Can I short sale to myself or to my friend?

My guess is no that it is illegal but that the banks do not want it. Any ideas why?
Are there ways to overcome this w/o breaching any contracts?
Any one has actual experience actually overcoming this challenge?

Edited: 06/26/2010 at 12:30PM

Audley Humes

Real Estate Investor · Jacksonville, Florida

100 posts
4 awards
50 influence

Apr 16 '10, 07:58 AM

Dan, think about it. If you loaned $100,000 to a homeowner, and they defaulted on their loan and then that same homeowner came back to you and said I want to Short Sale my home and get a new mortgage on it. Don't worry about the loss your're going to take though, just let me pay you back $60,000 and the other $40,000 I owe you let's just forget about that.

Or just let one of my family members buy it for $60,000 so they can let me lease it or buy it back from them. I'm not trying to be funny, but it just would not make any sense for a bank to allow that.

Honestly, I don't think there is any legal way possible to accomplish what you are suggesting. Especially since Approval Letters usually states the Homeowner cannot receive any funds and it's must be a ARM's length transaction.

Edited: 06/26/2010 at 12:30PM by Audley Humes

Michael Quarles

Real Estate Investor · Bakersfield, California

Pro

851 posts
8 awards
72 influence

Apr 16 '10, 09:45 AM

Hello

To yourself no, it would be a loan modification not a short sale.

To a friend. Yes. Must be arms length... Here is what an arms length documents looks like.

AFFIDAVIT OF "ARM'S LENGTH TRANSACTION"

Property address: _______________________________________________________________
Street City State Zip

All Parties to the contract to purchase aforementioned property dated:

Hereby affirm:

1. That this is an "Arm's Length Transaction" and that no party to this contract is a family member,
business associate, or share a business interest with the mortgagor.

2. Further, there are no hidden terms or special understandings between the Seller or Buyer or their
Agents or Mortgagor.

3. That neither the Buyers and Sellers nor their Agents have any agreements written or implied that
will allow the Seller to remain in the property as renters or regain ownership of said property at
any time after the execution of this short sale transaction.

4. The with the sole exception of payment of Agents' Commission, neither the Seller, Buyer nor
any other parties to this transaction shall receive any proceeds.

Edited: 06/26/2010 at 12:30PM

Michael Quarles, Yellow Letter Mail
E-Mail: michael@YellowLetterMail.com
Telephone: 888-YOUR-MAIL
Website: http://www.YellowLetterMail.com
1-800-Sell4Cash Territories are available for 147.00 per month.

Alan Barker

Real Estate Consultant · Logan, Utah

5 posts
1 award
50 influence

Apr 26 '10, 01:43 AM

Lets think about it... How would short selling to yourself be any different than robbing a bank.

Just because banks made bad loans and property values have declined doesn't mean that everybody should be entitled to get something free from them.

They may allow a loan modification, but there's no way you can get a short sale to yourself.

Edited: 06/26/2010 at 12:37PM