When Is It Better To Not "short Sale" ?

Discussion in 'Short Sale Outpost' started by GetOut, May 13, 2014.

  1. GetOut

    GetOut LoanSafe Member

    Is there ever a reason why it is BETTER not to try a short sale but to let the house go into foreclosure ?

    Thanks !
  2. Moe Bedard

    Moe Bedard Call 1-800-779-4547 Staff Member Loan Safe Mortgage

    It all depends on your situation, goals and state.

    It is better for your credit. The hit is usually 50-100 points as opposed to 100-160 point drop with foreclosure. With some lenders such as Fannie Mae, they may allow you to get a new mortgage right after the sale if you have never fallen behind 30 days late on your payments and then short sale.

    Also, your personal residence is exempt from IRS via the mortgage debt relief program if you short sale, but not if you walk away.
  3. bankwhipped

    bankwhipped LoanSafe Member


    I thought that the mortgage debt relief ended on Dec. 31 2013 and has not been extended, did I miss something? If it has been extended then
    my understanding is that both foreclosures and short sales would qualify for cancellation of debt forgiveness of tax but if not extended then
    both would be considered taxable income unless you can prove insolvency, am I missing something or am I misunderstanding the laws, please explain, thanks.
  4. buchanovich

    buchanovich LoanSafe Member

    It has not been extended that I'm aware and I am watching it since it affects my decisions. The only relief you'd have under IRS code is insolvency, which is not as easy as it might seem - they include retirement accounts such as an IRA in the calculation even though it can't be touched by a creditor. SOme programs separate from IRS require that the debt not be "forgiven" in the IRS sense. Got to be careful with the details.

    I will say this. If you apply for a new mortgage within a couple of years it will make a difference. In the case of a VA mortgage, one waits 2 years. Others have similar provisions. Mortgage applications ask if you have surrendered a house to foreclosure, deed in lieu within the last three years; they mention nothing about a short-sale.

    Other than that, a short sale introduces new variables, mostly contributing to a general PITA, such as valuation, finding a buyer and getting the bank to approve the amount. In a foreclosure, you just go. In either case there may be a deficiency they can sue for but in a short you negotiate it - another variable, whether you can get the deficiency waived - while in a foreclosure it depends on the laws of your state. In judicial states it often is a separate hearing to assess a deficiency.
  5. GetOut

    GetOut LoanSafe Member


    Also, it was my understanding that the Mortgage Debt Relief Act only applied to refinanced loans. They did not apply to non-recourse, purchase money loans.

    In my case, I don't plan to buy a house for the next several years, if at all. We have a child with special needs and need the flexibility to travel wherever he would get the best services / treatments that he needs. Being tied down to a location because we own a home there is not at all a good idea for us as it could possibly affect our son's treatment options.

    I honestly am pro-foreclosure. We have a fairly new car and a much older one and if/when we need a new vehicle, we would probably just pay cash and be done. Our children are still very young, so we won't be in need of student loans for at least a decade. Foreclosure seems "safer", less PITA and may not really be a big deal since we plan to stay renters and won't need credit for a few years.

    In my case, is there even an upside to going through the hassle of a short sale ?
  6. kidsandliz

    kidsandliz LoanSafe Member

    It is better to foreclose if you live in a non-recourse state (or a very short limit on when they can come after you for the deficiency and the bank(s) won't forgive the deficiency with a short sale. IF YOU HAVE EXPLICITLY IN WRITING THAT YOU SEE WITH YOUR OWN EYES that the deficiency will be excused (my agent lied to me about this because I said I'd not sell short and would foreclose instead if the deficiency wasn't excused, he wanted his commission so he lied, but he didn't have it in writing and now I have a mess), that the banks will forgive any deficiency then it is better to sell short.
  7. Moe Bedard

    Moe Bedard Call 1-800-779-4547 Staff Member Loan Safe Mortgage

    Get a good lawyer and sue him and his broker. There are lawyers who specialize in going after this type of fraud by real estate brokers. In addition, they have insurance policies for these types of lies called errors and commissions insurance because it is common in the industry.
  8. kidsandliz

    kidsandliz LoanSafe Member

    Moe - I tried and tried to find an attorney who would take him on. The ones in Boise (ID), which is where I got some free advice, didn't want to drive to Moscow, there was one nearly local to him who charged me $500 and then decided he wouldn't take him on after essentially advising me that there is insurance but he wasn't going to take the case. The guy is a big name in a small town and local attorneys all claimed conflict of interest. I sold short Jan 25, 2011. Isn't the statue of limitations over now? Also how the heck can I find an attorney to take this case? Any suggestions as to anyone who would? Moscow is 3 miles from WA so many attorneys around there (including Spokane) are licensed in both states. I called and called and called people. I now live in MS so it is a heck of a distance to go knocking on doors in person to beg and plead.
  9. kidsandliz

    kidsandliz LoanSafe Member

    Moe - PS he owns his agency (been in business 25+ years) so doesn't that make him the broker too?
  10. Moe Bedard

