Reply
Contributor
Posts: 93
Registered: ‎06-26-2009
0

Filed Ch 7, want to sell 2nd home - won't appraise!! Can we do short sale?

Hello,

 

We filed ch 7 last year, included first and second home (rental property). 

 

Recently we tried to sell the rental, but the appraisal came in much lower than what we owe (no surprise there!).  We purchased it for 150k in 2008, with 15k down.  Selling for 130k, just enough to cover the loan balance.. buyer puts 5% down... APPRAISAL came in @ 105k!  Loan is dead! 

 

Question 1 - what can we do?  given that we're way under water we do not want to keep the property.. and lease is up in 5 months and tenants will not extend.  Rent just covers the mortgage... and we don't want to drag on finding good tenants. Also there are so many comparable homes for cheaper rents.  So we're stuck.

 

Question 2 - Can we do a short sale?  Customer's loan appraisal came in at 105k.  We owe 129k.   Would my loanholder (WF) approve SS? I don't see why not, since we've already filed BK.. and rental home is under water!!

 

Any suggestions/recommendations are greatly appreciated.  Thanks in advance!

Community Leader
Super Contributor
Posts: 5,393
Registered: ‎03-06-2010
0

Re: Filed Ch 7, want to sell 2nd home - won't appraise!! Can we do short sale?


MyFico_704 wrote:

Hello,

 

We filed ch 7 last year, included first and second home (rental property). 

 

Recently we tried to sell the rental, but the appraisal came in much lower than what we owe (no surprise there!).  We purchased it for 150k in 2008, with 15k down.  Selling for 130k, just enough to cover the loan balance.. buyer puts 5% down... APPRAISAL came in @ 105k!  Loan is dead! 

 

Question 1 - what can we do?  given that we're way under water we do not want to keep the property.. and lease is up in 5 months and tenants will not extend.  Rent just covers the mortgage... and we don't want to drag on finding good tenants. Also there are so many comparable homes for cheaper rents.  So we're stuck.

 

Question 2 - Can we do a short sale?  Customer's loan appraisal came in at 105k.  We owe 129k.   Would my loanholder (WF) approve SS? I don't see why not, since we've already filed BK.. and rental home is under water!!

 

Any suggestions/recommendations are greatly appreciated.  Thanks in advance!


Yes, you can do a short sale. I'm a Realtor and its very easy to get a short sale approved once your personal liability has been discharged in BK.

Make sure you get an agent that is a knowledgeable short sale agent - if they have the CDPE designation AND EXPERIENCE you will have a much easier time with it.

Regular Contributor
Posts: 106
Registered: ‎07-20-2012
0

Re: Filed Ch 7, want to sell 2nd home - won't appraise!! Can we do short sale?

The first piece of data is to confirm that the debt was discharged.  Pull your discharge paperwork from the court or get it off the PACER system.  Then pull your CR to confirm they are reporting the mortgage IIB.

 

Once you confirm that you are not liable for the mortgage, then you can do many things.  You could stop paying the mortgage and still collect the rent.  The mortgage company will have to foreclose on you.  A forclosed mortgage that was IIB will not show up on your CR. You could just call the mortgage company and ask them where to drop off the keys.  It gets complicated with rentals when you have tenents living in the property.

 

You have nothing to worry about.  You probably want to call your BK attorney to confirm.


MyFico '08 3 Fico Mar15: EQ=706, EX=704, TU=694
Mortgage Ver3 Score: JAN15: EQ= 704, EX=733, TU=697
MyFICO '08: DEC2014: EQ=704, TU=694
MyFICO '08: AUG2014: EQ=707, TU=693, EX=711
MyFICO '08 JUN2014: EQ=700, TU-688
MyFICO JAN2014: EQ=704, TU=720, EX=708
MyFICO MAY13: EQ=701, TU=708, EX=705 (Lender Pull).
MyFICO JAN13: EQ=701; TU = 677) 2 years after filing BK7, 18 months after discharge in JUN11
MyFICO (SEP12: EQ=677; TU=670) 16 months after discharge BK7.
MyFICO (JUL12: EQ=671) 13 months after BK7.
Community Leader
Super Contributor
Posts: 5,393
Registered: ‎03-06-2010
0

Re: Filed Ch 7, want to sell 2nd home - won't appraise!! Can we do short sale?

Don't just drop off the keys, that would not be a good solution for you as the bank will have no incentive to complete or even start the f/c in a timely manner.

 

Yes, confirm the property was not reaffirmed in the BK. You would know, you would have had to sign a reaffirmation agreement.

You can get a copy of all of your BK docs including petition and discharge and the entire file in PACER if you didn't already keep a copy. Naturally your attorney can answer the question, but you will want to keep proof for your records too.

 

The BK discharges your personal liability. The lien still has to be removed. How the bank removes the lien is either through Deed in Lieu or Foreclosure or you can do a short sale. If you let the bank foreclose or SS or DIL, then the other poster is right, the bank can not change your credit report from iib and zero balance. Same with the DIL or SS. The difference is the time frame. In my area (S FL) the foreclosures are averaging more than 2.5 years and the banks are taking a long time to even start the process. That is why I suggested a SS. You start your recovery much more quickly. The recovery period will begin from the date of discharge of your BK OR the date the deed transfers from you back to the bank or to a third party whichever is later. In your case, the deed going back to another party will be the lastest event.

 

You have choices. Do what is best for you and your family. If you leave it in the hands of the bank to make the decision they will do what is best for them. I have found in our area that short sales are much quicker than a f/c. An average short sale is 60 to 120 days now and the f/c is 2.5 years.  Your area may be different.

