Printer-Friendly
Email this Story
Post a Comment (0)
Short sale of the 21st century: One couple's story
To hear former Culpeper resident Brian Rife tell it, when he and his wife, Michelle, fell behind on their home mortgage payments after Brian lost his job, the options before them were like a nightmare question on "Who Wants To Be A Millionaire?"
"Our options were a) either you find a job making more money, which wasn't really feasible, b) you could short sell, c) foreclose or D) deed in lieu," said Rife, 29.
Their final answer turned out to be "B", as they initiated a short sale through another B, local Re/Max Regency Realtor Beverly Herdman.
A short sale is a sales transaction in which the seller's mortage lender agrees to accept a payoff of less than the balance due on the loan, according to the National Association of Realtors Web site. Short sales appear on a seller's credit report as "pre-foreclosure in redemption," not "debt discharged due to foreclosure," and allow the lender to minimize its losses before the seller falls further behind on their debts and housing prices fall further downward.
In the Rifes' short sale, a buyer was found, and the house, which the couple had bought in the run-up to Halloween in 2006 for $389,990, was sold this past Dec. 19 for a frightfully low $275,000. The couple now lives in a 2,500-foot, three-story townhouse in Bristol, which they rent for $1,500 a month.
"It's a nice way to catch up on everything and save some money," said Brian Rife.
"I think that's the most important thing for people who are heading toward that process," Herdman said. "They didn't think anyone would rent to them because of their credit. But that not's true. Most of the people who are renting are in that situation too."
The financial trouble began when Brian was laid off from his job running an afterschool program in Centreville. Michelle, 28, still had her job as an office manager in Reston, and Brian was able to find another job that paid about half of his previous earnings, but the combined income of the couple had dipped to a low of $3,000. With a mortgage payment of $2,400 due monthly, plus monthly car payments of $650 and money spent on food, gas, credit card payments and various insurance policies, the Rifes were looking at roughly $4,000 in expenses each month.
Although the Rifes stayed current on their mortgage payments, they exhausted their savings, and that's when Herdman's knowlege of short sales entered the picture. "They were in my Web site looking at property in Prince William County and I had called them to see if there were any questions I could answer," said Herdman of the couple, who were living in the Pelham Reach area of Culpeper. "And Michelle said, 'I really don't know, because we don't where to go or what to do.' She was actually staying with her mom in Manassas instead of driving with the gas prices."
The couple met with Herdman, and the three decided to initiate a short sale. "We determined what the properties in the neighborhood were going for, got a list price, and once we got a contract, we submitted it to the Rifes' banks," said Herdman.
But that was just the beginning, as Herdman and the Rifes went through a negotiation process. "The banks will not even talk to you about a short sale -- they'll send you a packet that will list everything you need to conduct a short sale," Herdman said. "Once you get that in, the bank will order an appraisal from someone not affiliated with the transaction...and if they agree to the sale, they'll send us a letter saying they'll sell the home at this price and forgive the debt." Although total forgiveness of the debt does not always happen (it's up to the individual banks), the Rifes' debt was wiped out.
Herdman has only been doing short sales since January 2008. "Not knowing the ropes, my first one took a full year to negotiate," she said of a Warrenton property that was bought for $825,000 and short-sold for $475,000. "his is a new beast -- nobody was negotiating short sales before. Usually. they take 30 to 90 days, depending on different factors, like the number of banks involved." The Rifes' short sale, which involved two banks, took about two months, with a two-month wait before that for a buyer to come forth with a contract.
Herdman has done five short sales so far, and two others are about to close. "The relief that it's bringing to sellers is immense," she said. "The short sales been known to go so long that the buyers just give up and the property goes into foreclosure. You send them paperwork and the bank says they never received it, so you have to send it again and you end up losing time in the process.
Despite what he's been through, Brian says he and his wife may end up buying another house a few years down the line, although he understands that there will be more obstacles in their path. "The banks are so tight with their credit that there asking a certain amount of money as down payment. If the time comes that we have that money, that's great. If not, we'll keep saving."
You must be logged in to post a comment.