The business case for a short sale?

Debating about short selling my current home: THe facts: +Home in Gilbert, AZ (Primary residence, 2-and-a-half years living in it) + Purchased in 2005 for $530,000

+ I have just been told by my agent that after looking at comps, I could list it for $430,000 to attempt to sell it (Currently 18.9% decline vs. purchase price, not yet considering any low-ball offers) +If everything goes according to analysts閳?expectations (what I read in the Journal, opinions from Credit Suisse, etc), the market would continue to slide in the months to come. (Additional 25% to 35%) + First Mortgage is for $360,000, 5/1 ARM at 5.25% but resetting in 2010. +Second Mortgage is for $150,000 fixed rate 7.45%. This second mortgage was originally 86k but I refinanced it +Provided there is a new law that Congress has passed (閳ユ发ortgage Forgiveness Debt Relief , would be liable for taxes if I pursue this short sale?

The business case for a short sale?

Assuming you CAN get the short-sale approved.

I seriously doubt if a bank is going to take a $100K loss on a loan amount that low.

No, you won%26#039;t have to pay taxes on the loss....again, the banks aren%26#039;t forced to take the loss.

The business case for a short sale?

3 things about your proposed short sale.

1. You have prove that you can%26#039;t handle the payments. I see nothing about being late or moving towards foreclosure in your question...

2. You had a 1st mortgage for 360,000 and second for 86,000 (total of 446,000). You refinanced and took another 64,000 out. This 64,000 is the amount that puts you in trouble right now.

Congress%26#039; law addressed federal taxes only, you could still be liable for AZ state income tax (if there is one) on the difference.

3. The business case for a short sale is to contain the loss for the lender. You are in for difficulty because your first mortgage holder would get paid in a foreclosure (they are owed 360,000 and you can list at 430,000). It is the company with the second that is in trouble. The primary mortgage holder would be much better off if they just foreclosed (remember that a short sale is a loss mitigation measure and they won%26#039;t lose in foreclosure). They would be first in line to get paid, they would get paid everything they are owed and they would be happy. The second mortgage company would probably be forced to buy out the first to see any cash...

I%26#039;m betting you aren%26#039;t a candidate for a short sale from your primary mortgage lender.

good luck!

The business case for a short sale?

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