Expert: Karyn Foley - 10/27/2011

Question
First, thanks for your time.

I'm currently  5 years into a 30 year fixed at 6.1%.  I bought at approx. 350K and my house is now worth about 200K.  I have about 270K left on my loan.

Like many....I'm stuck.  My wife and I can afford our payments, but would like to move out of what was our first "starter" home and move into something a bit bigger (we have a new baby).

Is a short sale something we could do?  My wife is not on the current deed/loan.  Is there a way for me to short sale, and potentially purchase a new house in my wife's name.  Is that allowed?  Is it legal?  

I've seen so many short sales in my neighborhood and among friends and co-workers.  How are these short sales being obtained?

Thanks for any info.  Again, I appreciate your time.

-Ben
Roseville, CA

Answer
Dear Ben:  Here is a comparison:  I lost money on my stock and bonds investments during the past few years, and would like to recoup my losses so I ask the government to give my money back or pay me for my stocks so I don't lose any more money and allow me to recoup my losses.  Somehow the government nor the US citizens want to help me out.  Your home was an investment for you, too.  Why should anyone bail you out?  Now, if you lost your job and can prove you have no financial resources to continue paying on your mortgage, perhaps the bank will allow you to do a short sale and they will agree to take less than one hundred cents on the dollar.  You should either speak with your mortgage holder and explain how and why you cannot afford to live in your home and pay any more mortgage costs.

If your wife is not on the deed and NOT on the loan, she should go to the bank or a mortgage broker and apply for a loan.  They will check her sole credit and her assets and she if she alone can qualify for a mortgage, and if so, for how much.

The above two paragraphs are not mutually exclusive.  Be prepared, however, to end up with a bad credit rating for several years if you succeed in the short sale process.

Ask your friends and co-workers all the information on their short sale process.  Contact their advocate, or real estate broker who specializes in short sales, and get support and advice on your chances of success.

In this downhill economy it is not a badge of dishonor to go through a rough period, even to lose your home.  But it does have repercussions and you need to be within the bank's guidelines to make it work out.  It is not as simple as it sounds.  I have known many people who had lots of money, and they went through a real estate attorney to make it happen.  That was expensive, but it saved them money in the future.  It is not a comfortable position for any person to be in, but it is a fact of live now here and abroad.  I am not being judgmental, but just want to alert you that it is a process that has regulations and may take time.  

Good luck in working this out. KARYN FOLEY