Hi folks. Recently I have had several Florida Short Sale sellers ask me the same question.....”We need to replace our car. Should we do that before we go through the short sale process?” The concern is that once they go through the short sale their credit will be dinged and financing an automobile will not be easy. One is even paying cash and is concerned how it will look that he went out and spent $15,000 cash on a car and then turned around and asked the lender to accept a short sale.
Interesting question. And one that certainly shows that we are in a different stage of the short sale wave. The Short Sale Sellers mentioned above do not have cut and dry hardships. They are current on payments and have great credit scores.
The first wave of short sellers that started mostly in 2008 were distressed sellers. Property owners that could no longer afford to make their mortgage payments. The next wave were folks that had adjustable rate mortgages that were resetting and they couldn’t refinance as promised when they took out their mortgages.
The current wave is made up of folks that just need to sell but can’t because their properties are too far underwater. They are current on their payments and are not in foreclosure. They could continue to make payments. BUT....they have to move.
Their family has out grown the property. They have a job transfer. Or they are strategic short sellers.
Their situations are different than the first two waves of short sales...
So......should they go out and replace their car prior to doing the short sale? It depends. My response to them is........
- “If replacing your car is something you would be doing even if you weren’t getting ready to do a short sale then, yes, go ahead and do it. If dependable transportation is needed for job purposes then, yes, go ahead and replace it now. Do what you need to do to make sure your family is taken care of. BUT...be able to defend your position if the lender ask you about it. Be able to show that buying a car was needed and not just wanted. And.....be prepared to make a cash contribution towards the short sale lender’s loss.”
This is my opinion. What’s yours?
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Do NOT be foreclosed on! Avoid foreclosure. Short Sales DO close.
Want to find out more? www.CentralFloridaShortSales.com
***I am NOT an Attorney nor do I play one on TV. Click the button below for my Bio.
Tutas Towne Realty, Inc handles Florida real estate sales, Florida short sales, Florida strategic short sales, Florida pre-foreclosure sales, Florida foreclosures in Kissimmee Florida Short Sales, Davenport Florida Short Sales, Haines City Florida Short Sales, Poinciana Florida Short Sales, Solivita Florida Short Sales, Orlando Florida Short Sales, Celebration Florida Short Sales, Winderemere Florida Short Sales. Serving all of Polk, Osceola and Orange Counties Florida. Florida Short Sale Broker. Short Sale Florida.
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Excellent post and good advice, Being able to defend your decision is always important. Have a great day!
If they need to get financing for the car, they better do it before they go delinquent on payments on the short sale. Otherwise they may not get financed at all.
To me these strategic short salers have to answer that personal question for themselves. Do they short sale and damage their credit and break a contract vs. stay trapped in a house that they can barely afford but protect their credit and keep their word? Not an easy decision.
Well, I pretty much agree with you. What is interesting is that we still have many sellers in the first of the two waves you describe.
Good morning Bryant. Great post. I don't do short sales at all, but my view, like yours, is that the people requesting them today are different. The car question blows my mind. I can't decide what would make anyone feel entitled to walk away from a responsibility. I lost $$$$$ in the stock market, and don't expect anyone to make me whole. Things happens, both good and bad. I love your picture.
I deal with this daily and it is a difficult situation. I tell the people that they have a made an obligation to the home they purchasesed and the bank that financed it, and during this process they will look at all your finances, everything you have done and they will want to see monthly bank statements. It is up to them I can only tell them what my experience is and what we have seen the bank do...
Great advice to home owners and agents who are faced with this question.
My instinct says that most agents would advice a quick DON'T.
If the vehicle is needed for work, there's only one answer.
Bryant ~ interesting very real situation, I agree if you need a vehicle for work you have to do what you have to do. Excellent advice.
Shilea. Most of the folks I deal with are not shirking their responsiblity. They have to move and are therefore offering their lender an alternative to foreclosure. You can take your stocks with you. You can't move a house and most lenders won't move the loan. So the only option is to offer the lender a compromise. That's a short sale.
Good morning Bryant,
Intersting conundrum, and one that I have not had to attempt to answer. I have not been aware of any short sale sellers that were doing their best to meet their current obligations...not taking on any new debt.
I really like your perspective here, Bryant, and the way you explained it. When I read the beginning of your blog, I thought: "Wow, what a complex situation." Your response took the complexity right out of it and made it seem common-sensical. Well done.
Another example of why the "right" dialog is so important. It is good to be prepared. But, we are finding lenders do not seem to be questioning large disbursements as much as they did a few years back.
BB - It would be rare that an individual or family for that matter can be productive without a dependable vehicle. A quickly depreciating asset such as a car is a necessary part of most of our lives so I say BUY IT. Next time the need arises we should be looking at a little more daylight around us.
I have had banks/investors pont out high car expenses as a reason for requesting seller contributions. Have you?
Bryant
Guess it depends on what/how they're buying. If they're buying an inexpensive but USED car, it may be justifiable to say they will need it for their job.
But to pay CASH? C'mon! Who'd believe the owners are in distress if they have that much money to pay?
Pacita. Not all short sellers are in distress. In fact most of mine right now aren't. But they have to sell. If you have to sell and you're underwater and can't afford to pay the difference then a short sale may very well be a solution.
Bryant I agree with you and I just got asked that question last week. I agree we are entering into a new wave of short sales. Great post and advice. Thanks for sharing.
Great post! I have not been asked this before, but I do see other things similar.
I agree that this is a whole new group of short seller's we have now. I get calls from many people who believe you still have to be behind in payments in order to get a short sale approved. If they only knew!
Best of luck in 2012.
Unless the car is a luxury car I don't see why the bank would have a problem with it...might be a hard sell trying to convince the lender you needed to purchase a fully loaded convertible Benz to get to work!