Need opinions: short sale or improve and wait?

[Shoopy]

I officially despise our condo. On top of all the problems we''ve had over the years, the final straw is that we now have a spider problem. I don''t know where they came from. We have taken this place apart looking for holes and sealing them up. We have an exterminator coming out tomorrow. It''s not a big deal for us but having a baby in the house, it freaks me out.

So I want out but I''ll admit that I know nothing of real estate so I''m looking to pick everyone''s brain and get opinions. Before going over our options, just want to say this: we can''t sell right now because no one is buying. Our neighbor who has the same unit has had hers on the market for 2.5 years. We could rent it out but we''d need $1,000 to cover mortgage and taxes as well as $250 for association fees and I don''t see that happening.

Option 1: do a short sale. The condo is in my mom''s name as this was an investment property for her. She will lose thousands but has said that she is willing to take the loss (the short sale is her idea as she wants us to get into a house).

Option 2: wait it out. In the meantime we can put the place in my name (we''re losing thousands as we can''t take any tax advantages with this being an investment property including the $50k homestead tax exemption) and we can make improvements such as get rid of the disgusting carpet and redo all of the cabinets.

The problem with option 1 is that a) we know nothing of short sales and b) we will take a huge loss including the $50k down payment my mom made (I tried talking her out of dropping that much casg but she wanted to do it and it was her money to spend.)

The problem with option 2 is that we will be spending thousands to improve this dump and may never get our money back. Plus we need a bigger place and our community keeps getting worse so I want out but we''re not in a rush and can wait.

Opinions? Other suggestions?

 

[Loves Vintage]

You should look into how the short sale would affect your mom's credit. If you were to go this route, keep in mind that short sales do not happen quickly.

Realistically, how much could you rent it out for? Even though it sounds like the rent will not cover mortgage, taxes, fees entirely, this is a good third option if you want out right now and it sounds like you do! Wait until the market improves and then sell.

If you decide to rent, do a credit check and contact references.

Good luck!

 

[Italiahaircolor]

Okay, a couple of things.

You can''t just "do" a short sale. You actually have to qualify for it. Usually the three major qualifications for a short sale are: dropping home value below what you owe on the house, defaulting on your mortage/close to foreclosure, or having fallen on hard times personally. Even at that, you have to get your lender to approve you for a short sale--which they rarely want to do because they are going to be taking a loss on your home and it doesn''t benefit them.

I would meet with a real estate agent and discuss the ins and outs of the process, but I would also seriously consider trying to sell ligitmately. If you''re priced right and your home "shows" well it will sell--it may take some time, but it''s possible. Replacing carpet, updating some hardware and pricing it below market value--those are going to make your home stand out.

 

[D&T]

check out legal and finacial ramifications on investment properties on short sale. there maybe Deficiency judgement against your mom if there is one in your state especially if this is an investment property if/when a short sale is completed.

ETD:

 

[Tacori E-ring]

Banks only take short sales once you are behind on the mortgage and they think a short sale would benefit them more than a courthouse auction. Once you are behind you need to put together a short sale packet explain why you can no longer afford the payments (tax returns, bank statements, etc). Also you need to have a buy ready and willing to buy your condo at X amount of dollars. My DH is an expert not me but I believe they are willing to discharge the debt so as to not ruin your mom's credit. I forgot what they call it but you need to get it on writing that they will not come after your mom. Legally they *could* 1099 her for the difference claiming it was "income." I am sure some of the RAs on here can explain this more. Since the home is in your mom's name I would try HARD to rent it or wait it out. Short sales are for *desperate* situations.

ETA: D&T mentioned what I was trying to remember, Deficiency judgement.

 

[iheartscience]

I was just watching Real Estate Intervention last night and the owner was going to have to do a short sale. (So a disclaimer that all of this information is from TV!) The realtor/host of the show said that in order to get a short sale approved by the bank you usually have to prove a real hardship.

In this case the owner had a negative amortization mortgage and her payment had just increased by about $800/month. On top of that her mother had terminal cancer, so the odds were that her short sale would get approved because she had a provable hardship. If the condo is in your mother's name, it looks like she can afford it and she doesn't have a hardship, it may be difficult to get a short sale approved.

