• FreeAdvice has a new Terms of Service and Privacy Policy, effective May 25, 2018.
    By continuing to use this site, you are consenting to our Terms of Service and use of cookies.

foreclosure vs. short sale - which is better?

Accident - Bankruptcy - Criminal Law / DUI - Business - Consumer - Employment - Family - Immigration - Real Estate - Tax - Traffic - Wills   Please click a topic or scroll down for more.

Y

youngalky

Junior Member
What is the name of your state? CA

I have two investment properties I bought 100% financing owner occupied that are both now about 6 weeks from foreclosure auction. I'm about 5 months over due and my credit is now badly damaged. I never refi'd the properties, but I'm probably 100 grand upside down in each one, plus the cost of taxes, liens, etc, which brings the total I'm upside down to about 250k between the two properties (some of the conditions of the properties were not disclosed to me when I purchased- a situation which I have a pending lawsuit over). Anyways that all aside, I'm just wondering if I would be better off giving up and letting the properties go to auction. My realtor has not been able to get any negotiation on a short sale from any of the lenders (2 on each property), and I have another professional trying to get the lenders to negotiate, but already doesn't think we'll get anywhere. Are there any advantages to foreclosure? Will I see a 10-99 either way?
 


A

acmb05

Senior Member
youngalky said:
What is the name of your state? CA

I have two investment properties I bought 100% financing owner occupied that are both now about 6 weeks from foreclosure auction. I'm about 5 months over due and my credit is now badly damaged. I never refi'd the properties, but I'm probably 100 grand upside down in each one, plus the cost of taxes, liens, etc, which brings the total I'm upside down to about 250k between the two properties (some of the conditions of the properties were not disclosed to me when I purchased- a situation which I have a pending lawsuit over). Anyways that all aside, I'm just wondering if I would be better off giving up and letting the properties go to auction. My realtor has not been able to get any negotiation on a short sale from any of the lenders (2 on each property), and I have another professional trying to get the lenders to negotiate, but already doesn't think we'll get anywhere. Are there any advantages to foreclosure? Will I see a 10-99 either way?
Click to expand...
There is no way a bank is going to short sale a home and lose 100k or more on it. Possibly with 5 or 10k and even that is rare but no way with that much owed.

That being said there really is no advantages to foreclosure, however it is looking like your only option at the moment
 
Ohiogal

Ohiogal

Queen Bee
acmb05 said:
There is no way a bank is going to short sale a home and lose 100k or more on it. Possibly with 5 or 10k and even that is rare but no way with that much owed.

That being said there really is no advantages to foreclosure, however it is looking like your only option at the moment
Click to expand...
Actually I have seen banks allow short sales of 15k or thereabouts. It depends on quite a few factors including what priority the bank allowing the short sale is, how muhch they are owed and the credit history of the owners before the current foreclosure incident. But 100k is not going to happen. Foreclosure is probably what will happen and then you will still owe what is short.
 
Y

youngalky

Junior Member
there were several details on the properties i didn't know about when i bought them, and now i am suing for non-disclosure. in the mean time the rents are much less than should have been and the property values are the same. also the original purchase price represented an inflated appraisal which my realtor was very good at making look like a good deal and reasonable value. we have the properties listed for about 70-80k less than i paid and only a couple offers have come in and they were both about 100k under what i paid.
 
I

ice5146

Member
Get an appraisal done by a Licensed Appraiser. Get a Contractor to do a walk-thru and provide you with an itemized listing of ALL repairs that must be done for the property to be fully marketable. Once you have the actual value of the appraisal, the Lender can then compare the actual appraisal to their Realtor's BPO. They will then subtract the repairs necessary and be able to see in black and white if it's best to take the loss.

I was also wondering how you financed both INVESTMENT PROPERTIES as Owner Occupied? Was there a double of you or did you move into one, move out, and then move into the other in a really quick timeframe? If you obtained 100% Financing because you signed Settlement Docs stating you were occupying the property, this is fraud and it's no wonder you Defaulted. Maybe I'm not reading something correctly but it appears you may have commitment fraud to obtain 100% Financing and if the Lender pulls the Application signed at Settlement showing your current and previous addresses, they will see this. Maybe they will take the loss since the 100% Financing placed you in this situation.
 
