Can my friends or family buy my home at a discount
so I can stay there?
While turning to family and friends is a good support system, be careful about trying to sell your home to family and friends. While most family love you and would do anything for you, they will become ultimately responsible for this debt and there are rules.
First off, in a short sale situation, know this… A SHORT SALE HAS TO BE AN ARMS LENGTH TRANSACTION meaning you can not be related AT ALL to the person your bank is negotiating with. In a short sale, the bank is the one who is forgiving the debt. While it shouldn’t make a difference that the property is sold to, it does because they look at it as a way for you to walk out on your obligation. The bank would rather use your relative’s income to re-work the loan with you. Friends are a grey area. We do not advise this either.
When you sell your home Short, you are reducing property values in your area. If there is any way to modify your loan with the bank and keep the values, this ultimately helps stabilize the values in your neighborhood. Once we can obtain a stable economy, we can begin growing again.
If you have equity in your home, you can sell your home to family under a provision called a gift of equity transfer with the new lender. This sells the home at fair market value, transfers the equity to your relative and you have no decline in value from short selling your home. Not many people know you can do this, but it is out there.
Right now, loan modifications are coming in lower than current market interest rates under Obama’s plan. I have seen modification companies drop fixed rates to 2% for 5 years under this plan, so it is working, but with a lot of advocacy and attorneys. August 2009, in that month alone Bank of America alone did $64million dollars worth of loan modifications, the highest they have ever done in the history of banking. Most of which were restructured or reviewed with NACA.
Be careful, there are companies out there that will state you can rent back the home and they will buy it up front. These companies have been cracked down upon by the Federal Government. Similar to loan modification agencies taking monthly payments for as long as you stay in your home. These are not considered ethical companies. Some will buy the notes in bulk while strong arming the banks to settle for less. This in turn can create issues and 1099 statements to you. So be careful and don’t fall into something like this. We understand that it may not be fair right now, but there are things that are changing in the industry to try and make it fair.
Remember cram downs are possible, but you have to fight for them. When it comes right down to it you have to ask the question. If walking away is the only answer left in your mind, then it is time to call a Realtor to help you through the process one who uses an attorney based agency who charge a minimum consulting fee to the seller of $150 and negotiates their fee trough the bank. They are a good source of affordable legal advice and they can work throughout the states in some cases. Find the ones in your area by contact a local agent who specializes in short sales. The good ones know where to go.
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