It might make the most sense to get your condo rented, even if it is at a slight loss, and wait until the market improves to sell. The good thing is that you could get a mortgage for a house without selling the condo since the condo's in your mother's name, right? Good luck and I hope it works out for you!

ETA if you don't plan on staying and it's not going to help your house sell, I wouldn't do any expensive improvements...I probably wouldn't do any improvements, actually, unless something desperately needs fixing.

 

[Shoopy]

LV-The reason why we''re so hesitant is because of how it''ll affect her credit. She has also been telling us for months to stop paying the mortgage all together. She says she doesn''t care about her credit anymore as her home is fully paid for but a) there''s no way I would ever do that to her and b) I wouldn''t feel right just not paying the bills when we have no problem paying them. This unit is renting out right now for $900. Our in-laws have suggested that we rent it out, pay the difference, and live with them so we can save and wait for the opportunity to sell.

Italia-thanks for your input. As I said, I know nothing of short sales. My mom seems to believe it can be easily done. I have no idea. Actually, she wants to do the short sale so that I purchase but I don''t think it works that way either.

 

[D&T]

Date: 9/21/2009 2:16:24 PM
Author: fiery
LV-The reason why we''re so hesitant is because of how it''ll affect her credit. She has also been telling us for months to stop paying the mortgage all together. She says she doesn''t care about her credit anymore as her home is fully paid for but a) there''s no way I would ever do that to her and b) I wouldn''t feel right just not paying the bills when we have no problem paying them. This unit is renting out right now for $900. Our in-laws have suggested that we rent it out, pay the difference, and live with them so we can save and wait for the opportunity to sell.

Italia-thanks for your input. As I said, I know nothing of short sales. My mom seems to believe it can be easily done. I have no idea. Actually, she wants to do the short sale so that I purchase but I don''t think it works that way either.

please be careful with this. At title/signing if you are doing a short sale, you have to fill out paperwork stating that you are in no way related or know this seller in any way that could possibly indicate any type of "arrangements" which could have legal consequences.

 

[TravelingGal]

Date: 9/21/2009 2:16:24 PM
Author: fiery
LV-The reason why we''re so hesitant is because of how it''ll affect her credit. She has also been telling us for months to stop paying the mortgage all together. She says she doesn''t care about her credit anymore as her home is fully paid for but a) there''s no way I would ever do that to her and b) I wouldn''t feel right just not paying the bills when we have no problem paying them. This unit is renting out right now for $900. Our in-laws have suggested that we rent it out, pay the difference, and live with them so we can save and wait for the opportunity to sell.

Italia-thanks for your input. As I said, I know nothing of short sales. My mom seems to believe it can be easily done. I have no idea. Actually, she wants to do the short sale so that I purchase but I don''t think it works that way either.

Fiery, you and your mom need to do more research (which I see you are doing by asking questions here). As others have said, short sales are no easy solution.

As for spiders, check out Ortho Home Defense. I''m looking into it now. My friend says she sprays the perimeter of her home every six months and has no issue with spiders inside the house. We have a ton of spiders in our new house and I hate it.

 

[Shoopy]

D&T and Tacori-thanka for that info. I''m going to pass it along.

Thing2-I don''t want to do any improvements for that reason. My only fear though is that if we are here for a longer period, DD will start crawling around and ther is no way I would allow that with these floors. Redoing the floors won''t be much since its a small space but we have no idea what condition the floor is in once we rip up the carpet and we''d also have to put in a sound proof barrier since we live upstairs so it could end up being a lot. We''ve had money set aside for a while now but I think I rather save that for a down payment. It''s a lot to think about.

 

[MichelleCarmen]

You mention you need a bigger place. Are you planning to rent something more accomodating or buy? Do you have the funds to pay for either? If not, probably stay for now.

I don''t think it''s fair to do a short-sale with the home being in your mom''s name. Yes, her house is paid for, but she cannot forsee other financial situations coming up that she may need excellent credit for.

