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There Was This Guy Banging On The Door… Inquiring About Lis Pendens Foreclosure Action On His Home

This had been quite a turn of events for Bobby, a single dad, recently divorced with full custody of his two boys. His ex-wife had taken off with a new love found on the Internet. She said it was real love this time. During the strain of the divorce and loss of half the household income things began to slide into disarray.

Bobby had already determined that he and the boys could not stay in the home and crank the mortgage payment. He had four Realtors in to give a Comparative Market Analysis on the home giving some idea of a probable sales price. It didn’t take long to figure out that Bobby was upside down in his home. With the Monthly Option ARM with negative amortization that Bobby and his then wife had taken out when they purchased the home. The original mortgage amount had increased 15% of the original balance. It was always the intent to pay the mortgage down, but with the divorce and other expenses of a single wage earner in the home, that didn’t happen. He had a mortgage balance with catch up penalties, late charges and such that was approximately $30,000 above the net sale price of the Realtor’s estimates. Three of the Realtors were pretty close but the other was obviously dreaming and apparently trying to “buy” a listing with a kited price. Bobby had been checking the neighborhood activity during the divorce proceeding. Bobby was to get some court ordered child support but has yet to see any money. He wanted to keep the boys on a regular schedule without too much disruption of their normal activities and was able to keep them both in little league and in an after school karate/kick boxing program. The karate school picked the boys up after school then Bobby was able to pick them up after class. Being a self-employed outside salesman gave him the flexibility to work around the boys schedule.

Bobby straightened the guy’s shirt out and smoothed it out the best he could. He invited the bloke in. He said his name was Frederick. Bobby asked him, “Look what were you saying before I was interrupted?” Frederick explained the plan that simply he’d try to save Bobby’s home or would negotiate with the mortgage lender to accept less than what was owed on a “short sale”. He further explained that Bobby would need to quit claim the deed over so that he could position himself to negotiate and get paid. All the while the home would be sold to a buyer at slightly below market and for Bobby’s trouble he would get nothing but would obtain an agreement from the lender not to sue for a deficiency judgement and would avoid a foreclosure proceeding. Bobby thought about it for a minute and asked, “Well why couldn’t I do that for myself?” He received a blank stare back from Frederick then he responded, “Well I’m a better negotiator.” Bobby grabbed Frederick by the arm and showed him the door. Bobby gave Frederick some parting words “Look I’m sure you’re a good negotiator but you’re not as motivated as I am going to be and I’m certainly not going to quit claim my house over to you.”

“So see ya and don’t bother coming back!”

Bobby was not operating in a vacuum. He had been researching the sale prospects ever since he had interviewed the Realtors for comparative market studies. One of the Realtors, Ralph had touched on the “short sale” aspects of selling the home and had indicated that he had successfully negotiated three “short sale” situations to gain a sale on a reduced basis and free up the owner from any further obligation. Bobby had been reviewing some horror stories written up in the local paper about persons or companies extracting up front fees from homeowners in the process of a foreclosure and it turned out to be an out and out rip off. Other “investors” got the homeowner to sign a quit claim deed over and then would get the homeowner to move out to do some sort of “creative financing”. In some cases the “investor” would rent the property out and garner three or four months of rent plus deposits and security and ride it all the way into foreclosure with the homeowner and the tenant getting ripped off. A few “investors” would negotiate a “short sale” with the lender and would then flip it to a new buyer.

With time ticking away, Bobby called Ralph the Realtor to come over right away with the plan of selling the property on a “short sale” basis and put this nasty business in the rear view mirror. Ralph laid out the plan. To lay the groundwork to go at the lender, Bobby would need to prepare a tight and accurate family budget to prove to the lender that there was zero blood in the turnip to be squeezed. Bobby shared with Ralph the entire loan documents, the mortgage note, mortgage, mortgage statement with all the contact numbers and account number. Ralph completed an updated sales market analysis and made recommendations to Bobby on how to position the home to sell quickly. Bobby had not made any mortgage payments for the past four months and had limited funds to move to other living quarters with his sons, Brian and Mitchell. Ralph wanted Bobby and the boys to pack up immediately and remove all clutter from the closets and garage. A $50 storage unit was rented to store the stuff that was going to be kept. A garage sale was scheduled to sell all items not to be retained and raise a few bucks. Ralph and Bobby discussed freshening up the entryway with fresh paint and painting the master bedroom with a more neutral shade, which had a wild color and would be a distraction for most buyers. The carpets were shampooed and foodspots removed. Some potted flowers and plants were purchased at a local flea market to pick up the front of the house. In the meantime, Ralph was in contact with the lender and was engaging them with the “short sale” proposition. The lender already had three or four Broker Price Opinions in hand to further bracket the price. After a week of negotiations, Ralph received a verbal agreement from the lender to proceed on the sales plan. Ralph would receive nothing and would assign over all escrows for taxes and insurance. Ralph and Bobby checked with a local Real Estate Attorney to make sure they were avoiding any current and future land mines.

With the property spiffed up and clutter now in storage, the home was in good condition to show. In the agreement with the lender, the net to the lender would include a buyer incentive to pay up to $5,000 of buyer’s closing cost and prepaids. The listing price was set at 5% less than comparable properties with seller help on the closing costs. Ralph, got Bobby and the boys to go ahead and move into a townhouse apartment complex that was close to the boy’s school and Bobby’s work with the apartment community offering a move in special waving the deposit with one month free. The garage sale had generated just enough money to make it happen. Bobby was a good salesman, and in spite of everything was continually meeting his quota numbers and was on track to earn a bonus in a few months.

At the second open house, Ralph had an offer, which was a few thousand less than the list price. The incentives of buyer paid closing cost and prepaids were making a big difference. The buyers had already been pre-qualified with a mortgage lender letter in hand and were ready to close in two weeks. The fact that this home was vacant and immediate occupancy was possible made a big difference in the sales process. After a few days, the lender accepted the terms and took a little more of a hit to their bottom line net. Even though they had lost $40,000 other lender’s statistics show that in this current market place the loss could have been in the $60,000+ range without someone like Ralph getting involved and time running on and on.

Bobby had done his homework and after being assaulted with a parade of “investors” and “foreclosure specialist” then settled on a known professional, Ralph the local Realtor who had demonstrated his skills from prior experience. Anyone facing this foreclosure situation it is not uncommon to be filled with emotion and cloudy thinking.

To gather all the facts, consult with market experts that have a license to protect and then coupled with seeking legal advice will go a long way of solving this situation. Open and continuous communication with the lender will serve to make this an easier experience. There are many lenders acting in a proactive way to keep homeowners in their homes IF it can be done. In Bobby’s case, he could only sell and get out. When a “short sale” is not possible, a deed in lieu of foreclosure, or just walking away is better than having the Sheriff set one’s stuff to the curb. That may be the “Ultimate Reality Show Experience”.

Bobby and the boysFeature Articles, six months after the sale are doing ok and the ex-wife is sending some child support. Bobby’s bonus came through and the process of rebuilding his credit history is underway. Little league and karate classes continued for the boys and school was going pretty good as well. Bobby was thankful that he had researched and called Ralph. It was the answer for this situation and Bobby and the boys were able to get on with their lives. Note: A knock at the door may not be an opportunity for owners.

Dale Rogers                                                                

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Dale Rogers is a thirty-year mortgage veteran and frequent contributor to the Broken Credit Blog. The BCB is a free website created to assist the general public with information about credit repair and responsible mortgage lending.

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