Why did I buy a house in 2006? Am I a complete and total idiot?

toro wrote:

So it looks like you got a short sale and didn't have to completely walk away.

How was the process?

Step 1) put the house on the market at your mortgage amount plus 6% for real estate commission. Don't worry about market value quite yet. Do this with a realtor that you're NOT RELATED TO. Just do this first step to prove to yourself that the house is indeed underwater. You'll also need to have done this in order to show the bank that you're a serious seller who is trying to honor the payoff of the mortgage.

Step 2) stop making mortgage payments, but keep paying taxes, HOA dues, special assessments, etc. You will get calls from the bank, roughly every other day, for a few weeks. They will eventually pass you to loan modification department and/or short sale department.

Step 3) Once you have the interest of the Short Sale department, they will ask you whether you've got the house on the market, for how much, and for how long. They might suggest you lower the asking price to closer to market value. Let your realtor figure out what market value is, and lower the asking price to about 5%-10% above current market price. The realtor should put "pending bank approval" on the MLS listing.

Step 4) Once you have a qualified buyer THAT YOU'RE NOT RELATED TO AND HAVE NO BUSINESS INTERESTS WITH, the Short Sale Department will tell you what to do next. You'll have to submit a hardship letter explaining why you cannot make mortgage payments, plus a full financial disclosure, plus bank statements, paystubs, tax returns, etc. You don't have to be in completely dire straits to get approved. I am not hurting that badly, but I got approved.

Step 5) Expect a lot of delays. The bank may be slow to respond, and your buyer had better be really, really interested in the purchase or he will have lots of opportunities to escape the contract. Luckily my buyer tolerated several months of bank delays and we closed successfully. The bank paid off property taxes, special assessment, broker commissions, and many of the closing costs.

Thanks for the summary.

Sounds like you have to be open with the bank and have a patient buyer.

Sure beats years of throwing money away.

Congrats on getting that off of your back.

I think your borrowing ability will bounce back given the special circumstances and the fact that you have the ability to pay back what you will borrow and your payment record outside of this is good.

This is a pretty nice, informative and now complete thread.

Yes, my advise is to be very blunt and very open with the buyer, too. Let the buyer know exactly what the situation is. If they run away in fear, then you didn't want that buyer anyway. This is like dating. Do not waste your time and efforts on buyers who are not serious, and without informing them of the difficulties of a short sale. Inform the buyer that whatever date you put in the purchase agreement, there will be a 99% chance that the bank will later request another two weeks, another two weeks, another two weeks, etc. Each time this happens, you will have to delay/change the closing date, which means you have to sign another addendum with the buyer. If the buyer is not committed, he can refuse to sign and he will get his earnest money back.

My buyer was perfect because he wasn't in a big hurry to close. He wasn't moving in...he was an cash-only investor. And he took over my lease agreement with my tenant. So the tenant wasn't inconvenienced by this whole thing. I feel really good about that aspect of it, too.

The following article made me think of this thread:

http://www.reuters.com/article/idUSTRE6BT3YI20101230

Former Treasury Secretary Henry Paulson just sold his home for over a one million dollar loss.

He bought it in 2006.

Complete idiot?

Well his net worth still stands at around $700 million.

But I guess he is still not as smart as some people on this thread.

yes

It's been 12 years. DO you still live in the house?