Foreclosure, bankruptcy, and short sales are words that have become all too common in today’s real estate market. They embody the good, the bad and the ugly for many home owners. We all know people who bought homes at high prices and who are now underwater on their mortgages, just struggling to hold on. We also know folks who have simply walked away from their dream homes, forced to start over, and with bad credit for years to come.
For a lucky few the short sale is the doorway to homeownership. My daughter, Jonelle, is one of those. In September she decided to give up apartment living in favor of a home big enough to expand her Etsy business and display her photography and other artistic endeavors. We were all excited at the prospect, but were naïve about the process, learning many lessons along the way. Here are some of those lessons in case you want to embark on a similar adventure.
Her story went something like this. She found a wonderful pair of agents, Kathy Bowman and Cheryl Stewart, from Lake Real Estate in Green Lake,who seemed to know the market, and had a good understanding of distressed homes. Although, Jonelle, would love to live in the Ballard, Fremont or Green Lake areas, her job was in Edmonds, and the homes were more affordable going north. She decided to concentrate on Edmonds, Shoreline, Lynnwood and Mountlake Terrace. For the next four months she saw scores of homes that were bank owned or available for short sale, and soon learned the difference.
Almost ready to give up, on a dark, rainy night she found a home that she thought would work for her, a 4-bedroom rambler in Mountlake Terrace. It looked like a good deal and besides, weren’t short sales wonderful bargains?! She and her agent put an offer on it and waited. No guarantee she would hear anything soon. And like the proverbial saying, “when it rains, it pours” she found a second house she liked even better in Edmonds which was open for bids at an upcoming auction. Still hearing nothing from the first house, she bid on the second, and continued the waiting game. She was finally notified on the first one that there was a competing offer, so she offered full price plus closing costs. And waited. The auction for the second house came and went, and she learned that her offer was not accepted, but she was second in line. Back to the first house, while waiting we did some searching and found that there was only one lien on the property – that of the lending bank. A notice came through asking if my daughter planned to rent out the home, to which she replied in the negative. It seemed like there was some movement. More waiting. People who had their own short sale stories said it could take up to a year, and still not work. She noticed that short sale homes went pending, only to appear again later as people grew tired of waiting for a response. The “not knowing” was nerve wracking.
Finally the news came that she could have the house if she wanted it. But, she needed an inspection to the tune of several hundred dollars. She also realized the property was on a septic, not sewer system which was a surprise because she assumed sewer systems were routine in urban areas.We encouraged her to get a septic tank inspection to make sure it was in good order. Several hundred more dollars later she found out the septic tank was just fine, but a can of worms was now opened. The city informed all parties that a new owner would have to pay a $4,000 + back assessment because it was supposed to have been hooked up to the city sewer several years ago. Nowhere was such an amount listed, and it certainly wasn’t listed as a lien on the property. Aaarghh! Not only that, the old septic system would have to be decommissioned and the new sewer line connected, to the tune of several thousand dollars more.
At this point she had a decision to make. She could get out of the sale because of this new development. The inspection showed a number of flaws in the house, and any potential repairs raised the amount she would be investing. But it was still a “good buy”, right? The words “as is” are part of every sale of this kind. There seemed to be no recourse to get out of installing the sewer system, unfair as it was. The failure to disclose on the sewer assessment was galling, but the city seemed to hold the cards in the matter, as the bank would not approve the sale unless the work was done.So, long story short, she decided to go for it, and see if there was some way to recoup the loss through small claims against whichever entity was responsible.
One last insult to injury had to do with the furnace. The owner said that it would go on and off and he didn’t know why. So Jonelle had a gas furnace specialist come out and inspect/fix the furnace. To her horror she was told that the furnace had not been serviced in years, and that the filters hadn’t been changed regularly, resulting in a burned out motor and a cost of $l,000 for a new one.
So now she is a bona fide homeowner with all the perks and problems that are involved. Along with the pride of ownership comes unexpected and additional costs not found in apartments – utilities, repairs, yard expenses, and the like. She said it felt like a bottomless money pit. “Yup, that’s what having a home is all about!” said I, a seasoned owner of a house, a cabin, a rental home, and two prior rentals that lost money because of the recent recession.
I think, though, that she will do just fine. She has dealt with every obstacle with inside trepidation and and an outside calm demeanor. She got a good enough deal, even with all the financial angst, that she will probably do well even if the future economic picture looks bleak.
If you are thinking of pursuing a path like hers, here are some things to think about.
1. Read up on short sales and bank foreclosure comparisons. There are many good sites, but an excellent one put out by Twin Cities Real Estate has a one page comparison of traditional short sale and foreclosed/bank owned properties.
2. Find an agent who will take as much time with you as Jonelle’s agent, Kathy, did. They went out night after night and many weekends for months on end. Bless you, Kathy. Both Kathy and Cheryl advised Jonelle and held her hand throughout.
3. Get pre-approved. Jonelle went with Sterling Savings Bank and her loan officer was Barb Huber-Read. Barb is kind, helpful and went the “extra mile” in spite of the crunch at the end caused in part by unexpected and heavy snow and a Fed Ex truck that was late because of icy road conditions.
4. On short sales determine if there is more than one primary lien holder. This can slow down the process.
5. If you are lucky enough to live in Seattle you can go to Seattle Short Sales for possible assistance.
6. If you need help with a sewer/septic system, we were truly fortunate to find Dustan Bunt, owner of Above Grade Septic. He responded quickly with a bid, was amazingly adept at what he does, and was able to handle a difficult problem concerning the depth of the sewer hook-up. I can’t say enough good things about him.
Finally, make sure you have a sense of humor and a healthy dose of patience. Finding someone who can do the leg work and field calls while you are stuck at your office desk is necessary. Also, have a big group of friends who have generally helpful natures. Lure them over with a promise of beer/wine and pizza. By this time it’s probably all you can afford. Good luck and God bless!