Expert: Jessica Bryan - 4/14/2011

Question
Hello,  My name is Chad Perdun, my two sisters and one brother are the owners of our Late Mothers home. Our mom died in 2002, my sister was living with her at the time of her passing. That Cancer sure is an evil thing. After her passing my sister decided to stay in the house and take over payments. USDA let her stay there with her husband. They contacted USDA and then took over payments. USDA left the house in my Late Mothers name, is this normal operations of USDA? My Sister has been paying the mortage on time up until a few months ago when my Sisters husband left her after 29 years of blissful marriage. Ya. She was then left with all the bills and a part time job as a cashier at Shop N Save.The divorce along with 1yr.old car,mortage,electric ect.all the bills couldn't be paid. He was ordered to pay $500 per month. He then lost his job and the court reduced her money to $200 a month. I guess she didn't pay the mortage and the thret of forcloseure forced her to decide to move. The USDA has sent letters pursueing payment or foreclosure. Now I get a letter for Notice of insurance termination. None of Us have any exp.in selling a house. Someone mentioned to me to get a hold of USDA and ask them if they would consider taking less money to clear the debt. I don't know if he knows what he is talkin' bout'. might not hurt to ask? Even if they don't what are my next steps in selling this house with none of Our money? Or can you? The house needs work but is fixable. Interest is compounding daily at 5.2%,How do I sell Quickly? Thank You for your time! Please, any advice would be greatly appreciated!  Chad.

Answer
Hello Chad;
I am sorry for you and your family's misfortune.  I have not had any experience with USDA loan programs so all I can speak to is how most lenders are handling situations such as the one you describe.  The person who advised you to get a hold of USDA to ask if they would consider taking less money to clear the debt was describing a "short sale" request.  Some lenders are agreeing to allow sellers to accept offers from potential buyers that are lower than the amount owed on the home. What this means is that the seller would then have to make up the difference at closing with their own cash or get the lender to sign off and forgive the remaining amount owed. This is not easy to accomplish.  Some lenders will accept less money than is owed and call it paid. Others will suspend collection of the debt for a certain period of time; other lenders will still require that the seller pays all of the closing costs, taxes, etc. It is a negotiation.  Most lenders will require that you allow them to look at all of your accounts to determine if you can afford to pay the debt off in full.  A short sale hurts the credit of the those who are involved but not as badly as a foreclosure.  I would say that it is definitely worth asking the lender about doing a short sale.  In the meantime, while they are making up their minds, go ahead and list the house at a price that will pay off the loan and include some cash to pay closing costs.  Right now is a great time for Buyers to shop for a home so take advantage of the Spring and Summer when people are relocating and looking for homes.  Since you mentioned that the home needs work, you might want to talk to a lender about the kind of home loan (for a potential buyer) that includes fix-ups.  Things change all of the time; and with the government cut-backs I am not sure if there is funding available for the various programs that might help make buying this home desirable. However,a lender will help you with this and might design a flyer that will show what the payments and real costs to a Buyer would be.  It might help.

Best wishes and good luck.

Jessica Bryan