Hi folks. It seems like only yesterday that we started hearing about short sales, foreclosures and financing issues. That's why I was a little surprised when I fouind this post that I posted in December of ........2006!!!!! No wonder I'm tired.
Three blind mice, three blind mice......blah blah blah.
Lately, as anyone knows who has been reading my Blog, I have been dealing a lot with short sales and pre-foreclosure listings. Since I am not an attorney and cannot give legal advice, I always recommend to these Sellers, that they seek competent legal counsel. Most do. In addition to this, I give them my opinion, about what a short sale may do to their credit and the possibility of the amount of the "short" being treated as income, for tax purposes, and/or being attached to them as a personal liability. I do this, so they will understand, that being foreclosed on or negotiating a short sale should be a last resort decision and will have dire financial consequences.
Anyway, on Saturday, I was out and about putting up signs and refilling a few brochure tubes before the Holidays and bumped into one of my Sellers who is in a pre-foreclosure situation. She proceeded to tell me how she and her husband were getting ready to go look at some new construction homes and were hoping to put a contract on one. What? You are in foreclosure and think you can go out and buy a new house? According to my Seller, she thought that since we were trying for a short sale, that their credit would not be affected and that they could go ahead and place another property under contract. She figured since the Lender was going to get most of their money back, they would just forgive them for not making payments in five months and let bygones be bygones. I was dumbfounded to say the least. But, OK then, good luck with that.
Also, last week, I was speaking with one of my other Sellers. He lives out of state but has a flip that flopped in Poinciana. He hasn't made payments in three months and is also in a short sale situation. He had been pulling equity out of his primary residence for about a year to try and sell the property, he owns down here. Last time I had spoken with him he was telling me that he had already pulled $40,000 and only had about $40,000 left in his house. When we were talking last week he was telling me how tight things are and how expensive it is to send his three children to private schools. Then he proceeded to tell me how he was going to pull the rest of his equity out of his house to pay the children's tuition next year. He's not worried because he knows his house will increase in value and he should be getting a new job next year. So let me get this right. You have a house in Florida that has decreased in value and is about to be foreclosed on. You have already spent $40,000 of the equity in your residence to try and hold on to this house. And now you have come up with the brilliant idea of pulling the rest of the equity out of your residence to pay for private schooling. Well, good luck with that one too.
Folks, believe it or not, there's one more. I have another Seller who is going through a bankruptcy. This should be discharged sometime in March. They too have been out looking at new homes. They told me that builders are desperate right now so they shouldn't have any problem getting into a property because the builders have "in house" financing. Their thinking is that once they sell their property, after the bankruptcy, they won't have any debt so the lenders will be happy to loan them money to buy a new house. I truly feel like I am in an episode of the Twilight Zone.
Two Sellers, with serious financial issues, who actually have no clue that this will affect their ability to purchase another home and another digging their hole even deeper, based on future appreciation, even though they are in the process of losing a house for that exact same reason.
Are folks really that blind? Is their reality clouded by denial? Does financial responsibility mean nothing anymore?
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Whoa! Some of your short sale Sellers sound like some of MY short sale Sellers. I'm gonna sell this as a short sale and, in the meantime, I'll find a great new house and get in it with no problems what-so-ever. Not gonna happen. Lenders are wise to the Buy-And-Bail mentality of people this year. You can't just buy a new house and turn in a lease for the old house now. Most lenders will see if a potential Buyer will qualify for BOTH mortgages before they shell out any more money. And, guess what? They pull that person's credit?! And guess what else? They'll probably see that that person is a poor credit risk. So, no go with the new house. Better for many people to change their intent and get into a good rental property for a while. But, I am not an attorney nor CPA so can't give advice about that kind of thing.
Hi BB! You got it--D-E-N-I-A-L! That's what it's all about! Sounds like people all over think that they can have their cake and eat it too!
A relative of mine has a friend who whooped it up in the mortgage business for years and then decided that it was time to get out of the business when things started 'falling apart.' He and his wife owned three properties and could not sell any of them to make the move to their destination city so, they just walked away from the mortgages recently! Just WALKED--these were TWO six-figure income-earning people who were living it up for years. I'm just not from that same cloth--I can't imagine risking my credit standing; there were numerous ways that this couple could approach their dilemma and sorry, but they chose the lazy, cowardly way. This is the mentality of many folks right now and I just don't get it.
Okay, I'll get off my soapbox!
Stay tuned, same bat time, same bat channel: December 2010.
Mark your calendars.
This aint going away and stupidity rules the world.
You mean we have to show we pay our obligations on time, have income we can prove AND have money in order to buy? What's the world coming to...
Your Real Estate acquaintances are certainly interesting characters. I guess there should be no surprise why they are in trouble to begin with...dooooo doooo do do dooooo dooooo do do. You have now entered a dimension of sight and sound where everyone is clueless - LOL
BB,
First of all if their lender on the short sees those transactions you can probably be sure they won't relieve them of their debt or they'll just wait for them to close and take the other house. Or if they do get through their short...I hope they don't escalate the promissory note that may have signed...not sure because I don't know all the story. That's crazy...maybe these people are getting sound financial advice from Mr. Madoff.:)
BB, this is what they were "taught" about finance- it worked the first time around. No short sales without lawyers, and I'm the last person who welcomes a lawyer in a transaction without wondering why they're there. They can have this situation to advise on, and for the sake of the sellers, should.
CYA.
I like that blue background to compliment superTLW lol!
