Foreclosure:the hangover after a wild financial party

The market has changed big time. Since January 2007, I have worked with people who were in the beginning phases of foreclosure, short pays, and work out loan programs. It seems that the years in the past were a wild party. Now folks are waking up with financial hangovers. The scene is the next morning. You see beer cans and paper plates scattered about with left over food on them. There are plastic glasses half full with stale booze and cigarette butts stuffed in the cups. The party is over.

Foreclosures are caused by life events. It isn't always a bad loan that was the cause. People have hopes of using their home equity to start a home business, remodel the house, but go to the extreme, loan money to family, buy a well needed vehicle albeit extravagant. All good reasons, but not well planned.

I helped a fellow buy a house in 2004. He was sleeping on a friends couch for several months after a divorce that left him homeless. He told me, that he was just one man that needed a small house. I found it. He loved his urban hideaway. His self employment went bust. His call to me to sell was a surprise. However, he kept a secret to himself when he listed it. He did not reveal; why he needed to sell quickly. His impatience and secrecy, was the embarrassment that he was entering the foreclosure zone. I had only 90 days to sell the house. This was a challenge. I wanted to help someone that had confidence in their experience with me. I used the basic marketing tool, which is OPEN HOUSES. He needed money but the house will only squeeze out what the public will pay. The market was beginning to soften like a snow pack. As we approached the last 35 days before the sheriff sale, we went into escrow with an ecstatic buyer who needed a place to live in, but for a very good price. The seller saved his credit status and walked away with $2,000.

In March, 2007, I was contacted by a family that needed my help. A family member was unable to pay his house first and second mortgages due to illness. The owner was distracted from his financial obligations due to his poor health and felt embarrassed to make it known to others. He lost his income and was receiving Notice of Defaults. By the time I was contacted to help. There was only 118 days left before the sheriff's sale. The need to save the house blinded good judgment. They needed top dollar to pay the back payments and keep the property. I accommodated them for two weeks and encouraged a reduction to attract buyers. When the financial grim reaper is approaching, you need to face reality and at least save your credit status. Banks will come after you after they reposes the house for their losses and you lose even more. Understandably the buying public will not pay more than the present market value. If I was only called sooner, I could have saved their house.

Recently I was called by a past client to help their friends with their dilemma. They owned a rental property that could not sale nor rent. They had hired two other real estate agents over the past year or so, but were unable to sell with the owner's needed price. I wanted to help because it was a referral. I immediately knew that it was over priced, when I went to preview it. It was obvious to me that the house was leaning. I relayed to the owners that I would not take the listing unless they had a structural engineer exam it. His findings were that the house needed a new foundation. The owners wanted to start off at market value price. I explained that it would not work in this case. The foundation replacement cost was extremely expensive. This was a contractor special. The house sold for land value only. Now they must do a work out plan (short pay) with the bank for the loss. It is better than repossession however you pay the bank. What is legally owed to them which is the difference not recived from the short pay plus penalties. The twist to this scenario is that the previous owner allegedly knew about the damage. I now consider myself a real estate snoop.

What causes foreclosures? Human events created by ourselves. If your life circumstances are changing, do not become fearful and shamed. Recognize what needs to be done. Do not wait until you receive a Notice of Default. Call a referred real estate agent and be open about selling before it is to late to save your credit by being honest with your agent. Give your agent at least 120 days or more to market your property. Have him show your seller's proceeds report. Your experienced real estate agent will save your future if you allow them to adjust the selling price as time runs out.