Better to foreclose, or short sale?

I've been an investor/landlord for 38 years and have done well until now. I have 2 florida properties that have dropped in value and I am negative cash flow now. ($1700/mo.) I re-fied and cashed out equity, and now have used it to "plug the holes". Im out of $. Should I let it go to foreclosure or try to short sale? I have other assetts, some are fully paid. Will they come after me? Hired a company to do a loan mod. Bank has denied me, with no explanation. All are in my name personally, too late to change that? Scared and confused. Credit currently mid-700's. Any advice?
In Selling Property - Asked by Deborah S. - Aug 29, 2009
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Answer(s)

Paul S.
Broker/Agent
Glendora, CA

A short sale is far less damaging on your credit than a foreclosure. Each lender has their own criteria for a short sale. Some work very efficiently and some are nightmares. A short sale package must paint a complete picture as to why the lender should take it. Keep in mind that a lender loses an average of 19% on a short sale and 49% on a foreclosure. It seems obvious they should take a short but that is not necessarily the case. Find out from you lender what they require in a short sale package? You can market the property at a price that will make it sell subject to a short sale. If the lender doesn't have a process whereby you can get a short sale approved in advance then go ahead and market it. I don't know about Florida but I would suspect that you will not be allowed to receive a dime out of the sale? Don't try to save money on marketing because you are not actually going to pay it. List with a broker and have that broker offer out a commission that will attract other brokers and their buyers. Remember you are not actually paying for anything, the lender is.
As for you question about letting it go and can they come after you, you need to seek legal advice on that one. In California the lender could not come after you on funds that were purchase money loans and there is no deficiency judgment on that. However, in California, your refi money would be considered hard money and the lender could come after you for any deficiency. You need to check out your states rules. Do look into a short sale.

Sep 2, 2009
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Vicki W.
Owner/Investor
Lake In The Hills, IL

Deborah, if you have equity in other Real Estate and or investments, they will most likely deny the short sale. The lenders ask for a financial statement from you for that very reason. Bank Of America is currently adding a phrase to their short sales that they reserve the right to serve you with a deficiency judgement, so even though they approve the short sale and release you from the lien they can still come after you in the future. IF the lender does accept a short sale, which they might, then I suggest you close with an attoreny that is VERY knowledgable with short sales so he can make sure that release is a FULL release. And find a Real Estate agent that had closed dozens or hundreds of short sales so you trust they know what thye are doing. And ask for their success ratio up front. 9 out of 10 short sales FAIL and that's due a LOT to agent's that have no idea as to how to handle a short sale. Hope this helps!

Sep 5, 2009
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Thomas S.
Broker/Agent
Chino Hills, CA

Short sale.

Oct 12, 2009
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Gregory G.
Broker/Agent
San Francisco, CA

Short sale, then when that doesn't work foreclose.
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Gregory Garver - Commercial Real Estate Broker
Broker License# 01716531
(415)225-9894
gregory.garver@gmail.com

Oct 23, 2009
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Louis W.
Broker/Agent
Needham, MA

Deed in lieu of foreclosure may be the fastest and least harmful to your credit. But speak with the bank and see if they will accept it without going after you personally. A lot depends on what you owe them, the present value of the property. Good luck

Nov 1, 2009
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