 

[Shoopy]

Date: 9/21/2009 2:19:35 PM
Author: D&T

Date: 9/21/2009 2:16:24 PM

Author: fiery

LV-The reason why we''re so hesitant is because of how it''ll affect her credit. She has also been telling us for months to stop paying the mortgage all together. She says she doesn''t care about her credit anymore as her home is fully paid for but a) there''s no way I would ever do that to her and b) I wouldn''t feel right just not paying the bills when we have no problem paying them. This unit is renting out right now for $900. Our in-laws have suggested that we rent it out, pay the difference, and live with them so we can save and wait for the opportunity to sell.


Italia-thanks for your input. As I said, I know nothing of short sales. My mom seems to believe it can be easily done. I have no idea. Actually, she wants to do the short sale so that I purchase but I don''t think it works that way either.

please be careful with this. At title/signing if you are doing a short sale, you have to fill out paperwork stating that you are in no way related or know this seller in any way that could possibly indicate any type of ''arrangements'' which could have legal consequences.

Thank you! Didn''t know that either.

Tgal is right, we need to do more research but it sounds like a short sale may not be an option for us. Would she be able to go to the lending office and have it reduced to its current value? Right now we owe $115k but if I had to guess based on talking to neighbors that are selling right now, its probably worth anywhere between $50 and $75k

 

[Rock_of_Love]

Date: 9/21/2009 2:19:35 PM
Author: D&T

Date: 9/21/2009 2:16:24 PM
Author: fiery
LV-The reason why we''re so hesitant is because of how it''ll affect her credit. She has also been telling us for months to stop paying the mortgage all together. She says she doesn''t care about her credit anymore as her home is fully paid for but a) there''s no way I would ever do that to her and b) I wouldn''t feel right just not paying the bills when we have no problem paying them. This unit is renting out right now for $900. Our in-laws have suggested that we rent it out, pay the difference, and live with them so we can save and wait for the opportunity to sell.

Italia-thanks for your input. As I said, I know nothing of short sales. My mom seems to believe it can be easily done. I have no idea. Actually, she wants to do the short sale so that I purchase but I don''t think it works that way either.

please be careful with this. At title/signing if you are doing a short sale, you have to fill out paperwork stating that you are in no way related or know this seller in any way that could possibly indicate any type of ''arrangements'' which could have legal consequences.

Ditto to this! It didn''t used to be the case so much, but now the banks are on to the fact that many people are trying to do this. Also, if your mom has a 2nd on the property, they may excuse the 1st but not the 2nd, and still make her liable for any amount she owes on the 2nd. I see this happening a lot! And, I see more and more banks not approving short sales these days, so it is really really risky. It sounds like this property is not upside down by that much, so that would make the bank more likely to take it back in a foreclosure, vs. approving the short sale.

From what you have presented so far, it really doesn''t sound to me like a short sale would make sense.

Also, it doesn''t matter if this is an investment property...there are still MANY tax advavntages. It sounds like it is your prinicipal residence, in which case you can take all the write-offs - property tax, etc. Just because your mom technically owns the house, she can give you the write-offs...just ask a tax guy. This is what me and my BF do. The house is in his name, but he is self-employed and doesn''t need the write-off...so our tax guy does the write-offs on my tax return.

Or, even if you rent it out, you can write-off any losses you may have, which on a rental property can be anything from repairs, marketing costs, printing out rental apps, etc. And, it sounds like you would do pretty well by renting it out...$900 is not bad when you have to cover $1000! Not bad at all.

IMO the market will get better, and I don''t think it will be that much longer.

 

[Loves Vintage]

I would get in touch with a real estate agent and a lender. Find out how much you can afford, given the amount you have available for a down payment now. Hopefully, you can find a great place for a great deal, given current market conditions.

Rent your place out and have your mother talk to an accountant about whether the additional amount she would pay above the rent received would be deductible as a business expense on her tax return. Assuming her tax rate is 25%, then the 4,200 (350*12) additional cost per year would actually be 3,150, plus she would continue to pay down the mortgage. (This is just a hypothetical estimate to give you something else to conder, not intended to be tax advice.

