ActiveRain – I Need Your Help. Is This a Short Sale? How Would You Counsel this Seller?

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Real Estate Agent with Mason Real Estate CA BRE 01444168

ActiveRain - I Need Your Help.  Is This a Short Sale?  How Would You Counsel this Seller? 
by John Occhi, Hemet REALTOR®  
Mission Grove Realty  

Last night I received an email (thank you ActiveRain) that I followed up with a 45 minute phone call this morning from a homeowner who knows he is on the steps of disaster as his 80/20 sub-prime adjustable loan (ARM)already reset once increasing the principal and interest from $2200 a month to over $2900 monthly payment...and is expected to reset once again in under two months.  He has a homeowner's association payment of $300 due every month on top of his mortgage payment.  I am not sure what the insurance runs, probably not a big bullet.  The taxes however are getting ready to be 3 years delinquent - to the tune of roughly $10,000 that he cannot afford to pay.

What Can He Do to Avoid Foreclosure?

The homeowner first identified himself as an Assistant-Pastor and was not looking for the easy way out, but wanted to be both a good steward of what he and his wife had been blessed with and at the same time to be responsible for his debt.

The Pastor earns $3600 a month.  His wife is a hair stylist that does OK, but her income covers the food, gas, utilities and other day to day living expenses.  Their cars are paid off and they carry no other consumer debt - including credit card balances.

They ended up in sub-prime because they thought they would file a bankruptcy when they sold their last home and wipe out a bunch of consumer debt.  However, the Pastor made the decision to use his equity in the pending home sale to do the right thing and pay the debt.  However, the bankruptcy had been filed.  Even though he did not go through with the scenario, it still shows as a negative on his and his wife's credit scores.  When they bought the condo in March of 2005 her FICO was a 680 and his a 620.

Even though she earns the lions share of her income as cash with tips, they were very straightforward with their stated income loan and only claimed the amount they claimed on their income taxes.  There was no funny business.  Good people buying a home with the best loan they could qualify for at the time.

When they bought their condo, their intention was to refinance in two years, after the hefty pre-payment penalty disappeared.  Unfortunately, the weekend their prepayment disappeared (March 10, 2007 - Saturday) so did the equity in their condo.  This was the same week (Monday, March 12, 2007) that the subprime market went south, started by the collapse of New Century and all of the other subprime lenders right on their heels, when Wall Street quit buying their risky products.

So, lets look at the condo itself...

A nice upscale condo they paid $370,000 for.  It had escalated in value to $430,000 to $440,000.  It is a 2 bedroom 2 bath - freeway close and 10 minutes fro his Church / place of employment.  Perfect for the empty nester Pastor and his wife to both enjoy life and relax from the stress that the ministry can cause as well as close enough to entertain and host Bible studies and other meetings as a Pastor will typically do from his home. (This complex has nice recreation rooms that can accommodate all of his meeting needs and a great way to witness to his neighbors.)  Of course, it had all of the amenities one would expect from a new upscale condo complex -so they were very happy.

Unfortunately, when the subprime market began its downward spiral, so did values in real estate, as we all know.  They have seen their little nest egg of equity drop from a $40,000 to $50,000 investment to a $380,000 condo that would leave them upside down to the tune of about $10,000 if they were to sell and pay closing costs and commissions - plus they would still owe another $10,000 in delinquent property taxes...which they had planned on paying off with the refinance.  Not to mention that there really haven't been any fair market transactions in the complex for several months now - but lots of inventory.

Other than the taxes, the Pastor and his wife are current on all of their bills.  They are of course concerned with what a short sale or foreclosure will do to their credit as well as the tax consequences that may be imposed by the IRS reporting their forgiven debt as taxable income.

ActiveRain - Now It's Your Turn

I have an appointment set up to meet with the Pastor and his wife for Wednesday afternoon.  We have discussed many options and alternatives.  I have offered both the pros and cons.  I have even done something that I just don't typically do and emailed him a copy of my book, "What You Need to Know...About foreclosure and How You Can Stop It!"

