Thursday, April 23, 2009

Can't Sell, But I Wanna Buy a 2nd Place

(sorry for the jumbled post. The copy and paste didn't work well)
Hi Frank
First, I have to tell you, your its great, after trying every free option available, and some paid for, I think this is the best for this area. Now to business. Me and my wife own (and live in) a townhouse that we bought in the worst possible moment, back in 2004,  

Frank reply> Only 2005 is worse. 

when the prices were close to > burst, it was stupid, but it seemd like a good idea at the time.

Frank reply> Kinda like now (based on yout email below)

We own more to the bank than the current value on the market.  > We both work full time. My wife works for a company and makes > XXk/year. I own my own company that I started back in 2008, > less than a year ago. I am the only employee. My total income as per the 2008 taxes is around > XXXk. We filed joined taxes for XXXk last year. This year it should be > better. My last salary for another company was XXXk/year.  
> We would like to buy a detached house in the coming months, now that the > market is down, seems like a good moment to buy, we do not want to sell the > townhouse for the same reason, and I am not even sure that we would be able > if we wanted to, we owe (~XX%) more than its worst.
> We called a loan officer that a friend recommended, she seemed really smart.
> She said that because we have no equity on the townhouse and are not selling > it, but buying a new one, and have no equity on it, we need to prove that we > can afford to pay both mortgages, which we think its still possible. But > then she said that because I have my own business, that business would have > to be in business for a year or two before I can use that income to apply > for FHA loan, and that the only option for us was a "sub prime" loan, which > does not sound too exiting.  > Is she right?? What would you recommend?  > thanks > Eric >

Frank reply> In my opinion, you are crazy. What you are proposing is SUPER risky. Ever been to Vegas? Lose $100 on the roulette table? What is the best way to win it back? DOUBLE DOWN. That is what you are trying to do. One is down, so you want to double down. What if things still go down more? You will be wiped out. Way to risky. If you sell your place and move UP and buy a bigger house, you will be ahead. Yes lose 10% or $30k on your sale, but on your purchase you also save 10%, but on a bigger home, that is $50k below. The total benefit is $20k ahead. If you can't sell, then rent. Rent your place and rent a bigger place. Even after taxes it is cheaper to rent, even in this market. And subprime. Don't even think about it. That is nuts. That extra 3% you get charged... no way. Yeah yeah , you plan to refi, but if the market goes down, you are stuck with a horrible high priced loan. I have a blog on subprime and how subprime people should never buy. But that is just my opinion. 
Sure you could make a killing with what you propose, but it is super high risk speculation.
Hope that helps.  

Friday, April 3, 2009

Short Sale Listing Agent needed. Can you help me?

Hello Frank,

I found your site through an internet search for seeking short sale real
estate agents in Alexandria.

In summary, I own a house that has an estimated value of about $400k
(maybe even less) but I owe about $450k (a little less actually) on it
through two loans (mortgage + line of credit), putting me $50k in the
red. I am not late on the loans, but I am under a lot of pressure to
sell it.

I was hoping, after seeing all my options, to secure a short sale. But
I'm not sure if the bank will agree to it because I pay so well. The
first bank is Suntrust (owe about $250k, pay $2000 a month), the
second is Countrywide (owe about $100k, pay $1000 a month).

The main reason I want to sell is because living in that house causes
emotional distress.

My dream scenario (that would at the same time be realistic)? Someone
would invest in the house by buying it for fair market value, but paying
off all my debt and then setting up a payment plan for me to repay back
the difference, perhaps at a rate higher than typical house loans.
Played out: Corporation X buys the house for what I owe ($450k) and then
makes out a loan that I have to pay back for the difference between what
was paid and FMV ($50k). My monthly payment goes down, or perhaps stays
the same (around $4000 a month) but then I pay back the loan in 24
months and then I'm done with the house, my credit worthiness intact,
in two years instead of 25 more. Furthermore, my debt is reduced from
$450k to $50k, paving the way for me to buy another property.

Can you help??


Hey Samuel,
Good brainstorming, but that dream will never happen.

But you are CLOSE! What may happen is you agree with your banks to pay them back part of all of the difference. So if it sells for $300k, and you sign a
promissory note for $50k difference, then you might have a shot.

I can help you, but what I can't do is do what I did with the last 2
emails like this, which is spend hours on it, and then the person just stops replying. So I need to know that this email wasn't copied and pasted to 5 agents.

I would also recommend a 3rd part short sale negotiation company that
knows EXACTLY how to make you look in front of the banks and they
might be able to cut that $50k note by 25-75%.

It all depends how much you have in savings and how distressed you really are financially.

But no, no investor in their right or wrong mind would agree to the
arrangement you proposed.