BiggerPockets

Ok , check this out... 4 years ago i co-bought a house with a friend of mine (both of us are nurses). To cut out a lot of boring details, we are now trying to short sale the house.Because we were not in default and i don't have a bad credit score, the deal is not looking good however at this point and neither of us think it's going to be approved. My co-buyer is now telling me that if the sale doesn't go, she's just going to stop paying. MY QUESTION IS.. what are my rights in this matter. I would like to protect my credit as much as possible and avoid a foreclosure. What would my rights be in a deficiancy judgment if i tried to keep paying. Are there any protections for the partner that doesn't abandon. any help you could offer would be great, Thanks, Lee

Lee

There is a very good (I think) thread right here at biggerpockets that you should read. I hope this link works:

http://www.biggerpockets.com/topics/17168

It discusses a short sale success, without default, what the seller put up with, and the later consequences they experienced to their credit score.

Can't offer anything on the co-owner situation. You don't mention why you're trying to sell or any of the particulars. Is getting a quitclaim (and letting her leave) and taking in a tenant an option?

Good luck.

Ralph

You might want to talk to your lender. They are under a lot of pressure to not have any more foreclosures and could offer some help. The chances are pretty slim but you never know.
Even if your partner leaves you still have to make the payments or leave too which will mess up your credit.
Depending on how close to the value your mortgage is you might be able to do a lease with option to purchase. You can get higher than normal rent, a higher purchase price than today's value and an upfront option payment that you can use to help make your payments.Do the option period a year at a time and have an increase each year.
Doing this will turn the property into a rental with tax benefits. Talk to a tax man and see if you wouldn't be close to a breakeven point. With this in mind your partner might decide to stay on and help make the payments.
If you reply give some figures such as value, amount owed and payments.
Good luck with it.
Don

Lee,
Don't panic I see this everyday and there is a solution.
As far as the deficiency goes the answer is "it depends' on
whether or not you ever refinanced after you bought and whether or not you have multiple loans. This is actually a legal issue and I am not a lawyer but I know one who will talk to you and not charge you for the answers to these questions.

First question for you...

Who is the lender or lenders?

Each company has created its own confused tangle of policies and each negotiator at each company possesses a different level of skill and understanding.
So it is important to have an understanding of who we are dealing with here.
I always determine the lender before I approach them with a deal because it might seem completely reasonable to you but is against their internal policies and therefore will be much harder to negotiate.

You likelihood of success comes down to two things:

1. The ability to demonstrate a hardship (and clearly losing one owner's income meets that criteria) and

2.The skill of your negotiator.

I always say if you are going to a fist fight, then take a knife or a gun. ]
My negotiatoris both of these things, sharp and tough. but very patient and professional as well and she gets amazing things done that other so called experts have told us was impossible.
So much for a viewpoint.


As to your questions about credit, yes it will impact your credit negatively but a foreclosure ruins you for 4-7 years and after a short sale you can get a Fannie Freddie loan again after only two years.
Don't wait because the stress will ruin you.

Talk to someone right away and get the negotiations started. With a little more in depth information not suitable for posting on a publicly viewable site, I can help you come up with a strategy to stay in your home as long as the process takes, even if you ultimately stop making payments.
Your rights are numerous and not likely to be explained or pointed out by your lender in my experience.
The recent passage of SB1137 gives us all even more tools to get short sales done with formerly unwilling lenders.
Do not fear them they are paper tigers and if you follow your plan closely you won't even have to talk to them again just tell them you are represented and to talk to your loss mitigation specialist.
I hope this helps. Post again if you still have questions. Everybody in the business hould know about short sales in California because the large number of foreclosures is going to begin turning into an even larger number of short sales for the near future because of the implications of SB1137. But if you don't know your rights...how can demand them?

Message for Mr Bill... i appreciate your response, and would like to talk to you further. It looks as though my short sale is going to fall through... and my co buyer is ready to stop paying... i've been thinking about quit claiming her now, and trying to do this on my own. with just one income, i may be in better position hammer out loan mods or whatever else. I'm dealing with countrywide (1st) and wells fargo (2nd). let me know if we can talk further.

Lee,

While I sympathize with your situation, unfortunately, you are in some trouble. If they abandon and don't care about their credit, there really is not that much you can do. You both signed so you are both responsible. As others have said you need to talk to the lender and see what you can work out. If the short sale falls through, and you cannot afford the property, then foreclosure is probably inevitable. You already said getting a tenant is not an option and you are over 200k upside down. Not trying to be a downer but this is the truth.

As far as the quit claim suggestion, that makes no sense to me. Sure, I suppose a fool might quit claim the deed to you. But that only removes them from an interest in the property, they are still on the loan so no one in their right mind would give up their interest and still keep the loan liability even as dire as your circumstances are, unless I am missing something.

As William suggests, most of the negotiators can't think outside their little box and have very specific guidelines to follow depending entirely on who actually owns the loan. Creativity is not encouraged. Most make less than a good investor on a couple of deals. To them you are just another folder of stacks of folders on their desk. Unfortunately, that is the way it is.

Talk to your lender and an attorney. You need professional help fast.

Good luck

Mike C