What I am looking for here is your advice on how to handle this situation.  I believe I have relayed every pertinent fact that I have short of giving you his name and phone number.

What course of action would you recommend?  I am sure when the Pastor and I get together on Wednesday, that the results of this survey will correspond with the advice that I have already given - I am looking to confirmation so that the Pastor and his wife will know through the power of prayer and the Internet working together that they are making the right decision for them to do what is God's will for them.

I welcome all opinions, not just those of Believers.  After my meeting, I will return and update you as to what transpired. 

I'll end this article though, the way I ended our phone call with a passage form the Book of Romans - chapter 8, verse 28, "And we know that all things work together for good to those who love God, to those who are called according to His purpose."

Now Have a Blessed Day,

by John Occhi, Hemet REALTOR®  
Mission Grove Realty  
Preforeclosure Specialist

 

 

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Until Next Time, Have a Blessed Day,

John Occhi, ePRO, REALTOR®
DRE Lic No: 01444168


ePro,John Occhi,www.johnocchi.com,realtor      Certified Probate Real Estate Specialist Logo Awarded to John OcchiFive Star Logo,Certification,REO,Five Star Institute     

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This blog and the contents written here is the intellectual property of John Occhi, Temecula - Murrieta, CA REALTOR® in the South West Riverside County region of the Inland Empire of Southern California.  The views and opinions expressed are just that - views and opinions of John Occhi and those who comment.  Please note that I am not an attorney or a tax professional and any time I discuss either topic, I suggest you consult with the proper professional for relevant assistance. 


I am proud to be a full time REALTOR® who is proud to be a contributing member of the ActiveRain community.

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Location:
California Riverside County Hemet 92544
Tags:
short sale
activerain
preforeclosure
bankruptcy
fico
credit
2005
2007
new century
adjustable loan
subprime
arm
avoid foreclosure

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Rainmaker
301,471
John Occhi
SRES,CPRES.ePRO - Temecula-Murrieta CA Real Estate
Mason Real Estate

 Bill Nazur - I want to thank you for your input.  You have truly come up with a great solution - if indeed they can swing the extra $100.  Unfortunately, it the loan will be resetting in 2 months - so I am not sure just how viable this solution is.  My guess, your placeholder for the wife's income is probably pretty close.

I am sure the Pastor and his wife will read what you have suggested and consider it in prayer, as they will all of their options.

Once again, after I have had my meeting and whatever course of action is put into play, I will report back to each of you who have responded.

Until then, Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty

July 30, 2007 01:30 PM
Rainmaker
88,900
Paul Moye
Broker, GRI, SRES
Benchmark Realty

What can you truly sell the condo for in under 90 days?

What altenative does the bank have but to try sell the property through you?

His financial troubles aside, they can not afford to live in the house without a substancial increase in salary so forebearance and loan modification is not a viable option.

I would start the short sale process steps at once and let the bank know at least they are trying to find a solution.

July 30, 2007 01:34 PM
Rainmaker
301,471
John Occhi
SRES,CPRES.ePRO - Temecula-Murrieta CA Real Estate
Mason Real Estate

Paul Moye - I believe the condo is realistically in the $370 to $380K range - it really depends on the upgrades and condition.  since I have not seen the unit, I cannot give an opinion.  Based on what I see on paper though - the $370 to $380 is very realistic in today's market - now what will that look like in 90 days?  hmmmm, I wonder

The pastor is trying to get past the first line of defence with the lender and get to someone with some authority this week, before we meet on Wednesday.  He is sincerely seeking solutions - which is hwy I have posted this article - to help him with the collective mindset of some of the best REALTOR minds on the topic - in the entire country.

I'll address the resolution after we meet on Wednesday.

Thanks again for chiming in.