So many are under the assumption that they can rack up bills, claim bankruptcy and everything will be all right. I declare...WRONG! lol. You know what..it is with that mind set that this comes to mind.....are they that irresponsible where they truly believe that credit grows on trees?
We must still be in denial when will they get it that they have some responsibility for the decisions they make and the house may not increase enough to bail them out .
I don't understand the reasoning and lack of responsibility of people with views like this. I guess they'll find out the hard way that you reap what you sow.
Broker B, if this is what short sale sellers look like, I'm going to stick to the Buyer Broker thing! These peopel scare me!
Bryant- One of the ways that we get out of giving legal advise is to say upfront:
We are not attorneys and we can not give you legal advice. Other seller we know, other homeowners we know do this or that, this happened to them or that, while there are no guarantees this is what may or may not happen. We have information from third parties such as fannie mae and freddie mac that we give them info from regarding how long it will be before they can buy another house under the different situations.
We have sellers here who go and buy another house( we don't work with buyers so we do not do this) and then short sale the one they are living in, they 'lease' their primary out, buy the other one across the street for less than half what they own on theirs, then stop paying on the first one.
And we should bail these people out? I don't think so!
Way too crazy what some folks believe to be the case. All the best to you and TLW for the holidays.
It is amazing how people think. The stories keep geting crazier and crazier as we continue through this mess.
I'm laughing, BB, because it is all true. Here's one for you. After a seller who was selling on a short sale signed loan documents last week, he walked out of closing kicking himself because it never occurred to him to make his home security for a rather large unsecured debt.
When I take short sales, I ask my sellers to sign a hold harmless agreement that specifically states I am not giving them legal or tax advice, nor am I advising them to stop making their mortgage payments, and I suggest they obtain legal and tax advice before proceeding. I suspect we will see a lot of lawsuits down the road from sellers saying they had no clue or their agent told them to do it.
Yikes, that the mentality like this exists 2 years later, scary. Then again, with the government seemingly unperturbed in consistent corporate bailout mode, is that unreasonable for consumers to expect equal treatment?
Yes, Twilight Zone certainly describes it.
LOL! I can't even finish reading this post it's so funny. And yet...unlike TBoardman's recent post that took me a few minutes to decide it was a joke...I realized it was true at first sight. Florida has more like that than I've seen anywhere though...have to say.
Awe...
You're so sweet. Over :)
TLW...ROAR!
Hey Broker Bryant, welcome to the new age of real estate. Common sense went out with the bath water....and the lenders are not far behind with some of the antics they are pulling either. I have a pending on a Short Sale and the BPO the lender used was on the wrong property! We have to change our heads to be in the industry right now. Thanks for all the comments you made this year Bryant...have a Happy Holiday Season.
I have a solution for all of these short sale problems, JUST DON'T DO THEM TO BEGIN WITH! Find another agent in your office who is willing to do them and refer them to that person. If they close it at least you will get something and have a lot less headaches in the process...
Michael, It must be nice to not sell real estate in Florida :) Almost 90% of the closings in my market are either REOS or short sales. My choices are to do them OR get out of the business. I actually LOVE doing short sales on the listing side. The sellers are far easier to work with and pricing is never an issue.
OK guys and gals I have once again been a terrible blog host!!! I have to say that for about 3 months now I have been having a very difficult time getting my head into AR. I haven't recovered from TLWs recent medical issues and I have been using all of my mental capabilities to focus on my business during this changing market. It's all been mentally exhausting. Please know that I appreciate each and everyone of you stopping by and participating.
I hope everyone has a great Christmas!!!
BB--I just want you to know that I TOTALLY relate to your dilemma! With Ray's hospitalization and multiple surgeries--coming home to being a nurse (I'm sure TLW would say-Not nearly as good looking as YOU!) and trying to keep my business going in this tough market--PLUS two in college...
I think you and I have SO much to be thankful for, including our own health, our best buds back at home and doing GREAT, AND the fact that we're keeping our business heads above water! We've had a TOUGH year but, as it turns out, we have more to be thankful for than most!
I hope you and your lovely bride have a DIVINE '09. I know I'm looking forward to the start of a NEW year!!
I would almost not believe these stories; if I have not heard some of the same things! People just don't get it! They think a short sale is a get-out-of-debt free card! ....Oh I have a title for my next Blog! LOL Happy Holidays!
BB,
It is unbelieveable the things that people come up with. I can't imagine ever thinking this way. But I guess that is just how I was brought up.
BB - Not to worry about not being a good host on your blog. You have to work three times as hard now to make half as much money and TLW had a close call, so you've got every right to be mentally exhausted.
In October I finished a short sale from you know where. The seller had not made payments in almost a year (still can't figure out how he stayed under the radar that long) nor had he paid propoerty taxes and of course he didn't have homeowner's insurance. This was a fairly new house built in '05 so there was still some brand new homes in the community.
When I submitted for a short sale and finanlly got approved, the seller had the nerve to ask me if I could factor in a few thousand dollars for him. I couldn't believe my ears... you haven't paid your mortgage in a year and you want a few thousand dollars from a short sale?? Of course I told him that sellers could not receive any money from a short sale, but the audacity of him even asking just sent me boiling.
Anyway fast forward to last week, he called me and wanted to go look at an owner-financed property. I thought ok fine, I knew he needed somewhere to live. But as we are viewing the property and discussing his options, he mentions that he was looking at the property for an investment property and not to live in himself. Are you kidding me!!
Needless to say, I ended the showing with a few choice words to him.
The nerve of some people.