A decline in current market value doesn’t qualify you for a short sale, you may have a case for a loan modification (if your ARM is about to go up) but just because you can’t sell the property for enough to pay off the note, wouldn’t in and of itself allow you to negotiate special treatment.
Here is a recent conversation I had with a seller (not a real name)
Client Keith: Hi Steve, thanks for bringing me the offer so soon after reducing the price to current market value…what do I do next?
Broker Steve: You have requested a short sale status from your lender right? And you have authorized the lender to speak with me about the transaction right? And you have a contact person I can begin to work with right?
Keith: Steve I know you told me to do all those things when we first listed the property, and I know they sent you my pay off statement. But no I have never asked them for a short sale status on the property…I was hoping you could do all that.
Steve: I can’t do anything until you request authorization for the lender to speak with me, and they will do nothing to help you without a hardship letter and full financial disclosure.
Keith: Well I’m really busy and I thought you were getting paid a commission to close the deal…why can’t you call my bank and do everything?
It’s just not that easy, you qualified for the note when you purchased the property and help isn’t given to those that have means to continue to pay.
The words “the sale is subject to the sellers lender accepting a short sale transaction” in the purchase agreement may keep you from being sued for specific performance…but it doesn’t guarantee the lender will let you off the hook.
Your Mortgage Company is going to want to review your tax returns, retirement funds, income, assets, bank accounts, stocks, bonds and any other properties you may own to determine if you have a case for hardship. And the decline in value to a level below what you owe on the note has no bearing on your ability to continue to pay or to liquidate other assets to come up with your own shortfall.
Owing more than your property is worth doesn’t qualify you for a short sale.
These transactions may be all the rage where you live but they are not a free pass to get out of paying what you agreed when you borrowed the money.
Hell if I were a stock holder in that bank I would want you to pay back the money you borrowed from "Us".
Steve Loynd, your white mountain N.H. real estate expert.
firstname.lastname@example.org / 800-926-5653