Now, Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty

July 30, 2007 08:46 PM
Rainer
202,804
Mary Warren
John, I've been praying for this pastor and his situation...it's Wednesday a little after 8pm and I'm waiting eagerly to see if you have come up with a solution.  Any update yet?
August 01, 2007 10:02 PM
Anonymous #19
Anonymous
Anonymous

Great post and lots of options offered.  I hope all went well with your meeting on Wednesday.

Kim

August 03, 2007 01:21 PM
Rainer
18,363
Arnold Williams
Arnold Fitger Williams
Excellent post.

I still think the best response you got was Bill Nazur's.  Hope it worked out.
August 03, 2007 06:23 PM
Rainmaker
301,471
John Occhi
SRES,CPRES.ePRO - Temecula-Murrieta CA Real Estate
Mason Real Estate

                                                              

                                                                      > > >  T H E   S O L U T I O N  < < <

First I need to apologize for the delay in reporting on the ultimate outcome.  I know that there are several who really wanted to know what the results were.  I have just gotten so busy this last week - all due to ActiveRain.  I signed 4 new listings and actually passed on 2 - all since last weekend.  On one night, I did not get home until midnight - so I have been burning the candle at both ends.

                                   

 

Second, on behalf of my client he and his wife want to thank everyone who thoughtfully offered their advise on the situation.  My client thought I did a very good job of representing his viewpoint and situation.  My client and his wife carefully considered every comment and suggestion that was made - and do so with prayer.

Ultimately, when I arrived and my client had full opportunity to not only read this thread but my book"What You Need to Know About Foreclosure, and How You Can Stop It!", the decision was made to go exactly as we had discussed the proceeding week on the telephone - without ever meeting face to face.

The decision that the Pastor and his wife made were to continue to negotiate with the bank.  Remember, up to the end of July - they are current with thier first and second loans.  Starting this month, thew will start to make partial payments.  As they slip into the status of being delinquent - they are hoping someone from thier lenders office will talk to them a bit more seriously.  Right now they can't seem to penetrate the first level of obnoxious collectors who only talk about full payments - this will change.

Yes, they know this will be a hit on their credit as far as late payments go.  A temporary setback.

There is anticipation that the bill passed by congress will move quickly through the Senate and find it's way to the Presidents desk in the next few months, once the Senate returns from their summer break.  Then if passed, there is probably a pretty good shat at the effective date being around the 1st of the year. 

If this scenario plays itself out, then my client will not have to worry about the tax consequences of a Short Sale. However, there are no guarantees that it will pass or what the effective date will be.  My client feels as if they at least have a target date to move forward with.

So, yes, I did take the listing, I took the photos and I have the listing on the MLS - for a price that will pay off the lenders, pay all of the closing costs and pay a 6% REALTOR® commission for selling the home.  Unfortunately the listing is priced about $30K over current fair market value..  The listing period is for 1 year - so there is no pressure from me or to me to do anything other than list the property and market it on the Internet.  I have a lock box and sign on the property - it is for sale.

So, am I prepared for a Short Sale - YES.

Are we jumping in blindly - NO

The client will position himself to talk to others at the lenders office with more authority.  It's a shame he can't just pick up the phone and try to work out a solution to his problem - but the lender is not set up that way - so he must play by their rules and take a hit on the credit.  If he can't resolve anything - then so be it - he is prepared to start the short sale process as soon as he receives his Notice of Default (NOD).

There you have it - not a quick fix with ramifications but a long term solution that can take many courses of action - depending on the parties involved - and just in case the short sale safety net has been hung under this high wire act.

Thanks again for chiming in.

Now, Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty

 

August 05, 2007 11:04 AM
Rainer
202,804
Mary Warren
John, you should post this as a new blog, many are not going to see it as a reply...I seldom go back to old blog articles after I've replied only once or twice...I just came here becuase of your e-mail to me!  Let the pastor know that christians in Las Vegas are praying for him and God's will!
August 05, 2007 11:15 AM
Rainmaker
301,471
John Occhi
SRES,CPRES.ePRO - Temecula-Murrieta CA Real Estate
Mason Real Estate

Thanks Mary,

I was thinking the same think - hence the email.

