The Lender Agreed to a Short Sale But Nobody Wants to Buy It. – Hal

“Dear Steve,

We have a underwater mortgage that is approximately $100,000 in excess of the value of our home. We have been trying to get the principal reduced and now have the offer listed in the “question’s section”

We have underwater mortgage that was transferred from Bank of America to SPS and they have offered a “Short Payoff” in the amount of $156,000 on a original mortgage of $275,000. We have been unable to find someone to fund the $156,000. The home is in Florida and homes in the area are selling for $175,000 -$185,000 can you offer and help or advice? Thank you


Dear Hal,

I’m sorry to hear you’ve found yourself in this bind. You and tens of thousands of others are facing the same issue.

The problem become on how to best deal with the underwater mortgage. On one hand if you are unable to find a buyer and you absolutely want to get out from under the mortgage, then handing the house back to the bank and filing bankruptcy to discharge your liability gives you a clean break.

Decision timeIf you have not done it already, make sure your house is listed for sale with a local realtor who is experienced in selling short sales and fire sale properties.

The most logical buyer at a ridiculously low sale price is a local investor who might buy it to rent it.

The right sale price for the property is the one that leads to a sale and both you and the buyer agree on a sales price. That’s the ultimate definition of fair market value.

If your property is in an area where there are a number of homes that have been listed and not sold, you might just be in such a real estate sinkhole there (Florida reference) that the bankruptcy option becomes the most rational.

It might not be your first choice but bankruptcy is a legal option that allows you to move forward with your life and shed the house nobody wants to buy.

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The alternative is to fire sale the house for a price someone would buy it at today. If $156,000 isn’t moving the house quickly you’d have to either offer some financial inducement, invest in repairs or staging the house, or lower the price and pay the difference between the new lower sales price and what the bank wants.

The real question here is what is the goal you want to achieve.

Do you just want to sell the house or is it such an anchor around your neck that you need to jettison the house and move forward with your life?

Ultimately is the best decision here is not the one that is least painful, but the one that is most logical and the math makes sense.

You can click here to find a local bankruptcy attorney and talk to them for free about your specific situation. Get the facts and then you can make an informed and educated decision if bankruptcy is right for you.

Please post your responses and follow-up messages to me on this in the comments section below.


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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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3 thoughts on “The Lender Agreed to a Short Sale But Nobody Wants to Buy It. – Hal”

  1. we are planning on keeping the home. one of our options is to have the past due balance added to the end of the $275,000 and then start making monthly mortgage payments on the total, ( probably about $300,000) amount of the mortgage. If we do this, in a couple of years we can probably refinance with better terms. In the interim we well still pursue the “Short payoff”, ( maybe we will win the lottery!) as the $156,000 deal is much better.

  2. Good advice Steve. For all you readers, be sure to check the laws of your state. A first mortgage like this one may be “non-recourse” which means you can give the house back to the bank and not need a bankruptcy. Also, even if you’re in a recourse state, you have the option to negotiate down the deficiency, i.e., the amount you owed v. the amount the bank received when they sold the home.

    Make sure you need the bankruptcy – and you may for other things – before you file. Talk to a couple BK attorneys because remember they only get paid if you file so they have a bias.


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