Tuesday, July 22, 2008

The Homebuying Saga, Part II

Tuesday, July 15: I make my way to the credit union to fill out and sign additional paperwork for the mortgage application we already submitted two weeks ago. After a relatively clean blood-letting process, I go back to work. I call the Realtor who tells me she is drafting the contract and will fax it my way when she's finished. She tells me that she needs to have the contract signed within 48 hours so that she can fax said contract to the seller's lender. I question her on this point in a future conversation later in the day. It just sounded out of the ordinary to me. She assures me that "in this circumstance it is a common procedure." I ponder exactly what she might mean and brush it off. Whatever. We're going to sign a contract, right? Our parents and the company's retired lawyer also review the contract and put in their expertise.

Wednesday, July 16: After some changes are made to the contract, I make arrangements for Doug (still at school 100 miles away remember) to fax his signed copy of the contract to me and later to meet with the Realtor to sign the contract with her.

And this is the exact our American Dream begins to droop.

The Realtor tells me, "Now, I know you were questioning me as to why I needed to have the contract within a certain period of time. When you asked, I wasn't sure what I could legally disclose to you, but now I know for sure after speaking to the seller's lender. I just need you to know that this contract will be a short sell negotiation." My heart immediately sank. And then plunged when I found out that the first mortgage on the house is with Countrywide. I have listened to enough Clark Howard and Dave Ramsey to immediately know what we are up against. For those of you not interested in reading past the muckity muck on Wikipedia, here's our situation with completely fantasized numbers.

The seller owes $500,000 on her house, a first and second mortgage. Let's assume that in tip top shape, the house is also worth $500,000. (In all actuality, the house needs an estimated $5000 worth of paint, carpet, baseboards, and an outside plank). She is behind on her payments a few months. Behind enough that her lender, Countrywide, is threatening foreclosure. So, the seller (or the Realtor) asks Countrywide if they would let her out of the mortgage if she finds a buyer for the home (us!) in lieu of foreclosing on her and messing up her credit for many years. The problem is that no one will buy her house for the $500,000 that she owes on it. She's tried selling it for nearly a year on and off. There are people who will buy it for $450,000, though (us!). So, the seller is asking Countrywide if they take a $50,000 loss and pretty please not foreclose on her. Why would the bank agree to lose $50,000? Well, it costs an AVERAGE of $70,000 per house to take it through the foreclosure process. So, if the lender goes through foreclosure they will lose $70,000 and have a house on their hands that they aren't really able to take care of. Plus, the house usually just sits there, losing value, waiting for a buyer. If they accept our contract of $450,000, they will still lose $50,000. But it's out of their hands and a relatively clean transaction. In our case with our numbers, we know that they'll lose at least $10,000, but probably not more than $20,000.

Now, back to the saga.

Still Wednesday, July 16:

I meet the Realtor at 5:30 at her office and sign the contract. The seller hasn't signed the contract yet and I want a copy of it, so the seller is called into the office and signs. So, in an odd turn of events, I meet the seller before closing. Apparently, that doesn't happen a lot. And I figure that's because it could be a very awkward situation if we bickered on and on during contract negotiations. She's a very nice woman who wants to move back east. Maybe back to the Bronx or start anew in the Carolinas. She's very thankful and appreciative that we're getting her out of a mess. I could definitely see past the gentle smiles on this woman's face. She's extremely stressed and desperate. Thankfully, it wasn't awkward at all.

Contract signed, copies handed out. All is well...for tonight.

1 comment:

Amanda Z said...

Aaron met one of the sellers (the wife) during the home inspection, but I didn't meet either of them until closing. Good thing, probably-- the husband was a total asshole.