Last night I met with a David and his wife to discuss options for selling their house. They purchased their home at the height of Utah’s housing boom. It was August, 2006 when literally all you needed to qualify for your own piece of American Pie was a beating pulse and the desire to buy.
David’s sister had purchased a home in the newly developed subdivision just 7 month’s prior. She paid $247,000 for the 3,200 square foot 2-story.
She said, “What immediately motivated me to sign was that the same home was selling for $12,000 less just 30 days earlier. The builder told me that if I didn’t secure the purchase now, that next month’s price would be $259,000!”
By the time David and his wife had made the decision to buy, the price for the exact same home had sky-rocketed to $310,000. A 17% jump in just 7 months!
“At this pace we could buy the home, live in it for about 12 months and sell for nice profit, at least that’s what we thought at the time”
They obtained 100% financing using the infamous 80/20 interest-only loan.
“It was almost too good to be true. I couldn’t believe that we could own such a beautiful new home and not have to put any money down”
Now, two years later, David and his wife are struggling to make their payments. They’re only behind one month, but they fear that the $2,600 payment will just bury them if they continue.
“Work is slow and my hours have been cut” he stated.
Unfortunately, their home isn’t worth what they paid 2 years ago. Comparable properties in the neighborhood are selling for between $265,000-$285,000. Not to mention the fact that there are 4 homes for sale on his street already.
David’s options are limited. If he can’t continue making the mortgage payment, he will inevitably lose the house to the bank.
We discussed the possibility of doing a “short-sale”, a process where the bank might be willing to accept a pay-off which is less than what is currently owed on the note. If done properly, they might be able to avoid a foreclosure on their credit rating. However, it’s no walk in the park. The process can be lengthy and tedious. Especially at a time when banks are experiencing an overwhelming number of loan defaults. Nonetheless, it might be worth a try.
David and his wife don’t intend to make any more payments on their loan. They’re considering a short-sale but fear that if the home actually does sell, they’d have to move out right away. In addition, they realize that the foreclosure process could take upwards of 7-12 months to complete.
“If we just do nothing, at least we could save the monthly payment away until the bank forces us out…even if we just set aside $1,500 a month. At least that would help us get into a new place and still have some money in the bank”
David’s story may be unique to him but the theme is widespread. Many Utahns are finding themselves in similar situations and just dealing with it the best way they know how.
So you finally found the house you want. Maybe it’s not in the best condition but the location is perfect and the price is just unbelievable. The home has only been on the market for 3 days and the best part of all…..it’s a bank foreclosure!
“Going once! Going twice! … SOLD!” And that’s just what happened to 52 properties last night on the 23rd floor of the Wells Fargo Tower. A thunderous round of applause and cheers sounded after the gavel fell on the first property. And for good reason, many who came hoping to get a “steal” were excited to see the first property sell for a mere 55% of it’s estimated value. That’s right, the $950,000 custom rambler sold for only $520,000! This set the stage to be a bargain-filled evening for many.