) Hopefully, the market improves in a few years, and then she can sell. Maybe you can afford to split this cost with her or take it on fully yourselves.

Do you want to live with your ILs? I would strongly suggest researching what you can possibly purchase now, without have to save more downpayment money. Moving in with your ILs is likely to introduce some new issues, right? So, yeah, I would probably see what is possible, given your current financial situation. I also wouldn't invest more in the property, since your goal is to get out asap.

 

[Rock_of_Love]

Date: 9/21/2009 2:35:32 PM
Author: fiery

Date: 9/21/2009 2:19:35 PM
Author: D&T

Date: 9/21/2009 2:16:24 PM

Author: fiery

LV-The reason why we''re so hesitant is because of how it''ll affect her credit. She has also been telling us for months to stop paying the mortgage all together. She says she doesn''t care about her credit anymore as her home is fully paid for but a) there''s no way I would ever do that to her and b) I wouldn''t feel right just not paying the bills when we have no problem paying them. This unit is renting out right now for $900. Our in-laws have suggested that we rent it out, pay the difference, and live with them so we can save and wait for the opportunity to sell.


Italia-thanks for your input. As I said, I know nothing of short sales. My mom seems to believe it can be easily done. I have no idea. Actually, she wants to do the short sale so that I purchase but I don''t think it works that way either.

please be careful with this. At title/signing if you are doing a short sale, you have to fill out paperwork stating that you are in no way related or know this seller in any way that could possibly indicate any type of ''arrangements'' which could have legal consequences.

Thank you! Didn''t know that either.

Tgal is right, we need to do more research but it sounds like a short sale may not be an option for us. Would she be able to go to the lending office and have it reduced to its current value? Right now we owe $115k but if I had to guess based on talking to neighbors that are selling right now, its probably worth anywhere between $50 and $75k

They are really only approving loan mods on primary residences...but I have seen SOME on investment properties. IMO to get a loan mod, your mom would probably have to say that she lived there. And, again, in this case she will have to show a hardship as to why she is not able to afford the mortgage as it is now.

Here is more info from the gov''t backed programs that are out there:
Making Home Affordable

 

[TravelingGal]

Date: 9/21/2009 2:35:32 PM
Author: fiery

Date: 9/21/2009 2:19:35 PM
Author: D&T

Date: 9/21/2009 2:16:24 PM

Author: fiery

LV-The reason why we''re so hesitant is because of how it''ll affect her credit. She has also been telling us for months to stop paying the mortgage all together. She says she doesn''t care about her credit anymore as her home is fully paid for but a) there''s no way I would ever do that to her and b) I wouldn''t feel right just not paying the bills when we have no problem paying them. This unit is renting out right now for $900. Our in-laws have suggested that we rent it out, pay the difference, and live with them so we can save and wait for the opportunity to sell.


Italia-thanks for your input. As I said, I know nothing of short sales. My mom seems to believe it can be easily done. I have no idea. Actually, she wants to do the short sale so that I purchase but I don''t think it works that way either.

please be careful with this. At title/signing if you are doing a short sale, you have to fill out paperwork stating that you are in no way related or know this seller in any way that could possibly indicate any type of ''arrangements'' which could have legal consequences.

Thank you! Didn''t know that either.

Tgal is right, we need to do more research but it sounds like a short sale may not be an option for us. Would she be able to go to the lending office and have it reduced to its current value? Right now we owe $115k but if I had to guess based on talking to neighbors that are selling right now, its probably worth anywhere between $50 and $75k

Don''t think it would be that easy. Too many people are in the same boat. But it wouldn''t hurt to start with calling the lender - which could be challenging depending on how many lenders and who it is. Does she have PMI on the place? If so, the lender may not be motivated to do much of anything but to let it foreclose.

 

[Shoopy]

Date: 9/21/2009 2:30:23 PM
Author: MC
You mention you need a bigger place. Are you planning to rent something more accomodating or buy? Do you have the funds to pay for either? If not, probably stay for now.


