for up to another 10 years? That is what deterred us from just letting it go. I didn't want that hanging over my head for the next 20 years!

[Evan Bedard]

Also, our realtor did say in Michigan they (banks) have 10 years to come back after you if you foreclose. Then I guess they can file an extension for up to another 10 years? That is what deterred us from just letting it go. I didn't want that hanging over my head for the next 20 years!

I would try to make sure that in the short sale approval letter your lender waives their rights to pursue the deficiency once the short sale is finalized.. Below is an example of a short sale approval where the lender agreed to waive their rights to the deficiency..

"This letter will serve as Bank of America, N.A.'s demand for payment and advises you that Bank of America, N.A. and/or itsInvestors and/or Insurers have agreed to accept a short payoff involving the above referenced property and the referencedaccount(s). This demand should be used by the closing agent as our formal demand statement. No additional statement will beissued. This approval is exclusive to the offer from the buyer referenced in this letter.

WHAT THIS MEANS TO THE SELLER

The owner of your mortgage note, the mortgage insurer, if your loan is covered by mortgage insurance, and Bank of America, N.A.waive their right to pursue collection of any deficiency following the completion of your short sale and your debt is consideredsettled. The deficiency is the difference between: (1) the remaining amount due under the mortgage note and mortgage or deed oftrust; and, (2) the current market value of the property plus any cash contribution you make or amount you agree to repay in thefuture. The amount of the deficiency will be reported to the Internal Revenue Service (IRS) on the appropriate 1099 Form or Forms.We suggest that you contact the IRS or your tax preparer to determine if you have any tax liability.Bank of America, N.A. will report the debt to the credit reporting agencies as "paid in full for less than the full"