The Pastor will know he is in your prayers, as I know he will check back here.

Now, Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty

 

August 05, 2007 11:18 AM
Rainer
18,363
Arnold Williams
Arnold Fitger Williams
Excellent job at presenting a solution that preserves options for your client.  Thanks.
August 05, 2007 11:23 AM
Rainmaker
88,900
Paul Moye
Broker, GRI, SRES
Benchmark Realty

Great reply...It should be a Part II Blog and I will rotete it up on to the featured list. see this stuff helps newer agents really understand what goes on.

Paul

August 05, 2007 11:28 AM
Rainer
32,575
Coach Steve Toth
Real Coaching Radio Network™

Hi Jon;

This isn't a viable solution: 

"Starting this month, thew will start to make partial payments." -Lenders don't take partial payments on mortgages (if they did they couldn't foreclose).  They will send the checks back to him.  

To Your Success,  

Coach Steve Toth

August 05, 2007 11:29 AM
Rainmaker
239,696
Bill Roberts
"Baby Boomer" Retirement Planner
Brooks and Dunphy Real Estate

John, best of luck to all concerned. They are right, this should be a new post.

Bill Roberts

August 05, 2007 11:59 AM
Anonymous #28
Anonymous
Anonymous

I agree with Coach above, mortgage companies won't normally accept partial payments.

Kim

August 06, 2007 02:39 PM
Rainmaker
301,471
John Occhi
SRES,CPRES.ePRO - Temecula-Murrieta CA Real Estate
Mason Real Estate
Kim Zajan Thaks Kim - the Pastor will be monitoring this blog - we'll see how things progress.

Now, Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty

 

August 06, 2007 02:42 PM
Rainmaker
301,471
John Occhi
SRES,CPRES.ePRO - Temecula-Murrieta CA Real Estate
Mason Real Estate

Bill Roberts - Thaks for the confidence - If I had the time, it would be a new post - I'll try.  I also have several other case histories I want to put out there as a learning experience as well as letting the client see their options.

Time, where can I go buy an extra 2 days this week?

Now, Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty

August 06, 2007 02:44 PM
Rainmaker
301,471
John Occhi
SRES,CPRES.ePRO - Temecula-Murrieta CA Real Estate
Mason Real Estate

 Mary Warren - Thanks for the heads up.  I am sure by now the Pastor already knows that he is in yor prayers.  On his behlf, please allow me to thank you.  As I mentioned above, I would like to do a summary post -and please come back because I have some additional case studies to present.

Now, Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty

August 06, 2007 02:47 PM
Rainmaker
301,471
John Occhi
SRES,CPRES.ePRO - Temecula-Murrieta CA Real Estate
Mason Real Estate
 Arnold Williams - Thaks for the insight.  I appreciate your vote of confidence.

Now, Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty

August 06, 2007 02:49 PM
Rainmaker
301,471
John Occhi
SRES,CPRES.ePRO - Temecula-Murrieta CA Real Estate
Mason Real Estate

Paul Moye - I'll domy best to get it back up this week - just a very busy week.  I agree, it is here to help others - not be slef-serving.

There is so much to learn anbout this niche and I am afraid too many are going to jum in without being prepared and make mistakes that will cost thier clients dearly.

Now, Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty

August 06, 2007 02:51 PM
Rainmaker
301,471
John Occhi
SRES,CPRES.ePRO - Temecula-Murrieta CA Real Estate
Mason Real Estate

Coach Steve Toth - Thanks for the feedback.  I was certian I had replied to you earlier - In any event it may not work 100% of the time, but ther are times when it will work.  My lender has allowed me to do this several times over the past couple of years.

If nothing else, it will buy some time with the lender.  The Pastor knows there are no guarantees in any of this - yet this seems to be the logical course of action considering his unique circumstances.

Now, Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty

August 06, 2007 02:54 PM
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Rainmaker
301,471

John Occhi

SRES,CPRES.ePRO - Temecula-Murrieta CA Real Estate
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