The dull stuff

Buying a house takes a team of people and when you buy a short-sale property, it takes an army.

A short-sale is when a homeowner can’t make their mortgage payments and default on the loan, but is still “in title” on the property’s legal title of ownership. This is a sticky area; the bank technically owns the property, but the owner is still in the picture. Short-sales make people crazy in that it can take months and months to get approval for a contract only because everyone in the army has to evaluate the proposed contract.

Some definitions: A contract is an agreement between two parties, the seller (owner) of the property and the buyer. Sellers market their property, buyers are the people who want to take on the responsibility of the property that includes repairs, taxes, the neighbors, the homeowner’s association, etc. Contracts offers are submitted by the buyer, who “offers” a price for a property that may or may not be the same amount the seller wants or needs to get for the property. In this case, I’ve offered many thousands of dollars less than the owner originally paid for the property, about five years ago. Good for me, but bad for them; the IRS will count the difference between the price they paid and the price I pay as income. Read that sentence again and take it all in.

I came in at the right time, most of the wrangling that goes on when someone has defaulted on their mortgage is already passed. The bank has agreed to take less for the property, the bank that owns the second mortgage on the place has agreed to take less, and the owner walks away, or rather, limps away carrying an elephant on their back. The possibility of a mortgage for this person in the next decade is about nil and if they do get a mortgage, they will pay premium fees, and be ineligible for even a poor interest rate.

Some people swoop in on short-sales, and when I worked as an escrow officer for a major title company, I had files like this that sat in a cabinet and collected dust. I’ve even seen real estate agents have the owner quit-claim deed the property to the agent and the agent tries to negotiate a better deal. The victims of this illegal practice were usually women, desperate, single and poor.

Definition: Quit-claim deed is when a property is signed over to another person. Sounds easy, but the QCD doesn’t relieve the owner of the property of the mortgage, just the “ownership” of the property. I’ve QCD’s two properties I was involved with, one was when my ex QCD’s our home to me after the divorce (I’d already secured the mortgage) and again when I ended up with one of my aunt’s properties after she died and I gave it to her companion.

Until the paperwork is signed on closing day, the property is still in play. More on that AFTER I close.