John Chaump

While talking to a potential buyer client, I asked if she would like to see Short Sale and Foreclosure properties. Her answer was not what I expected. She said she would not hesitate to buy a foreclosure but did not want to look as any short sales. When I asked her why, instead of the usual reasons (negotiating with lenders, waiting months for approvals, etc.), she told me she did not to want to be a "vulture." She believed that buying a short sale property would be taking advantage of a homeowner in financial distress.

I explained that rather than taking advantage, she would actually be helping the homeowner. Why? First, she would be rescuing the owner from foreclosure. If the owner is not able to sell the house before the bank forecloses, their credit will be destroyed for at least seven years. If their work requires a security clearance, like the military or government, their emplyment could be jeopardized. By selling short, the owners could buy another house in as little as two years. Second, the homeowner would be relieved of the burden and stress of not being able to fulfill his financial obligation. Putting this bad situation in their past is a huge relief for the distressed homeowner. They can now breathe easier and get a new start.

Also, the short sale buyer helps the lender because even though the lender would receive less than the amount that is owed to them, this expense is much less that going to foreclosure and having to sell the house themself. Lenders do not want to be homeowners. Maintaining the property is an additional expense. When the home is unoccupied for any length of time, the condition (and value) will deteriorate .

Last, the short sale buyer is helping the community. Unoccupied homes become a blight on a neighborhood and reduce the value of all the houses in the community.

Rather than taking advantage of a family in a financial crisis, the short sale buyer is the savior for the homeowner, the lender and the community. So go head, buy that short sale. You are getting a bargain and doing something that is very admirable.

Sad, Angry, Disgusted

Today a buyer sent me a request for more information on a property he saw on the internet. The house was described as a foreclosure. I searched for the property on the MLS and didn't find it listed. Next I went to public records. The property was purchased in 1954. The lot size is 150 ft x100 ft, the building over 1800 sq.ft. 4 bedrooms and 1.5 baths. Next, I scrolled down to the transaction history. In 2000 a loan for $30,000 was recorded; in 2003 an ARM Home Equity Loan for $70,000 due in 2043 was recorded; in 2005 ARM Home Equity for over $365,000 was recorded. On the Sheriff Sale website, the property is listed to be sold at sheriff auction on January 8, 2010. These are the facts. What follows are my suppositions.

When the house was bought in 1954, the buyers were probably in the mid-twenties, say 25 years old. When they took out the first loan in 2000, they would would have owned the home for 46 years and be about 70 years old. By the time they borrowed $365,000, they had to be in their mid-seventies. Now toward the end of their life, they are faced with being homeless.

I have never spoken to or met the homeowners. I do not know why they borrowed so much money using the home they lived in for over 50 years as collateral. I cannot believe an ethical mortgage broker would sell them an ARM at their age. Where would the money come from when rate adjusted and the payments increased? What was the purpose of the loan? Were the borrowers able to comprehend the consequences of this type of loan? Would a reverse mortgage be more appropriate? To borrow $365,000 the home would have to appraise for $456,000. This number seems very high for this neighborhood and for a home with 1.5 baths. Is this an example of predatory lending?

Sad, because elderly people are losing their home; angry, because they were taken advantage of; disgusted, because there are people in our industry who would stoop to this level to make a buck.