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On patience…

In late November, 2006, a guy saw one of my bandit signs and called my answering service regarding selling his house. This was the beginning of the sub-prime fiasco, and he got caught up early on. He lost his job and could not afford his payments. After meeting with him and his wife, I initiated a short sale with the bank.

A short sale, for those of you who don’t know anything about real estate investing, is when you offer the bank an amount much less than the outstanding balance owed. If you can prove to the bank that the house is worth substantially less than what’s owed (possibly because of neglect), and that the owners were in a hardship situation and could not meet their obligations, the bank may take the offer rather than initiate foreclosure and take ownership of the house.

Banks are in the money lending business, not the real estate business, plus they have to put an large amount of money in reserve for each house they take back; that’s money they can’t lend.

The practice of short selling is usually common with second mortgages when the first mortgage is foreclosing, because all junior liens are wiped out after the foreclosure. There is a big incentive for the holder of the second mortgage to settle (usually 10 cents on the dollar) so they get something- anything back. What’s great is that you automatically build equity into the deal, which is why you see “No equity, no problem” on all those bandit signs in your neighborhood.

The problem was, there was only one mortgage on the house, which makes it harder to deal with the bank. Sill, I went ahead because it looked like a good deal.

Now, keep in mind, the process usually takes a couple of months, three at the most. In the initial documentation from the bank, they even said it takes approximately 30 days.

Six months later, mid-May, I heard from the bank…”Sorry, your offer was too low”…crap…I re-ran my numbers and I figured I might be able to sweeten the offer. I did, by $10K (which should really have been $5K but I wanted to make the deal happen). When I made the offer to the bank, I asked them if it was going to take a long time for their response, they responded that they will fast-track the analysis.

Five months later (last week) they finally called me back. They are “conditionally” accepting my offer…yea! (conditionally :o)…

Now…a lot has happened in the last five months, including a penalty on an unpaid property tax bill, and of course that nasty little sub-prime business. So I am going back to the bank to negotiate another $5K off the price. Yes, I can afford the higher price, but it’s the principle of the matter – and I need to practice my negotiating skills.

So, the moral of this convoluted story, is that sometimes you just need a little patience…


2 Responses to “On patience…”

  1. 1

    Hi! My apologies for this not dealing with your post, just wanted to wish you the best in the lifestyle design world!

  2. 2

    No apologies necessary, and thanks for the well wishes!


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