I am currently looking at a home that was reduced from $180K to $138K due to a short sale. I would like to "rent" from the Seller for the time being. Will his mortgage payment be reduced to reflect this new loan amount or is he still responsible for the original principal amount of $180K? This will effect the rental agreement. He is currently paying two mortgages due to his relocation. I want to help him out with this short sale home, but I cannot buy right now. Please let me know. Thank you.
Hi Anonymous, From my experience, the owners mortgage payment would not change. Here is what is happening. The owner obviously owes more than his home is worth. The home is collateral for the debt but in this case, selling the home will not satisfy the debt in whole. So, the bank and owner have come to some agreement that will let the owner sell the home for less than what is owed. This agreement does not change the original terms of the loan. Sorry.
Sounds like you have a little confusion over a short sale versus a modification. In a short sale, nothing changes except the bank accepts less than the full amount of payment when a property is sold. If a property is up for a short sale, it's highly unlikely the seller will want to rent as it would negate the possibility of the short sale and keep him trapped in his underwater home. A modification lowers the payment on a home that is not sold, but those are not typically done for investment properties. If you can't buy a home now, suggest you look under homes listed for rent, doubt the short sale home is a good rental candidate.