Tuesday, November 15, 2011

The Long and Short of a Short Sale

A couple of months ago I wrote about the challenges of moving my Mom out of her home of 50 years. Mom had such difficulty dealing with the emotional side of the move that she ultimately opted not to look for a new home until she was out of her old home.

After staying with a relative for a few weeks, Mom started to get tired of living out of boxes and suitcases. She longed for her own home. This caused her to get serious about her wants and needs.

Having looked seriously at homes in another part of town, Mom determined that it would be best for her to live close to the area where she had lived for decades. That's where her support system was.

Fortunately, this decision helped us focus on what was available in the target area. Mom looked at a number of homes. The more anxious she became for getting into her own home, the more she was willing to compromise away desires for some unnecessary features.

After getting somewhat serious about a home that was far larger than she needed, a home just a few houses away came on the market. It was a lovely, relatively new home in a planned community. While it lacked certain features, it looked to me and my siblings like the perfect place for Mom.

After considering the matter for a couple of weeks, Mom made a reasonable offer on the home, about 2.2% below the asking price. The one drawback was that it was a short sale. That is where the sale of the property will garner less than the outstanding loan balance and the owner cannot afford to pay the deficit. In essence, the lender agrees to take a loss on the loan.

In a short sale, the lender becomes the main party that has to be pleased. The property 'owner' may agree to the sale, but the deal only becomes binding when the lender agrees. The process of getting agreement from the lender can be long and painful.

However, the real estate agent handling Mom's offer was certified to handle what is known as distressed property transactions. She had been in contact with the lender and had priced the home according to her understanding of what the lender would accept.

Mom started to get antsy after a couple of weeks went by. We pestered the agent, who pestered the lender. (We were not permitted to know who the lender was.) After four long weeks, the lender made a counter offer of 3% MORE than the original asking price—more than 5% higher than Mom's offer. Moreover, the lender said that this was the final offer and that no counter offers would be entertained.

At first Mom was furious. She was ready to tell the agent that the deal was off. But I knew which other homes were available in the area. Certainly another acceptable home would eventually become available, but there was no telling when that would be. I also knew that even at the higher price, the home was still an acceptable value. It wasn't a super deal, but it was in line with market rates.

I urged Mom to put emotions aside and consider the value of the deal based on cold facts. She admitted that under those conditions the deal made sense. It was also the quickest way Mom would get into a new home. Mom's anxiousness to get into a new home outweighed her anger at the situation. Since Mom didn't need any financing to buy the home, the deal closed in rapid fashion.

We have spent the last few weeks moving Mom into her new home and reducing the amount of stuff in storage. Just changing her address with all of the places with which she does business has been quite a chore. Mom has given away a fair amount of furniture that won't fit in the new home. She has bought a few items of furniture.

And we still have two storage units that are full of stuff. Some of that may end up in the new home someday. But some of it will never go there. I'd like to say that we will eventually clear out the storage units, but Mom is still quite attached to some of the things that she won't end up bringing to her new home. We might have at least one storage unit for years to come.

This whole episode has been quite an adventure. And it continues to be so. But at least Mom is in a home that is better suited to her current condition. It's in a great neighborhood too. So it's not a perfect story. But it's pretty good.

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