I don''t think it''s fair to do a short-sale with the home being in your mom''s name. Yes, her house is paid for, but she cannot forsee other financial situations coming up that she may need excellent credit for.

We would buy. We have some money saved up, at least enogh for a decent down payment but I would feel really badly if we couldn''t give my mom anything back. when she purchased, it was with the intention that she would give it to me. I didn''t want this because she worked hard for her money so the deal I made was that we would sell and give her the down plus a percentage. That was when we really believed we would be able to improve and sell for a profit. Now, there''s no way we will make a profit unless we wait years. So my fiance and I are trying to figure out what to do since I would hate for her to lose that much. We''ve been putting up with this place but can''t do it anymore.

My mom wants to chalk it up as a bad investment and just move on which is why every time we talk she suggests that we just stop paying the mortgage.

 

[D&T]

Date: 9/21/2009 2:35:32 PM
Author: fiery


Thank you! Didn''t know that either.

Tgal is right, we need to do more research but it sounds like a short sale may not be an option for us. Would she be able to go to the lending office and have it reduced to its current value? Right now we owe $115k but if I had to guess based on talking to neighbors that are selling right now, its probably worth anywhere between $50 and $75k

you can definitely try this route for a modification loan and see what they will do if any. It doesn''t hurt to check it out for sure

 

[TravelingGal]

Date: 9/21/2009 2:43:10 PM
Author: fiery

Date: 9/21/2009 2:30:23 PM
Author: MC
You mention you need a bigger place. Are you planning to rent something more accomodating or buy? Do you have the funds to pay for either? If not, probably stay for now.


I don''t think it''s fair to do a short-sale with the home being in your mom''s name. Yes, her house is paid for, but she cannot forsee other financial situations coming up that she may need excellent credit for.

We would buy. We have some money saved up, at least enogh for a decent down payment but I would feel really badly if we couldn''t give my mom anything back. when she purchased, it was with the intention that she would give it to me. I didn''t want this because she worked hard for her money so the deal I made was that we would sell and give her the down plus a percentage. That was when we really believed we would be able to improve and sell for a profit. Now, there''s no way we will make a profit unless we wait years. So my fiance and I are trying to figure out what to do since I would hate for her to lose that much. We''ve been putting up with this place but can''t do it anymore.

My mom wants to chalk it up as a bad investment and just move on which is why every time we talk she suggests that we just stop paying the mortgage.

Fiery, what is it about that place that you can''t put up with?

Not to sound harsh, but you were happy to let your mom put a downpayment down when you thought you could sell it for a profit, but now that you''re upside down, you can''t deal with the place? Honestly, if my mom did me that favor, I would suck it up for as long as it took for me to either sell the place at a profit (or at least not a loss) or until I had the money to give her to make up for selling it at a loss.

Is waiting years so bad? I totally understanding dealing with a place that is frustrating. I lived in a two bedroom apartment that got infested with fleas every summer (we didn''t have pets, and I''ll tell you now I''ll take spiders ANY day over fleas.) Our neighbor smoked and when he did, so did all of us, it smelled so bad in our place. Amelia shared a room with my desk, fax machine and other unsafe office supplies.

So believe me, I sympathize. But if my mom owned it and the only option was to kill her credit rating and make her take a big loss now - well, the fleas and I would be buds a few summers longer.

 

[Haven]

Ditto to Tgal''s last post. I obviously don''t know all the details of your living conditions, but if I found myself in your position I wouldn''t be able to walk away and let my mom take the hit so I could be more comfortable. I would feel very guilty and extremely ungrateful.

I''m sorry you find yourself in this situation. Is there anything you can do to make the place more tolerable? Perhaps you could put a bit of money into the place to make it more comfortable for you for a year or two, and then hopefully the market will be in a better place. That way your mom won''t take a financial or credit hit, and you will be able to take advantage of this amazing opportunity that your mother gave you by putting that kind of money down on a place and taking out the mortgage so you can live there. It sounds like you''re in a uniquely fortunate situation from where I''m sitting.

