Expert: Dick Dennis - 7/13/2009

Question
Hi. My husband and are currently living in Northern Florida where he is stationed in the military. He is due to be transferred next summer and we are trying to figure out what to do with our house. We thought with being here a full 4 years that our house would have increased in value but it has decreased about 20,000. So, now we really cant afford to sell it at the decreased price and my husband doesnt want to deal with renting it out either. So, we are looking into short selling. I was hoping that maybe you could tell me more about it. The main thing we are wondering is just how much it will affect our credit. From what Ive read it sounds like it will affect your credit some but not as much as doing a foreclosure. If it does not affect our credit too much this is probably something we would like to do.. Can you give us some more info about it if you have any? I really appreciate your help!

Answer
First of all, Jennifer, it is not likely you would be able to do a short sale without a Realtor. But it should be a Realtor who has a good record of doing many short ssles. Be careful, because some Realtors do not do or don't want to do short sales because they take so long to close and the headaches they have to go through with certain lenders. Ask around. Trouble is, not too many of your friends would want to admit that they are either losing their house to foreclosure and/or have to move because they cannot afford the payments anymore.

Not all lenders are willing to consider short sales if your payments are current. They figure as long as your payments are current, you can afford your payments and your loan. Most of them will realize you mean business when they see you are actually behind in payments two or three months. Whichever Realtor you choose, that person will emphasize this. But no good Realtor will actually suggest you stop making payments. It has to be your decision only. Also, to get a sale through a short sale is not going to be very quick because banks, by their nature and the inventory of foreclosures they have, take their time about approving a short sale. They take typically up to 90 days to close a transaction. A good Realtor can do it in less.

Be aware the lender will specifically demand that the seller (you) shall not receive a dime out of the transaction as long as they are losing on the loan they made to you. And yes, it will affect your credit to the extent that it may make it difficult for you to obtain a new loan for a home purchase for two years. A foreclosure is five to seven years. A bankruptcy is seven to 10 years. So, obviously the short sale is better. But based on your information, you have a year to take care of this matter.

A few of the clients I have worked with stopped making their payments and put the funds for those payments into a savings account not to be touched until they are ready to buy another house. Some clients have stopped making payments, went out and found a house where they want to live to buy another house BEFORE they stopped making payments. Needless to say, Jennifer, these are very trying times, and for homeowners it is very difficult to remedy their situations.

Whatever you do, do not fall prey to those companies that promise to help you in this matter for an up-front fee. Just be aware that your bank may not talk to you without a Realtor who will be contacting them with your written permission. I do wish you well.

Dick Dennis
dixiedee13@aol.com