I have a friend that has had a tough time over the last couple of years. She has gone through a horrible divorce, not received child support and finally this led to the decision to sell her home. Unfortunately this put her on the path to a horrible adventure in today’s real estate and mortgage market. Her story should serve as a cautionary tale for anyone who has been thinking that the way to save money is to buy a short sale or foreclosure.
The first challenge that she had was out of her control. She lives in a far west suburb of Chicago and through no fault of her own her property value dropped dramatically. Her entire subdivision was filled with homes that builders sold at too high a price to buyers with no down payment on suspect loans. Thus, she could not sell for what she bought for. She had to sell at a price similar to the foreclosures, though she was not yet distressed.
Because dozens of similar homes were on the market, there were not enough buyers. For months she tried to sell at a price that would let her pay her mortgage, but the foreclosures were cheaper than hers and the few that sold, were at lower prices than hers. So to sell she now became a short sale.
During the next few months, the reality of the pending divorce hit and the lack of child support made it impossible to keep up with the payments. This caused her to not only be a short sale, but a property in distress. Now several low ball offers came in but were rejected. Now the lender was breathing down her neck and reasonable buyers were nowhere to be found.
Finally in the spring of 2009 a reasonable offer was presented by a couple who loved the home. They appreciated that some of the maintenance had not been done in 2008 but felt that they wanted the home and it was in better shape than the foreclosures in the subdivision. The short sale package was prepared for the bank and then everyone waited. Then they waited some more. Then they called on the package and the lender said that the offer was not high enough. The sellers offered a few thousand dollars more, because they loved the house. The wait continued.
Finally after months of waiting, the lender came back and agreed to the price. However the buyers mortgage approval had expired. When they went to get it renewed, the appraisal of the property came in $20,000 less than it had nine months earlier. The buyers
