Short Sales in Coeur d'Alene ~ It was gonna take a MIRACLE, and he got one! Maybe...

As a Realtor actively working short sales in Coeur d'Alene, I am finding no shortage of interesting stories to write about. Here is my latest. Really, I couldn't make this stuff up! -

The Joy of Short Sales ~ It was gonna take a MIRACLE, and he got one! Maybe...

A couple of months ago I met a great guy in Coeur d'Alene who was in a pickle. He bought three homes new, as an investment, 3 years ago. A year or two ago, when the market started turning south, he decided to unload them. Got two sold, and one under a lease option for a year. He told me how those folks were getting ready to exercise their option. Were approved to buy, but the appraisal came in about $10K less than the option price, which was what the seller paid for the house, and still owed.

Seems the optionee, doing research, found not one, but TWO of the same model home on the same street listed as short sales for about $20K less than their option price and $10K less than the appraisal. They did what any smart buyer would do, and skipped on down the street into a different house. Even though it meant leaving their $5K deposit and the new fence they installed...

The seller was between a rock and a hard place. Couldn't qualify for a loan modification since it was investment property. Couldn't rent it out for enough to cover his high payments. Couldn't make up the difference each month because as a local small business owner, his sales are down 30% over last year and he's really struggling to stay afloat. What's a guy to do?

We discussed the short sale option at length. He asked me what would happen if, while it was listed for sale, he found someone who would lease option it instead. We discussed that at length, about how a year from now he would be in the same situation at best, probably worse, even more upside down than right now. Once those same models on the same street closed for several tens of thousands less than he owes on his home, the appraised value will drop even further. Still, he believes in miracles, and he wanted to try. I agreed to list the house, agreeing that he could continue on his own to try to find someone to lease option it for about 40% above market rent with an option to buy it for higher than it would appraise for. Knowing the odds of that were almost zero.

Think about it. Who in their right mind would put down a huge deposit to lease option a house for $192,000 that is currently listed for sale at $159,000? It would take a huge deposit because he was no longer able to make payments, and they would have to be caught up in order to avoid foreclosure and lease it out.

About a month after listing it, I received a short sale offer. It was low, and contingent, but from a great guy who contacted me from sign. My seller was relieved that something was happening. He lamented how he was receiving no calls from his CraigsList postings for lease/option. In the past his phone would ring off the hook. He made the decision to stop his attempts to lease the home.

The next week, someone found his old CraigsLIst posting and called. Over the course of the next few days I found the answer to my rhetorical question of Who in their right mind would put down a huge deposit to lease option a house for $192,000 that is currently listed for sale at $159,000?

The new optionee is a builder/contractor from out of the area who lost a bunch of homes to foreclosure and has trashed credit. He is starting over. His wife has a good job locally. They need a home, and they understand they are paying more than market value for this one, which they plan to eventually keep as a rental. They spent considerable time being questioned by the seller's lender. Numerous references were checked. They wrote a long term lease of 4 years, with payments high enough to cover the seller's payments. A huge deposit caught up the missed payments and brought the loan current.

(The purchase contract was cancelled. Here in Idaho, our short sale addendums give both the buyer and the seller the option to withdraw at any time prior to Third Party Lender approval.)

My guy got his miracle! Maybe. Or not. Only time will tell. I was on a criminal jury once, where the judge instructed us that we could find the defendant guilty beyond a reasonable doubt, while still being fully aware that it was possible to be mistaken. This reminds me of that. I will believe in this miracle, while being fully aware of how wrong things could possibly go with this deal over the next few years.