trying for short sale-- help!

[quefunk]

Hi--

We bought a condo in San Diego in Aug 2005. We were 1st time buyers and didn't know a whole lot, but trusted our realtor and the lender he worked with. Bad idea. I had great credit, my boyfriend (now my husband) did not. We were told by the lender that we should do a 1 yr ARM, with a HELOC (80/20). I did not want to do a 1 yr ARM, knowing it would reset, but she insisted it was the best way to go and we could easily refi with both of us on the paperwork before it reset to a better rate once my boyfriend's credit improved. 6 months in we tried to refi, but were already upside down and could not refi. Turns out, the realtor never showed us comps (we were 1st time buyers like I said and we didn't even know what comps were) and we overpaid from the very beginning. Funny that the lender's appraiser could get the value high enough to get us the loan in the 1st place, but not to refi into a cheaper payment, but that's a whole other story....

So now we are upside down by about $80,000. We just had a baby and have been squeaking by and are still current on our payments, but my disability has run out and I am going back to work, but once you factor in daycare, we can't make the payments anymore as of next month.

We've had the place on the market for 6 months, with no offers. We are going to reduce the price to try and get some interest.

American Home Mortgage had both the 1st ($231K) and the 2nd ($99K), but recently the 2nd has been sold to GMAC.

Here are my concerns once we get an offer:

If the offer is lower than the fair market value, what are our chances of getting it approved? We did try for 6 months at fair market value, but had no offers and now we are looking at foreclosure since we can't make the payments. (At fair market value we are $80K upside down, more like $100K based on what we are trying to sell if for now).

Can they force me to use my 401k before they approve it?? Our savings??

The 2nd will likely be wiped out by a short sale, so will GMAC approve it if they are going to end up with nothing since another company holds the 1st?

Is GMAC likely to try to get a deficiency judgement?

We are so confused and worried!

Any info or tips on a short sale would be very helpful!!

Thanks!

Welcome to the forum and thank you for joining....

Yes with proper motivation GMAC will do a short sale, there is a fellow on the board --- Stangflyer....look up his posts their is a wealth of information in the posts with his "fun" with GMAC.

He has a Short Sale going with them presently and is very comfortable sharing his expertise with GMAC.....he adores them.....well that maybe overboard.

You need to approach GMAC and negotiate the first steps with them for Short Sale, Find and Agent that has good Short Sale Experience....very important.

Then you need to give them permission to negotiate on your behalf with GMAC for the Short Sale effort. GMAC has a Short Sale package and you need to request it and fill it out and send it back and get the ball rolling.

Please look up those posts by Stangflyer, very informative, helpful and if you post to him....he will respond and assist is in the middle of it himself presently.

But do get the ball rolling and request the Short Sale Package from the lovely folks at GMAC....do not let them bully you or make you feel that it can not be done. If you do not like the first answer you get when you call in, call back....be assertive and polite, but get the point across.

[quefunk]

Thanks for the quick info!

We do have the loss mitigation pkg from GMAC and are working towards completing it. I have called the person names at the bottom of the cover letter from GMAC, but can't get him to call us back and I hesitate to call too much b/c on his voicemail msg he states not to leave too many msgs or it will delay him calling you back!

I guess I'm just worried they won't approve it due to my 401k and I'm worried about a deficiency judgment.

And I will look up the posts from stangflyer..thanks!

As far as the deficiency "stuff" we are not lawyers, can not specifically answer that question. My recommendation is always an attorney, heck hire him for 2 hours, get the information and if you need him to negotiate the loose ends of possible lack of forgiveness by GMAC or the other lender, hire him for that for a couple of hours....just make sure they know what they are doing. Lots of them do not....

To heck with the messages leave them, you need to know answers and they do not return calls.....call, call, call and fax, fax, fax...

Spent the weekend in San Diego after a Real Estate Educator's Conference on Friday. Topic of discussion was of course the disturbing real estate market with an economist from the California Association of Realtors there explaining the anticipated numbers made public today.

The bottom line, in agreeing with Poppy, but recognizing that you should be guided by California Code of Civil Procedure Section 580b, that specifically identifies purchase money financing for a residence that you occupy as non-recourse in nature, effectively meaning that if your facts are as presented, GMAC is likely unable to seek a deficiency judgment against you, their sole recourse being to foreclose on their collateral. Since it looks to be underwater (sort of reminds me of the wet weather I experienced on Friday and again on Sunday), my guess it GMAC might be willing to play along on a short sale for very little money, so long as they are clearly shown an intent by you and the holder of the first loan that what they get is sort of presented in a "take it or leave it" way.

But again, gain assurance by contacting a real estate attorney and getting them to write an opinion letter that focuses on the protection provided by the above referenced code section. Openly share this opinion with GMAC. They will not like the message but they will certainly understand it.

Take care,

Daniel

[Marshall Rosenbach Esq.]

Quefunk - Assuming you would prefer to stay in the house, have you considered contacting the lenders to see if they will work out some kind of modification that suits you in terms of perhaps extending the term of the loan? Or reducing the interest and/or fixing it? Also, do you KNOW the appraiser was hand picked by the lender? Do you have information the appraiser was an employee of the lender? I would also be interested in the comps for your house at the time of the loan...I am sure you are going to be fine...just don't give up!

Daniel I am so tickled that you have found a way to make "sunshine" out of the misery that others are experiencing.....

All due respect.

[quefunk]

Thanks for all the replies!

