I need to get out of my house, and it's not all due to financial reasons. Is short sale a viable option?
posted by anonymous to home & garden (10 answers total)
Over the last year and a half, my wife and I have been through utter hell. Many, many situations have come up that are stretching us to our emotional and financial limits. I'll spare you the details on anything but the relevant bits. I'm suffering from chronic stress to the point that I'm worried about being headed for a heart attack, and my wife has developed severe anxiety problems to the point where she doesn't feel comfortable driving or even leaving the house without me. We've both independently come to the conclusion that we need, not want, to move out of the area as soon as possible. We're planning on renting and staying within the state when we are able to get out. I'm trying to look into our options and minimize the damage, which is the focus of my question.
The house is in bad shape. We discovered and got rid of several areas of mold which were severely affecting my wife's health. The house was not well-maintained, which probably contributed to the mold problem and others. A lot of babies got thrown out with the moldy bathwater - we have no flooring other than the bare cement foundation throughout most of the house, the master bathroom is stripped to the studs and missing every fixture except a toilet, the cabinets and about 2 sheets' worth of drywall were removed from the kitchen. We cannot afford to hire anyone to fix the place, so we've been doing it all ourselves and learning as we go. We've put a lot of work and over $10k into the house so far, including remodeling the front bath and master bedroom, laying flooring, replumbing, etc. I doubt that my HOI will help me at all; the mold is already gone, it's never been assessed by a professional, and the mold wasn't localized to one problem with the house like a single leak (As a state, Florida learned all about separate claims and separate deductibles the year we had multiple hurricane hits).
We have a lot of debt. Most of mine was incurred at a time that we thought we could handle it, and now our situation is considerably worse than it was at the time. My wife has a great deal of debt in collection, mostly from a previous marriage in which she was literally starving. We haven't even started to touch her debt yet and have kept financially separate. The plan from the beginning was to take care of my obligations first and then tackle hers when we're ready.
Our house is underwater and will be for some time, even when you consider full market value rather than the house's actual condition. I'm current on all my payments right now, and all of our bills and my debt are current as well. Financially we have the ability to stay current on our payments for several more months, but can't continue to make any headway on our other problems at all - we're paying the minimums on our debt now, and the home repair costs are really eating into anything that's left over.
I contacted a real estate attorney through a friend and explained my situation to him. All he essentially said was that I should go for a short sale. This isn't his specialty, but he recommended a particular Realtor who works with short sales. I sent a long overview of our financial and personal situation, which was forwarded to the Realtor. When she called me yesterday, she confessed that she hadn't read the entire writeup, but the first question out of her mouth was, "how far are you behind in your mortgage payments?". She seemed surprised when I told her that we were current. I explained myself as best I could to try and clear up any misperceptions - I'm sure that most of the people who come to her are already at the ends of their financial ropes, and it's an easy enough assumption to make. After talking, I took away the following from her:
• We shouldn't bother doing any more work to the house; we'll never see the proceeds.
• We should stop paying on our mortgage now (!) to show hardship, and start negotiating a short sale after we're delinquent (very scary proposition)
• We wouldn't be responsible for the tax burden if the balance of the mortgage is forgiven (my checking confirms this part)
• We also wouldn't be responsible for the balance of the mortgage (this part doesn't jibe with what I've seen elsewhere)
• If we stop paying on the mortgage, we could even move before the sale - using the unmade mortgage monies to pay rent - and complete the process through her remotely.
What I gathered from her sounds wonderful, if that's the whole truth of the situation. Somehow I don't think it'll be this easy, though. I'm certainly not willing to make a move like this without a second opinion, which I'm seeking now from here and from other real estate professionals.
A look over our bank statements and charges would probably show that we're not completely broke - yet. We still manage to inexpensively go out one night a week, and we buy more for ourselves than just survival items. We have drastically cut back expenses in some areas, and we've had negative net cash flow for some time now. Still I don't think we could illustrate a pattern of complete financial ruin. In fact, I don't think we could conclusively demonstrate any single hardship that's "big enough" to justify this action. If we were to list our debts jointly, I think we probably could qualify for bankruptcy. Having the debts removed would help, but I fear that with all the protections around the primary residence in bankruptcy we could end up even more tied to this place.
This is a step that neither I nor my wife take lightly. I'm not normally the type to fall down on my obligations when I'm able to meet them, but a lot has gone into this decision. I'm not completely averse to any risk, but want some assurances that we'll be able to survive somehow if we walk away from this house. I'm not good with negotiations, and would much prefer to have a Realtor or attorney take care of any dealings with my lender.
Other relevant information: We're in Central Florida, and we plan to stay in Florida but move to a different part of the state when we get the chance. We plan to rent a house and do not have any major purchases planned that would require a decent credit score. I work from home, so will not have to change jobs.
Credit checks are standard for employment in my line of work, so if I were to lose my job a short sale could affect my future employability (also, isn't there a box on most applications asking if there are any judgements or liens against you?), but as I said earlier I'm willing to take a risk. I'm also willing to sign a promissory note as part of the short sale, so long as the payments allow me enough left over to keep us fed, clothed, and sheltered. I imagine that I'll need to find out my limits of acceptability and give my representative authorization to work within those lines… Am I correct that this is how the game is played?
Any and all advice welcome. Please be gentle. I can't possibly convey to you how much we've been through, and it's hard to make reasoned decisions from where I'm sitting. About the debt - some of it was frivolous, but it was under control before we walked into WWIII and some of the reasons for going into debt were quite legitimate in my mind.
Income: ~$96k / year
Credit Card Debt: ~$45k, min payment ~$1070 / month
Auto Loan: ~$17k, payment $455 / month
Wife's Debt: Still compiling information, but probably around $20k currently in collection or default
Lived in house as my primary residence since 1999, refinanced twice.
Only one mortgage on the property at a fixed rate.
Market Value (Zillow): ~$135k
Mortgaged: ~$182k, payment $1200/month
Tax Burden: ~$1800/year
Throwaway email: StuckInAMoldyHouse@hotmail.com