 

[Shoopy]

Tgal- you didn''t sound harsh

When we first moved in, the developers made a lot of promises. We were going to have security, it was going to be gated, they were going to improve the overall property. Well, the market turned and they couldn''t afford it. We didn''t mind but since then we''ve had problems. We are paying the association each month but almost 60% of the owners aren''t so the association can''t do anything. They haven''t cleaned the lake in months, they cut the grass once every 3 months, and there is only one trash dump for nearly 300 units and only one trash pick up per week (so loads of garbage and animals as a result). But we''re paying for all of these services.

Secondly, they have opened it up to renters to make money but the property manager wasn''t doing any background checks so crime has increased. Cars are getting vandalized and there was a huge police shoot out when they found that a suspect wanted for killing an officer was living here. The shooting took place in one of our pools literally 30 minutes after a chuld''s bday party and feet away from some units. The pool is still closed down (but we''re still paying for maintenance.)

So its just a miserable place to live in. And don''t get me wrong. The profit isn''t necessarily for our sake. I figured we would get maybe $10k if we were lucky but I wanted a profit to pay my mom back.

We can wait it''s just stressful and kind of depressing here, KWIM?

 

[TravelingGal]

Date: 9/21/2009 3:53:31 PM
Author: fiery
Tgal- you didn''t sound harsh

When we first moved in, the developers made a lot of promises. We were going to have security, it was going to be gated, they were going to improve the overall property. Well, the market turned and they couldn''t afford it. We didn''t mind but since then we''ve had problems. We are paying the association each month but almost 60% of the owners aren''t so the association can''t do anything. They haven''t cleaned the lake in months, they cut the grass once every 3 months, and there is only one trash dump for nearly 300 units and only one trash pick up per week (so loads of garbage and animals as a result). But we''re paying for all of these services.

Secondly, they have opened it up to renters to make money but the property manager wasn''t doing any background checks so crime has increased. Cars are getting vandalized and there was a huge police shoot out when they found that a suspect wanted for killing an officer was living here. The shooting took place in one of our pools literally 30 minutes after a chuld''s bday party and feet away from some units. The pool is still closed down (but we''re still paying for maintenance.)

So its just a miserable place to live in. And don''t get me wrong. The profit isn''t necessarily for our sake. I figured we would get maybe $10k if we were lucky but I wanted a profit to pay my mom back.

We can wait it''s just stressful and kind of depressing here, KWIM?

OK, shoot outs are a good reason to move. Hopefully the killing renter was an anomaly though!

Well, if the association isn''t doing anything, any way you could not pay yours? Although it certainly won''t help the problems any if you don''t pay too.

Yes, I know that stressful and depressing isn''t the best way to live. I felt my last apartment was sort of like that, and we weren''t having shootouts of any kind. If you can rent it out for 900, and pay the shortfall, I think that might be the way to go. But do the background checks and everything yourself and take a good size security deposit so you can fix up whatever might need upkeep.

 

[violet3]

The above information is very helpful for you - I am sorry you've found yourself in this situation.

I just wanted to point out that someone above mentioned that the banks would possibly forgive the debt in order not to ruin your mom's credit. At least in the state in which I live, short sales ARE a big hit to your credit, and usually do involve paying back the differential in price (although it is usually negotiated down). They just happen to be less of a hit than a forclosure is (ie. 2 years restriction from getting a mortgage vs. 5-7 years for a forclosure).

I am a real estate agent, and that is how it works where i live - i would definitely explore with someone the ramifications of doing this to your mother's credit where you live.

 

[Shoopy]

Thanks to everyone for your opinion and knowledge on the subject. We definitely have a lot to research and discuss. In the meantime, we went to a tile place about an hour ago and found tile that we loved. The best part is that they quoted us about $2k less than in all the other places we''ve been to over the past year. So they''re coming tomorrow to measure and give us an exact cost. If we agree, they can have it done by the end of the week which would be ideal since mat leave ends this week (

) and my mom is visiting and can help me clean up when they''re done. So that makes me feel a lot better