Underwater

I apologize for my lapse in blogging over the last 2 weeks! The short sales have hit the fan. I have 4 on my plate at the moment, 2 listings and 2 buyers, and they can be REALLY time consuming. For those of you who are wondering what a short sale is, it's when the seller owes more money on his home than he can sell it for. That means I am negotiating with the lien holders on the house. In many cases it's not just one lien holder, but multiple lien holders all with different procedures for short sales. Ugh!!! For example, House A may have an offer of $300,000. The current homeowner refinanced the house in 2006 (peak of the market) and at the time it appraised at $425,000 so the homeowner refi-ed and received a new adjustable rate 1st mortgage of $350,000, plus a 2nd home equity line of credit for $50,000 (which they use to put in a new deck and do some landscaping.) Flash forward to 2009 and the homeowner has been laid off, the adjustable rate mortgage is about to have an interest rate increase and, of course, the real estate market has declined about 20%. The homeowner has not made a payment for some months and is behind $15,000 in interest and penalties. Here's where it gets tricky... The bank offers to refinance the $15,000 in interest and penalties, the homeowner accepts and it is actually refinanced by a 3rd party lender. Therefore we have 3 lien holders on the property. I am the listing agent on the house and we have an offer of $300,000 so I have to submit it to all three lien holders. The lien holders in 2nd and 3rd position can do nothing until the first lien holder agrees to the terms and offers a payoff amount (usually about 10% of what is owed) to the 2nd and 3rd lien holder. They then have to decide whether they will accept it. Naturally, every lender has different procedures, none of which are ever clearly explained, and I get to navigate this fun world. And we haven't even had the home inspection yet...

By the way, I want to make it very clear that the above scenario is fictional. Just a good idea of how short sales happen. So, I apologize for not blogging in awhile and if, you will excuse me now, I have to go fax a short sale "Affidavit of Arms Length Transaction" addendum to Wells Fargo so we can get payoff approval.