short sale advise.


D

Daniel T.

I'm currently renting a house and my landlord just asked if I am
interested in purchasing it on a short sale. I have no money to put
down... I don't know if she has actually missed any payments at this
point or if she is thinking about doing so.

What happens if she sells to someone else?
Is there some way I can find out about a possible foreclosure?

I know that if I were to buy it, I would get about a $100 per month
discount on the taxes but not the first year (homestead exemption.)
Given that, if I bought it for $134K (including costs.) I could see
picking it up, but not $175. Does that sound like an accurate
assessment? We are not emotionally invested in the house so if I were to
buy it, it would have to be because the bargain made it impossible to
pass up.

Some details:
The house was purchased on 4/2006 for $215K.
Landlord says she owes $210K on the mortgage.
She wants to sell it to me for $175K.
My rent is $1295/mo
Property taxes are $3639.90/year
Insurance is probably $2500/year or so.
"Just market value" according to the property appraiser is $170K
"Assessed value" is $118,656

All thoughts welcome.
 
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J

joetaxpayer

Daniel said:
I know that if I were to buy it, I would get about a $100 per month
discount on the taxes but not the first year (homestead exemption.)
Given that, if I bought it for $134K (including costs.) I could see
picking it up, but not $175. Does that sound like an accurate
assessment? We are not emotionally invested in the house so if I were to
buy it, it would have to be because the bargain made it impossible to
pass up.

Some details:
The house was purchased on 4/2006 for $215K.
Landlord says she owes $210K on the mortgage.
She wants to sell it to me for $175K.
My rent is $1295/mo
Property taxes are $3639.90/year
Insurance is probably $2500/year or so.
"Just market value" according to the property appraiser is $170K
$175K @ 30yrs, 6% is about $1050/mo. plus $512 for tax/ins. $1562 total.
But, you get a tax break based on your bracket, and whether you'll pass
the point of STD deduction. Do you have state income tax as well?
I cannot finish the math, you'll have to do that. Keep in mind the first
few years principal payments are minimal, the payment is nearly all
interest.

The question in my mind is this; will the bank permit the sale? Dp you
have to come up with financing or will her bank reduce the balance to
$175 and let you pick it up? Is the area one where you think you'd stay
for 5 years? The choice is not a 'no-brainer'. You have to decide if you
wish to be a homeowner.
JOE
 
D

Daniel T.

joetaxpayer said:
Daniel T. wrote:

$175K @ 30yrs, 6% is about $1050/mo. plus $512 for tax/ins. $1562 total.
But, you get a tax break based on your bracket, and whether you'll pass
the point of STD deduction. Do you have state income tax as well?
No state income tax. I'm in the 15% bracket and with my last house I did
pull above the standard deduction (that was a $130K loan @ 5.5%.)

With my rent currently at $1295 I wouldn't want to go over a $1200
payment (keeping the $95 aside for home repairs.) This was the mistake I
made last time, I didn't leave myself enough room in the budget to fix
things.
The question in my mind is this; will the bank permit the sale? Do you
have to come up with financing or will her bank reduce the balance to
$175 and let you pick it up?
I don't know the answers to these. As I understand it, the bank only
permits this sort of sale if mortgage payments are being missed.
Is the area one where you think you'd stay
for 5 years?
The answer here is "not likely". We are basically locked into the area
for the next 2-3 years but 5? Well we'd have to find a pretty good deal.

Overall, I'm thinking I shouldn't buy. Especially because I currently
have a negative net worth, and no down payment. But then I'm left
wondering if I'm going to be forced out if the house sells to someone
else or if I will be able to finish out my lease.
 
J

joetaxpayer

Daniel said:
With my rent currently at $1295 I wouldn't want to go over a $1200
payment (keeping the $95 aside for home repairs.) This was the mistake I
made last time, I didn't leave myself enough room in the budget to fix
things.

Overall, I'm thinking I shouldn't buy. Especially because I currently
have a negative net worth, and no down payment. But then I'm left
wondering if I'm going to be forced out if the house sells to someone
else or if I will be able to finish out my lease.
If the budget is that tight, you are making the right decision. Just
like a poster here will be told to invest in cash (t-bills /CDs) for the
short term, it doesn't sound like this is a good purchase for you.
Unless, you had cash, and the place needed work, and you said you and
the MRS loved to renovate. 2 years of plastering, paint, wood trim, etc,
and you might turn a tidy profit. There are those for whom that
situation works fine, it's not for everyone.
JOE
 
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W

Will Trice

Daniel said:
But then I'm left
wondering if I'm going to be forced out if the house sells to someone
else or if I will be able to finish out my lease.
I don't think a sale forfeits your lease.

-Will
 

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