Can I short sale and buy again later?
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Can I short sale and buy again later?
Sole owner 10 years in property – value declined so much so that I owe much more on the mortgage – attempted to apply for loan modification and this did not help. I am struggling financially so am considering short sale and buying in 2/3 years once I have regained my losses. What do I need to know?
Asked on April 12, 2011 under Real Estate Law, California
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
There is no general legal impediment to selling property short then buying other property or even the same property again later. Here are factors to consider:
1) A short sale will still hurt your credit--though not as much as a default, foreclosure, or bankruptcy--because it's still not paying a debt in full. This will impact your ability to borrow and the rate and terms you get later.
2) If the bank does not approve the short sale, they can sue you for the remaining balance of the mortgage.
3) If you sell the property to person A, then buy it back later from person A, then--assuming you got bank approval, which means the bank essentially wrote off part of the debt--you will be under scrutiny to see if the series of transactions was not at arms length and was intended to defraud the bank.
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