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Prices are moving up now all over the county so you may actually not be underwater in your loan. Are you current with your mortgage?
What is the value of your home in its current condition? If you haven't had an experienced agent give you a market anaysis, have them do it so you are working with as much accuracy as possible.
Is is possible to do some fix up and get a much higher value? Sometimes it is possible to do enough repair that you actually walk away with a profit. All over the country now we are experiencing a market with inventory shortgage which is pushing up the home prices. Don't assume you are short unless you have done your homework. And if the price of the home is related to its current condition, you have the chance to cure that with a little rehab.
I don't know why you say Chase isn't participating in Short sales, but they do participate regularly. Someone gave you bad info. They actually have a decent short sale program. You would need an experienced short sale agent in your area to handle it. If you need a referral for one, pm me.
If you choose to do a short sale, that will create issues for you if you are looking to purchase immediately. There is a wait period from the time the short sale closes anywhere from two to seven years after the deed transfers. There is a very limited set of circumstances where you can purchase again right away, but you would have had to have never been late for the proceeding 12 months up to and including the short sale transfer and you have to show you didn't take advantage of market conditions.
To sum up: get your current market value of your home in its current condition AND the value based on certain fix up costs. You may be able to sell it without going through the short sale process.
Is the goal to move because you want another location, or to move because of the condition of the house?
If your true problem is the condition of the house I believe you might be able to refi with a special loan (I think it is called a 503b loan) which provides escrow for the cost of repairs. If you do that and get the house fixed up maybe you won't want to leave at all..... but if you do decide you still want to leave, the house should be much easier to sell in repaired condition. Another option (which would require repair) would be to hold the preperty as a rental when you move/upgrade.
I would like to sell eventually. I was denied by Chase for a refi due to credit problems. My credit score was over 650. My transunion is 710.
We were in a similar situation. Hubby purchased the house in 2005 for$128k -- it was brand new at the time, but small, bad layout, tiny yard, and in a neighborhood that was rapidly going downhill. Even though we had it appraised early this year for $122k (we owe $112, so not technically underwater) we couldn't find a realtor willing to list it for more than 110K. This was after we had already put 10k into finishing the basement. We didn't want to take such a big loss, so we refinanced it for the lowest possible rate and put it for rent. I was suprised at how competitive the rental market was. We were able to get top dollar, allowing us to put an extra $150/month in the bank for future repairs while having them pay down the mortgage. Even though we couldn't claim the rental income, we were able to get approved for a house we love -- without the temptation to over-spend that we might have had had we not had that other mortgage on our DTI. Although it was frustrating when we were trying to figure out how we would ever get out of there (I remember feeling trapped and seriously wishing the place would burn down or something when we weren't home) it all worked out well. Although we're still early in the process, we're happy with the decision to rent so far. Maybe this would be an option for you?