 

PS When you have been discharged in a BK 7 the banks make the short sale very very easy and fast IME.

Contributor
Posts: 93
Registered: ‎06-26-2009
0

Re: Filed Ch 7, want to sell 2nd home - won't appraise!! Can we do short sale?

[ Edited ]

Thanks everyone for the suggestions.

 

Question 1 - Is there a waiting period before I should do SS?  BK was discharged in Sept 2011 and officially "closed" Jan 2012.  I really need to get rid of this house.. don't want to deal with tenants anymore!

 

Question 2 - Do I have to use a realtor that specializes in SS or can a homeowner do this themselves?

Valued Contributor
Posts: 2,705
Registered: ‎08-13-2009
0

Re: Filed Ch 7, want to sell 2nd home - won't appraise!! Can we do short sale?

?Just a side note - please do not screw your tenants over.  If you know that you will be getting rid of the property, can you wait until they move out before listing it?  OR waiting like a month before their lease expires before asking the bank for a short sale?

 

The bank may be more motivated to say yes if they know it's your second home AND the tenants lease is up.   

Community Leader
Super Contributor
Posts: 5,393
Registered: ‎03-06-2010
0

Re: Filed Ch 7, want to sell 2nd home - won't appraise!! Can we do short sale?


MyFico_704 wrote:

Thanks everyone for the suggestions.

 

Question 1 - Is there a waiting period before I should do SS?  BK was discharged in Sept 2011 and officially "closed" Jan 2012.  I really need to get rid of this house.. don't want to deal with tenants anymore!

 

Question 2 - Do I have to use a realtor that specializes in SS or can a homeowner do this themselves?


Answer to Question 1:  No, there is no waiting period before you do a short sale.

Answer to Question 2:  There is no requirement to hire a Realtor, but why would you take that on yourself when the fee for the Realtor is paid out of the proceeds that go to the bank? You don't come out of pocket for the Realtors' fee.  I strongly suggest getting a Realtor that has experience doing short sales. There is a lot that is involved negotiating the short sale behind the scenes. It is not a regular sale by any means.  As a matter of experience I also suggest that you get a CDPE (Certified Distressed Property Expert) and make sure the Realtor works with a team of attorney's too so you have a real estate attorney's office, the Realtor and you all on the same side of the deal. The fee for the attorney's office comes out of the proceeds that go to the bank as well (at least here it does). Interview at least 3 or 4 short sale agents to get the right agent. It is a very detailed type of sale.

Contributor
Posts: 93
Registered: ‎06-26-2009
0

Re: Filed Ch 7, want to sell 2nd home - won't appraise!! Can we do short sale?

Thank you very much for your suggestion.

 

1- I didn't want to use a realtor because I THOUGHT I would have to pay for it just as a regular RE transaction.  Good to know that the owner does NOT have to pay for it and that it comes out of the total proceeds that will be paid by the bank.  Knowing this I will definately look for a qualified realtor that specializes in distressed properties.

 

2- I will be using the attorney that I hired to do my bankrutpcy.  Is this a good idea?

 

 

Community Leader
Super Contributor
Posts: 5,393
Registered: ‎03-06-2010
0

Re: Filed Ch 7, want to sell 2nd home - won't appraise!! Can we do short sale?


MyFico_704 wrote:

Thank you very much for your suggestion.

 

1- I didn't want to use a realtor because I THOUGHT I would have to pay for it just as a regular RE transaction.  Good to know that the owner does NOT have to pay for it and that it comes out of the total proceeds that will be paid by the bank.  Knowing this I will definately look for a qualified realtor that specializes in distressed properties.

 

2- I will be using the attorney that I hired to do my bankrutpcy.  Is this a good idea?

 

 


The BK attorney most likely doesn't do short sales. It's an entirely different kind of practice. You also don't want to get the kind of attorney that does 'everything'. The type of attorney that does short sales is a real estate/title attorney.

Most short sale agents work with an attorney so you have a team approach. Interview several Realtors that specialize in distressed sales and ask about their process. Check to see if they work with an attorney or try to do it on their own. There are pro's and con's for each approach. However, IME it is helpful to have the team approach with an attorney. Again the attorney retainer fee is paid out of the proceeds going to the bank so be careful if the attorney fee is required up front. Different states have different regulations about the attorney fee so find out your options in your location. If you would like a referral for your area, PM me.

Contributor
Posts: 93
Registered: ‎06-26-2009
0

Re: Filed Ch 7, want to sell 2nd home - won't appraise!! Can we do short sale?

Here's the other part of my question.

 

My primary residence is approximately valued around 220k, the primary mortgage is about 190k (2nd, HELOC IIB).   I would like to refinance through the HARP program to get a more favorable rate, original rate of 5.75% from 2006.  If I'm able to refinance that would save me over $350/mo.

 

- Considering that I've been recently discharged from BK.. is this possible?  Mortgage is with major bank in Charlotte.

 

Other question is.. if above is possible which should I do first, refinance my primary mortgage OR do SS on the rental property first?  Mortgage on rental is also with same bank.

Advertiser Disclosure: The listings that appear on myFICO are from companies from which myFICO receives compensation, which may impact how and where products appear on myFICO (including, for example, the order in which they appear). myFICO does not review or include all companies or all available products.

Copyright ©2001-2015 Fair Isaac Corporation. All rights reserved.   | Terms of Use | Privacy Policy | Sitemap

IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more

FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.