House for Sale!

We’ve decided to put our house up for sale and try to get a short-sale approved by our lender. Our house is worth approximately half of what we paid for it just two short years ago. There are two ways for us to get out from under the crushing debt of our mortgage: (1) lender approved short-sale OR (2) foreclosure.

We are trying to avoid a foreclosure (if possible), so we’ve put our house up for sale. The hope is that someone one will make and offer and the lender will approve the short-sale. The lender will lose money but we won’t.

Arizona has an Anti-Deficiency law that protects purchase price mortgage borrowers from having to pay the difference between what they owe on their mortgage and the price their house can actually sell for on the market.

In Arizona (and other states) purchase money first mortgages are non-recourse. That means if we default they can take the house and temporarily ruin our credit - but it ends there. They cannot pursue us beyond foreclosure and reclamation of the house.

They can’t raid our savings account or our 401k, and they can’t garnish our wages. I spoke with a real estate attorney a few days ago and she put all my fears to rest. Our credit score will be affected for the next two or three years, but that’s the worst thing that will happen.

If the realtor markets our house for the next six months and the lender forecloses on the property before she can sell it, she gets nothing for her time and trouble. Many real estate agents will not list short-sales for this reason, but I found an experienced professional who is willing to take the risk now in order to gain us as a client and maybe make money later.

We’ve had four showings so far. Whether we wind up with a short-sale or a foreclosure, we will be out from under this upside-down mortgage in a few months. That will be a weight lifted from my shoulders.