Should I stop payments before negotiating for short sale?

Guest

Hi Larry, thanks for the confirmation.
Just to confirm, this is refinanced mortgage. Would it benefit and cover me if I stay for 2 complete years, if at all. I will consult a tax attorney on Monday.
For Deed in Lieu, Is there anything I need to be aware of to make sure that bank is not putting me in any kind of hidden wordings?
How much credit hit will I be taking for D-I-L? How long will it be before I buy a house in the future?
Thank you

larry · Joined: 27 Jun 2007 Posts: 3328 474.49 Dollars($)

Hi Kish,

Credit effect for deed in lieu is almost same as foreclosure. Your credit score will be dropped by 200 to 250 points and it will be shown on your credit report for 10 years.

Your need to improve your credit to buy a new house in future and that will take at least 2 years from now on. .

Now to check if there is any kind of hidden wordings you should check the papers thoroughly and take help from an attorney.

Feel free to ask if you have any further questions.

Best of luck,
Larry

Guest

Hello, I am still waiting on the bank for the final terms of DIL. While at it, I have a buyer that is interested in buying my house, if priced right, which is 180K less than what I owe. Even if they do DIL, they wont get more than that when the bank try to sell it. Which option do you think to better? Should I talk to talk about short sale? Is my liability same on whichever way I go? I have an appointment with Tax CPA next week. But, want to see what our experts say.
Thank you.

Niicss · Posted: Fri May 09, 2008 6:17 am Post subject:

Welcome Kish.

Credit effect of short sale and DIL is not the same. DIL effects more than short sale. So you can think about short sale.

In case of short sale if the sale price is less than the amount you owe to the lender then you will have to pay the deference to the lender.

Let me know if you have any further queries.

cliff · Posted: Fri May 09, 2008 6:17 am Post subject:

Great work Kish! Congratulations on your deed in lieu! I deal with alot of clients with similar cases like yours. You do need to make sure and contact a "tax account and attorney" to ensure that you do not get stuck with this tax bill.

Guest

It seems than DIL is better option, if not for the credit hit. In DIL, i dont need to pay the difference and my 1099 tax liability might get wiped out because of the mortgage forgiveness act.
where as in short sale, I need to pay the difference to the lender.
I have always paid my credit card and other bills ontime in the past 10 years and never was fined for being late. So, I can improve the credit score in the long run. My only concern is about buying a home in the future. If I am able to buy a home in next 3-4 years, I am OK with that.

larry · Joined: 27 Jun 2007 Posts: 3328 474.49 Dollars($)

Hi Kish,

Welcome back.

How much will you owe to the lender even after the short sale?

Only if the lender accepts the DIL then you can go for it. Otherwise you may have to go for short sale.

"If I am able to buy a home in next 3-4 years, I am OK with that."
If you can improve your credit within this time period, then you can get a mortgage to buy a home after 4 or 5 years.

Feel free to ask if you have any further questions.

Best of luck,
Larry

Posted: Sat May 10, 2008 10:34 am Post subject:

Kish you can improve your credit enough within one year to purchase another house! So don't worry I sure you will be just fine.

cliff · Posted: Sat May 10, 2008 10:36 am Post subject:

Sorry Kish the last response was from me. I forgot to log back in.

Guest

Hello Cliff and Larry,
Thanks for your answers. That assures me a bit. Since it stays on my credit for 10 years, I was wondering if the mortgage companies would be able to lend me money in the near future, with a normal interest rate.

The difference would be about 180K if I do a short sale.
I was reading the article by Jessica regarding Deed in Lieu and she mentioned that Mortgage relief Act is not enforced in California yet. Is that still true? I am in CA.
Also, I read in one thread here that once the DIL process started, bank owns the house. Is that true? or does the bank own it after the process is completed entirely which is 2 months?
The reason I am asking is if I still need to keep paying mortgage once the process started.
Thank you.

I spoke with a CPA and he mentioned that I am covered under mortgage Act for the 1099.

kingno1 · Joined: 25 Apr 2008 Posts: 56 19.98 Dollars($)

Spoke with the bank today. He was saying that in order for doing DIL, the house has to be in market for atleast 90 days. Is that true? He wants me to wait until that 90 days iscomplete. Doesnt sound like a right statement. Can someone please confirm?
Thank you.

cliff · Posted: Tue May 13, 2008 6:07 pm Post subject:

Good questions!

Kish: as soon as you sign the notarized document conveying (i.e. giving property to mortgage company) property to mortgage company they own it.

Kinqno1: Many times mortgage companies want you to put the house on the market first to see if it will sell so that they would not have to do a DIL. Just make sure to get some kind of statement that says if the home does not sell in 90 days they will do a DIL.

Hope this helps guys. Very Happy

kingno1 · Joined: 25 Apr 2008 Posts: 56 19.98 Dollars($)

Hi, Kingno1 and Kish is the same person, thats me. So, the bank officer is not BSing. Wink

.
I still need to make another 3 months of payments before I let them do DIL. Smile

. I hope I can get someone for shortsale before that. I am having my RE agent submit an offer from a person this week, which is 160K less than the amount that I owee. Will have to see how it goes. Hopefully, they accept the offer.

larry · Joined: 27 Jun 2007 Posts: 3328 474.49 Dollars($)

Hi Kish,

So has the lender accepted the DIL? The difference of the sale price and what you owe to the lender to really too high.

kingno1 · Joined: 25 Apr 2008 Posts: 56 19.98 Dollars($)

Hi Larry, the bank said that I need to put the house on market for atleast 90 days before they do DIL. I send him an email to confirm in writing about the same. Its been in market for 1 month now. Meanwhile he suggested me to send in offers if any comes along for short sale.

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