Homeowners To Expect Pain When Unloading A Home In A Short Sale

A recent story in The New York Times describes the last-minute surprise sprung on a homeowner who was trying to unload a home, the value of which was less than the loan balance, and who was seeking to consummate a short sale:

• [R]eluctantly, banks are agreeing to let some short sales go through. But instead of writing off the unpaid portion of the debt, they want homeowners to sign a note promising to pay some or all of the balance due. This was the situation confronting Mike and Linda Kelly, who needed to sell their house in the foreclosure-plagued Central Valley of California when Mr. Kelly got a new job 75 miles away.

• The Kellys owe $300,000 on their house, which has a pool in the back, crepe myrtle bushes in front and, because Mr. Kelly is a ham radio buff, a 40-foot antenna above it. But the best offer they could get gave the bank $220,000.

• CitiMortgage said it would approve a sale at that price, but at the last minute told the Kellys they needed to pay $166 a month for the next 20 years, a total of $40,000. “When you are ready to participate in the loss, feel free to call me,” a Citi loss mitigation specialist, April Easter, wrote to them in an e-mail message.

For the story, see The Pain of Selling a Home for Less Than the Loan. (may require free registration; if no registration, try here, then click link for the story).