To answer your question Marshall Rosenbach Esq, we do know that the appraiser was chosen by the lender. In fact, 6 months into the mortgage, I started calling other lenders to go ahead and refi-- I was never comfortable with the 1 yr ARM, but the lender kept insisting it was the way to go and I finally gave in (the lender worked with and was recommended by our realtor-- again being 1st time buyers I wasn't clear we could have just gone to another lender....). Anyway, I called 7 different companies and all 7 said we were upside down and they wouldn't refi us. So, as a last resort I called the original lender to see what she could do. I told her other people had said we were upside down and she said, "Well, I'll call (appraiser's name here-- the one who did our appraisal the 1st time). He is always able to get us the highest values," and that comment caught my attention. So, we started talking to a realtor who is a friend of my husband's and he sent us comps from when we had bought originally. Turns out the appraiser had used 2 comps that were about 6 months old that were the same price as what we paid, but all of the closing prices of our identical unit in the other buildings were about $35-50K lower within the 4 months before we bought. We could have used those to bring the seller's price down if our realtor had been doing his job. And I can't believe the appraiser didn't say something about it either. We felt taken coming and going.......

Needless to say, the appraiser could not get the value to what we paid (again interesting that he could get it high enough to get the lender the loan, but not to bring down our payments).

Lesson learned-- I will say I am gald to have learned this lesson now on a condo than a more expensive house. This will not happen to us again...I've learned too much about what we should have done and how to advocate for ourselves.....

[quefunk]

PS-- Yes we have considered trying to get a modification or doing an FHASecure loan to at least refi the 1st, but we are in a 1 bedroom with a baby, and considering how upside down we are ($80-100K) b/c we overpaid from the start, it would take a long time to be right side up again! We thought it better to cut our losses, try to get into a rental and save save save in hopes of trying to buy a 2 or 3 bedroom in 18 mo-2 yrs or so.

Thoughts?

The final decision rests with you and your family's decision.....that being said the short sale package and the concept of short sale is a far less unpleasant although timely and stressful experience than that of foreclosure as far as your credit is concerned and over all feeling of UGH during foreclosure.

Modification is also a route that you may wish to examine, but again realistically that is one you have to make the call on....the fact that the appraisal was one done incorrectly as I do know by what you said in the post it was.....may be in your favor there.

Additionally you could look at an FHA Secure, but the value would have to support the 97% LTV for the first loan i.e. 3% equity in conjunction with you first loan. Now because you are with GMAC...that might be something you want to talk with GMAC about as an option...they may very well be able to accommodate you on that issue, they are very aggressive on the FHASecure, they are a direct lender and do maintain very rigid FHA Standards. I know you do not like them very much about now, but they do have some benefit in that area if you want to keep the property. They have the power to look at that as an alternative, you may want to approach them with that issue and take out American with a FHASecure if you have the 3% equity between the value of the property and the balance on the first mortgage. GMAC would surely subordinate in that case.....

Again these are options and the final decision is in your ball court and you have the full control over that decision.

[quefunk]

Hi--

We are in a condo in San Diego. We owe $231K on the first and $99K on the 2nd (total of $330K), but the current value is at about $240-$250K.

We put it on the market in Sept 2007 as a short sale, and have been periodically decreasing the asking price, but to date no offers. Current asking price is $238K.

As of now we are current on our mortgage thanks to savings, but that is running out and we are still able to stay current, but that is because I have been putting things like groceries on a credit card. So, we are current, but our savings are decreasing and credit card debt increasing.

We are looking into the FHA secure (my husband has credit of 720 and mine is 815), but even if we re-fi the 1st it will only save us about $100/mo because we are now paying interest only, and when you factor in the principal payment in a fixed FHA Secure, it doesn't save us much. But, he thinks we can get the 97% value in the 1st to be about $245K, leaving $14K to pay towards the 2nd. Our 2nd is with GMAC and what we were hoping to do is offer them a short payment on the 2nd and have the rest forgiven (we could get some $$ from my parents and try to pay GMAC up to $20-$25K to forgive the rest).

Is this something banks (GMAC) may be willing to do? The reality is that if we short sale or foreclose they probably will get nothing, or next to nothing, so this way they're actually getting more than if we walk away.

Our real estate agent said maybe we want to do a deed in lieu of foreclosure instead? Not sure what that is, we are in CA and not sure if we would need to worry about a deficiency judgment?

We don't know what to do at this point! Do we just start missing payments? Or keep using our savings and credit cards?

Thanks!!!

[schwefls]

Hi quefunk:

Welcome, I am sorry to hear of your problems. You have come to the right place. You have our support here and shortly someone will respond to you with some sound advice. I just wanted to stop in, say hello and let you know you are definitely not alone....

[Moe Bedard]

Is this something banks (GMAC) may be willing to do?

Yes, it will take some negotiation, but they will do it.

The reality is that if we short sale or foreclose they probably will get nothing, or next to nothing, so this way they're actually getting more than if we walk away.

If they are smart they will reduce the principle to help you refi. That would be in their best interests. Often, they do not. I feel this is something we will see soon in the near future, but not so much now. But by all means try.

Our real estate agent said maybe we want to do a deed in lieu of foreclosure instead?

That would be best for you, but very hard to acquire.

Not sure what that is, we are in CA and not sure if we would need to worry about a deficiency judgment?

A short sale may have a very adverse effect on your credit and it is not always the case that a short sale is a better option than foreclosure. This is something you should take up with a lawyer.

Are deficiency judgments permitted in California?

Only in certain circumstances. Adeficiency judgment may not be obtained when a property in foreclosure is sold through a non-judicial public sale or if the foreclosure relates to apurchase money mortgage. Different rules apply to guarantors of such loans.
top What statutes govern California foreclosures?

The laws that govern California foreclosures are found in California Civil Code, Section 2924. To view these statutes on the Web, you can visit:
http://www.leginfo.ca.gov

California Foreclosure Laws - Foreclosure.com


I wish you luck!