Hi folks. Recently I have had several Florida Short Sale sellers ask me the same question.....”We need to replace our car. Should we do that before we go through the short sale process?” The concern is that once they go through the short sale their credit will be dinged and financing an automobile will not be easy. One is even paying cash and is concerned how it will look that he went out and spent $15,000 cash on a car and then turned around and asked the lender to accept a short sale.
Interesting question. And one that certainly shows that we are in a different stage of the short sale wave. The Short Sale Sellers mentioned above do not have cut and dry hardships. They are current on payments and have great credit scores.
The first wave of short sellers that started mostly in 2008 were distressed sellers. Property owners that could no longer afford to make their mortgage payments. The next wave were folks that had adjustable rate mortgages that were resetting and they couldn’t refinance as promised when they took out their mortgages.
The current wave is made up of folks that just need to sell but can’t because their properties are too far underwater. They are current on their payments and are not in foreclosure. They could continue to make payments. BUT....they have to move.
Their family has out grown the property. They have a job transfer. Or they are strategic short sellers.
Their situations are different than the first two waves of short sales...
So......should they go out and replace their car prior to doing the short sale? It depends. My response to them is........
- “If replacing your car is something you would be doing even if you weren’t getting ready to do a short sale then, yes, go ahead and do it. If dependable transportation is needed for job purposes then, yes, go ahead and replace it now. Do what you need to do to make sure your family is taken care of. BUT...be able to defend your position if the lender ask you about it. Be able to show that buying a car was needed and not just wanted. And.....be prepared to make a cash contribution towards the short sale lender’s loss.”
This is my opinion. What’s yours?
Are you under water on your Florida mortgage?