    Moe Bedard Call 1-800-779-4547 Staff Member Loan Safe Mortgage

    Many attorneys work for brokers or banks. They go where the money is and who will pay their bills. Not what is best for consumers or right persay. After all, we live in a capitalist society where greed is king and doing what is right often makes you poor and an outcast kind of like it does for me ;)

    You can try locating a lawyer via the National Association of Consumer Advocates. An association of more than 1000 attorneys and consumer advocates who have a wide range of experience curbing abusive and predatory business practices. Here is a link -http://www.naca.net/find-attorney

    But I tried that link and could not locate an attorney within 50 miles so you may be out of luck there.

    Maybe you can also try and find a newer green and hungary lawyer in or near the county who has bills to pay as well, but as not made friends with the elite in that town. The other option would be to try and file a lawsuit yourself in civil or even small claims court.
  11. Moe Bedard

    Moe Bedard Call 1-800-779-4547 Staff Member Loan Safe Mortgage

    Yes, most likely unless he hired a broker and he is the managing agent. I would assume if he has been in business for that long, he is also the broker.
  12. kidsandliz

    kidsandliz LoanSafe Member

    I tried in 2012 and couldn't locate one willing to go to the middle of nowhere to go after him either.

    It says the statue of limitations for written contracts is 5 years in ID (at least according to where I looked it up). I signed a re-up with him (we had the short buyer at the time so switching would not have made sense even though it took 7 months for the 2 mortgage holders to agree to the short sale) Aug 2010 which then would imply I have until Aug 2015 to go after him or do you suppose it would be until Jan 2016 since Jan 2011 is when he lied to me so I'd sign the short sale papers?
  13. kidsandliz

    kidsandliz LoanSafe Member

    Moe - I tried in 2012 and couldn't locate one willing to go to the middle of nowhere to go after him either. Thanks for trying that link and looking for me. That town is in the middle of wheat fields for miles and miles and miles. It 8 miles from Pullman, WA and most people near the border (be it Spokane or Pullman) have licenses in both states. I looked in both states back in 2012 too.


    It says the statue of limitations for written contracts is 5 years in ID (at least according to where I looked it up). I signed a re-up with him (we had the short buyer at the time so switching would not have made sense even though it took 7 months for the 2 mortgage holders to agree to the short sale) Aug 2010 which then would imply I have until Aug 2015 to go after him or do you suppose it would be until Jan 2016 since Jan 2011 is when he lied to me so I'd sign the short sale papers? Also I have seen two different figures on the web for statue of limitations for promissory notes for ID – 10 years and 5 years. Do you know a good site is reliably right? They seem to agree that written contracts are 5 years.


    I also just got an email back from an attorney who had a good Q&A on his website (so I emailed him) and he said the statue of limitations count for going after me with the deficiency started from when I stopped paying (May 2010) rather than when the house sold. He also said since I now live in MS that how they can collect from me depends on MS law. MS law says they only have 3 years to get me, so I am free and clear in that respect, however I think he is only talking about the methods they can use if they get a judgement against me in ID. That attorney (and I am taking on faith he knows what he is talking about) said that there used to be cases all the time for banks coming after you in ID for the second and he hasn't heard of one for the last couple of years…He just advised me to lay low and drop it, then once the statue of limitations was past contest the credit report as they'd be required to send out with the report that it was contested; not contest it now as I might get back on their radar.
  14. Moe Bedard

    Moe Bedard Call 1-800-779-4547 Staff Member Loan Safe Mortgage

    That is my understanding that you have up until the statute of limitations expired which based on the dates you provided sounds about right.

    I never heard that the statute of limitation starting when you stop paying, but from the foreclosure date. In regards to collecting in another state, I agree that it is based on that states laws in which they would have to file suit in your state if they plan to do that.

    I like that approach of just laying low and staying off the radar. If that works, by all means do it and ride it out until the end.
  15. kidsandliz

    kidsandliz LoanSafe Member

    Yeah unfortunately I noticed on my credit report I pulled this week when I protested it said foreclosure in 2012 (house sold Jan 2011) that triggered them to start sending back in the monthly unpaid amount on the second to the credit report companies, rather than not sending any information, so that was a screwup on my part. I stopped paying when I got laid off May 2010 as I needed to focus on paying rent (rather than rent and mortgage) where I was (2500 miles away), house sold short Jan 2011 so if they do count from when I stopped paying then I only have 10 months to go instead of 17 months. I have my fingers crossed.
  16. Moe Bedard

    Moe Bedard Call 1-800-779-4547 Staff Member Loan Safe Mortgage

    I do believe that sometimes just ignoring them by hoping for the best that some of you will get lost in the mountains of mortgages and messed up paperwork. That and also keeping your fingers crossed ;)

    I wish you the best of luck!

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