B

Bigfoot

Member
Foreclosure vs short sale

Too many holes in your story.

If an appraisal was needed it should haved been ordered by the lenders. If it was appraised at an inflated price, take it to your state's appraisal board. The realtor is not responsible for the appraisal.

If there are problems with the property that were not disclosed, you likely did not have it inspected. If you are renting these properties, knowing that there are problems that could impact the health or liveability of the renters, then your next real problem is with the renters, who can legally withhold their rent until you fix the problems.
 
T

tranquility

Senior Member
I agree with Ice, the first thing that stood out to me was that something funny is going on with the financing. There could be a legitimate explanation of course, it just smells bad. You have many issues here and it seems best you talk with an attorney to see where you stand after you disclose all the facts to him. Timelines and intent will be important and there are many possibilities for the outcome. Few of the outcomes look good for you.
 
A

alent1234

Member
ice5146 said:
Get an appraisal done by a Licensed Appraiser. Get a Contractor to do a walk-thru and provide you with an itemized listing of ALL repairs that must be done for the property to be fully marketable. Once you have the actual value of the appraisal, the Lender can then compare the actual appraisal to their Realtor's BPO. They will then subtract the repairs necessary and be able to see in black and white if it's best to take the loss.

I was also wondering how you financed both INVESTMENT PROPERTIES as Owner Occupied? Was there a double of you or did you move into one, move out, and then move into the other in a really quick timeframe? If you obtained 100% Financing because you signed Settlement Docs stating you were occupying the property, this is fraud and it's no wonder you Defaulted. Maybe I'm not reading something correctly but it appears you may have commitment fraud to obtain 100% Financing and if the Lender pulls the Application signed at Settlement showing your current and previous addresses, they will see this. Maybe they will take the loss since the 100% Financing placed you in this situation.
Click to expand...
from the stories I read the last few years anyone could get an owner occupied mortgage for anything and the banks didn't care.

as far as problems with the properties, in the insanity of the last few years a lot of people signed inspection waivers in states that allowed it.
 
A

acmb05

Senior Member
Ohiogal said:
Actually I have seen banks allow short sales of 15k or thereabouts. It depends on quite a few factors including what priority the bank allowing the short sale is, how muhch they are owed and the credit history of the owners before the current foreclosure incident. But 100k is not going to happen. Foreclosure is probably what will happen and then you will still owe what is short.
Click to expand...
I am seen it also but it is very rare and as I said there is no way they are going to just walk away from 100k.

I just last week put a bid in on a house that they said would accept a short sale. We offered 5k less than the asking price and they turned around and refused it. They wanted more like 1000 dollar loss not 5k.
I was wondering about the Owner Occupied also and was trying to figure out how he managed that with both houses.
 
Last edited:
L

LindaP777

Senior Member
alent1234 said:
from the stories I read the last few years anyone could get an owner occupied mortgage for anything and the banks didn't care.
Click to expand...
Totally NOT true. As a real estate investor, I often have to sign a document stating the property is not "owner occupied" (a different block is checked for owner occupied). Owner occupied properties generally tend to get a better interest rate (less risk).

So, beware of karma. What goes around comes around. If you live your life trying to stick it to someone (get a mortgage you don't deserve) you, eventually, will get stuck!
 
T

tranquility

Senior Member
The bottom line is that you need to talk with an attorney. You may have a criminal liability here if you lied on the form about the property being "owner occupied". You may have tax issues and it's not even clear if the loans are recourse or not. I would suspect that they are recourse based on the true facts, but the bank may believe they are non-recourse based on the (possible-I dont' know the facts) lie on the application.

How all the things come together is impossible to tell without a lot of time researching and talking with the other parties to see their intent and belief.

See an attorney. You are in a bad place.
 
You must log in or register to reply here.

Find the Right Lawyer for Your Legal Issue!

Fast, Free, and Confidential
data-ad-format="auto">
Top