Mark and Lindsay (psuedonyms to protect their privacy) at one time owned their home together but more than 10 years ago, Mark signed a quit claim deed giving full ownership to Lindsay. They thought they were going to separate, but over time, they decided to stay together and the home continued to be owned in Lindsay's name only.
Their mortgage payments have just about tripled to approximately $11,000 per month, and it has become impossible for them to make these payments with their current income and expenses. Lindsay tried for more than a year to negotiate with Bank of America to either refinance their current loan, or to get a modification of the loan. They were rejected on more than one occasion as they attempted to make their home affordable.
Bank of America told them that they did not qualify for a refinance of their loan because their income was too low. Then, as was advised by Bank of America, they contacted the organization for the loan modification; and were told that, because the loan was more than $750,000, it did not qualify for a modification. Lindsay continued to place calls to Bank of America to get some kind of help either to lower the interest rate, or to get forbearance, or get some kind of help to lower the payments to an affordable amount. Again, she hit a brick wall and no one would help.
As if these difficulties were not enough, a drunk driver hit Lindsay's husband while he was sitting on his motorcycle at a red light. It was 1 p.m. on a Sunday afternoon in June 2008 and it was a beautiful day. He was on his way home from work. The driver had a .28 BAC, he also happened to be a Santa Clara County Deputy District Attorney. Lindsay's husband, Mark was thrown from his motorcycle and sustained many broken bones in his back and several other injuries to his body, and, as a result, became disabled was unable to work for several years.
Lastly, Lindsay's employer filed for bankruptcy in 2011. Her income stream dropped from 15K a month to $2,500 a month in 2011 and will drop to zero this year. Because of her employer's financial difficulty, they will no longer be employing Lindsay.
The combination of events has made it impossible for Lindsay and Mark to meet their mortgage obligations.
They have contacted me to do a short sale. What is a short sale? A short sale is when you owe more on your house then the home is worth and because of a hardship, you must sell it. There are a variety of acceptable definitions of hardship, but the most common ones include death, unemployement, illness, transfer, divorce or loss of income. When the house sells, the proceeds from the sale are not sufficient enough to pay off the full amount owed. The lender agrees to accept this amount and the seller agrees to sell the house without accepting a penny in proceeds.
To have a successful short sale, you need a lender that is willing to accept less than what is owed, a buyer willing to purchase your home (and wait out the short sale process which is fraught with uncertainity and delays), and a Realtor that understands how to do a short sale.