[JAC53]

Suggestions please?

My sister has a property when she purchase for 175k, recently appraised for 135,000, paying for a mortgage that the value of house drop.

a friend told me to do a short sale to get rid of property. Bank does not want to negotiate.

I would appreciate any help.

Thanks

[Fr_Chuck]

yes, this is very common, so she will have to come up with the balance of the money if she wants to sell it for less than the loan.

The bank is not required to accept a short sale. And some take months to decide if and when they do.

So basically until the house values go back up, they are stuck with the house

[ballengerb1]

The fact that the appraisal is lower than the balance is no reason to sell. It is the reverse of buy low sell high, just wait it out. If there is another reason for her wish to sell then we should hear it.

[Fr_Chuck]

agreed, houses are like stocks, you don't sell at a loss unless you have to, you hold on to the house and in a few years values go back up.

[JAC53]

Thanks very much for suggestions

[XTC832]

Keep in mind also it's not the bank's fault that home values have dropped. And it's not your sister's fault either. Millions of homeowners are going through the same situation, paying for a home that isn't worth the loan value. The mortgage amount was secured by the then-current value; there is still a promissory note to pay each month. Even if the bank negotiated a short sale, your sister is still on the hook for the remaining 40K, assuming it's worth 135K now.

[JAC53]

I don't think that the court would in favor of the bank for deficiency due to market conditions, worst case 2 years bad credit, 5 years foreclosure.

[XTC832]

JAC53

Ultimately, the decision for a deficiency judgment will be by the court. You are correct in one sense here. Many local courts are reluctant to grant a lender a deficiency judgment if (and it's a big "IF") the debtor has some proven financial hardship (job loss, medical issues, death of a non-insured spouse... ) that caused him to lose the home. In most cases, courts view this type of litigation as "insult added to injury." Simply put, if a person lost his home because of a job loss, it's quite unlikely he would be able to pay a deficiency balance when the house is sold.

However, (and this is a big HOWEVER) prevailing market conditions can't be considered as a reason not to pay a mortgage. No mortgage contract that I know of has a clause allowing the debtor to simply walk away because the home value has dropped. And many homeowners are trying to do this right now, believing they are wasting their time and money on a deficient asset. But if it's discovered that said homeowners have good income, maybe some stock or savings, and no proven hardship, then that particular court is more likely to rule in a bank's favor for all or a specified deficiency amount. And all financial information is subject to full disclosure. Take care.

[JAC53]

Thanks XTC832, that's an excellent answer and appreciate the help.

Thanks all for the help. Have a great holiday and HAPPY NEW YEAR!