A Question Regarding Short Sales

This question came in the in-box yesterday, and I wanted to share it with the other inquisitive folks out there who may be wrestling with similar issues, and I’m sure there are many! Remember, if you need help, don’t be afraid to ask for it! You can also look at The Realty Butler Foreclosure Help Resources Page. Talk to you soon. . .

Question:

Hi. My husband and I are considering doing a short sale on our townhome. We owe $195,000 on our home but cannot get that amount for it due to the comps in our neighborhood. We are current on our payments and have good credit but our realator said we could do the short sale to sell our home lower so we can move to Missiouri. My question is basically will we be able to buy once in Missouri with the short sale on our record? I know that with missed payments it damages your credit a ton but will it damage ours as much since there won’t be any missed payments? We just need to sell our house so we can relocate. Thank you!

Answer:

Thanks for the question. Generally speaking, lenders are very averse to allowing borrowers who are current on their payments to do short sales. The whole premise of a short sale is based upon hardship, however, and it doesn’t necessarily have to be a financial hardship. Let’s put it this way: is staying where you are causing a hardship that would be alleviated by moving to Missouri? If that’s the case, the lender may look at your need to move. It might depend on how far the townhome is “upside down”. Also, most credit damage resulting from a short sale is the result of missed payments. So, if your lender agrees to a short sale with your being current on the mortgage, very little, if any, damage will result. When I say very little, it is because of this: when your loan is payed off (in whole or in part), an annotation is made to your credit report. The note says something like “loan remitted.” Some lenders may make a small footnote to that footnote, that says, “remitted for less than amount owed”. There is some debate as to whether that little footnote will affect a borrower’s credit at all. Hope this helps.

Remember, I am not an attorney, nor do I play one on TV or the Internet. If you have specific questions about your unique legal situation, contact qualified legal counsel. If you think I may be able to help, send me an email: abutler@realtybutlerhomes.com

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