Monday, January 15, 2007

Chat du jour: please slow down folks

This friendly feline in the Dimond was later the unfortunate victim of a speeding vehicle.

Friday, January 12, 2007

A short sale is not discounted beach wear

. . . it is no day at the beach at all. I recently completed one and it was more like riding the roller coaster on the boardwalk.

A "short sale" or a "short pay sale" occurs when the proceeds from the sale of the property are insufficient to pay the seller's related indebtedness (mortgage or secured note). Selling the property results in a shortage of funds to pay the seller's obligations and costs of sale.

As a result, one of three things usually happens:

1. the seller has to make up the difference by using depositing cash from other assets in to the escrow account, or
2. the sale fails to go through and foreclosure may follow, or
3. the lender agrees to take less than the full value of their note.

In my client's case the short sale aspect came as a surprise . . . to me. One day I drove up to check on the house (it was vacant and unsold at the time) where I found a foreclosure notice taped to the front door. I knew that my clients were in some considerable financial distress due to huge medical bills, but I did not know how far they had fallen behind or that their adjustable loan was structured with negative amortization. Although their payment stayed the same, the principal amount due on their interest only loan increased each month as interest rates increased. The rising principal, delinquent payments, a variety of late fees and penalties, and decreasing values in the neighborhood made it impossible to sell the home at a profit. There will be more about this situation and similar problems in another post.

Don't get caught in a spiral of increasing debt if you are unable to make your mortgage payment. Sell the house while you can still either get something out of it or at least leave without the burden of a foreclosure, bad credit, and a legal judgment against you for the balance.