Archive for the ‘Short Sales’ Category

A homeowner called in response to one of my “We Buy Houses” advertisements. She was interested in selling but not “highly motivated,” to use the industry term. Her condo was worth maybe $37,000 in fully fixed-up condition. She and her husband had more than $75,000 in debt on the place, in a first and a second mortgage, secured at times when credit was much easier.

I regretted breaking the news to her that a short sale was the only way out. I outlined the process. Both lenders would have to agree to accept less than what they were owed. The owner of the second lien would have to agree to take “much less” than the $18,000 due. She and her husband didn’t like the idea of walking away from an obligation, nor the prospecting of becoming renters, not homeowners.

“You are already renters.” I didn’t say that exactly. But that was the essence of what I told her. If you’re paying to live in a place in which you’ll never build equity, aren’t you in fact renting? I say certainly. Holding the deed is a mere formality. “I admire your integrity.” I did say that. She’d actually been overpaying on the second, hoping to eventually retire the debt. Should she continue doing so?

“I wouldn’t,” I replied. Should she devote the extra funds toward paying down her first mortgage? My answer was the same: “I wouldn’t.”

This report by a University of Arizona law professor, Brent T. White, identifies two reasons people keep paying on underwater mortgages. One reason is to avoid shame and guilt. Another is exaggerated anxiety over foreclosure’s perceived consequences.

This point from the report is most poignant: Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility.

In other words, the banks didn’t worry about honoring their moral obligations. His point is, “Why should you?”

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Most homes are sold by a broker, who often ask a standard 6% or more in commissions. Brokers aren’t as motivated as a homeowner to sell the house, since they don’t pay the expenses of the home. A listing agreement binds you, the homeowner, to sell through only one broker for a long period of time, like 6-12 months, regardless of the performance of the broker. You also have to keep the house ready to show at a moment’s notice and have to leave during the showings, which can really interrupt your life. You put up with strangers walking through your home. Sometimes, they leave doors open and lights on when they leave! You may have to make costly repairs to the home to satisfy the buyer and pay for closing costs, and other seller’s concessions.

We are not real estate brokers, we do not want to list or sell your home. We are a team of experts who buys homes from people who choose to sell their homes or MUST sell their homes and move. Many things can happen in life that create changes that require a home be sold, such as financial problems, medical problems, a growing family, job loss, job transfer, divorce, retiring, a death in the family, etc. We specialize in assisting homeowners who have a financially unstable property.

Contact the experts at Colorado New Beginnings today at 303-350-8237

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A short sale is a win-win solution for the homeowner and the bank. The homeowner avoids a foreclosure, which is like “death” to their credit. The bank is often willing to discount the loan amount and sell the home, taking a loss, to avoid having to keep a “non-preforming asset” on their books. The bank accepts a discounted payoff, meaning the bank gets paid less than the full loan amount owed. So, the home is sold, the mortgage or deed of trust is satisfied (paid off) and you avoid a foreclosure or bankruptcy.

For more information about how Colorado New Beginnings Program can help you call us at 303-350-8237.

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