Who Loves Short Shorts

It had been over a year since I had talked with Joe and Rita. I had met them at an Open House on RODNEY  in the PIEDMONT_NEIGHBORHOOD in Portland Oregon. I remembered that Rita was a type A personality backed by a Let’s get Going attitude. I also remember from last year that they had an abundant amount of enthusiasm but not much money. A year ago I had sent them to my lender  TAMMY_WITTREN of Northwest Mortgage. Tammy is very good at sitting people down, analyzing there problems and structuring a game plan for them to follow. A sort of road map to Real Estate Financial success.

As Rita began to speak I sensed that something was up. With a little prodding Rita began to unravel like a ball of yarn. Both Rita and Joe had been so impressed with the work done by one of my rehabbers a year ago that they became convinced that they could do the same. 

( Step 1) was to call Tammy . True to form Tammy quickly determined that they were not in a position to purchase. She gave them a game plan to follow and of course in their minds that was not acceptable as it would just take too long. So they went out on their own and found a FSBO to purchase.

They had been working on the FSBO for about 6 months when they out of the blue gave me a call. It sounded over the phone as if they were stuck on a solution to a plumbing question and wanted some advice and asked if I would come over and take a look. I agreed. 

When I arrived I was greeted with a Horrible sight. I tried to be positive but everything I seen indicated that they had bought a major Money Pit. Not the worst thing in the world, that of getting a little in over your head. However the Seller was now threatening  to foreclose on their contract of sale and he wasn’t interested in thier problems or solutions. He just wanted paid off and he wanted it now!

To further complicate matters for Joe and Rita they had put up their Cars and household possessions as collateral. I advised them to see an attorney as there was nothing that I could do for them. They were totally buried in this house and it still needed at least 60 days worth of work to get it in to a financible state.

A month went by and Joe called. After beating around the bush for a while he said that they had lost the house and their cars. The Seller had felt sorry for them and let them keep their personal possessions. Rita was too embarrassed to call but they wondered if I could come out to their home for a talk. It turns out that they had purchased a second FSBO just after they had bought the first Fixer. The Home was of course leveraged beyond belief and they were not even sure of the payoff amount.

They had borrowed from several family members enough money to buy the home from the bank using a no-income no-doc loan. Their theory was that they would pay off all of the family members after they refinanced. Big problem was the home needed a lot of work and they had not been making the full house payments. Just making enough to keep the bank at bay while they continued to poor more and more money into the other Money pit neglecting this home.

After arriving they took me though the home and we discussed potential market values. I left and returned the following evening armed with a full market analysis. A review indicated this house to be worth between $240,000 to $248,000 with 20 very relevant comps in the same subdivision and roughly the same condition.

After spending some more time on the comps I once again asked if they had those payoff figures from their lender that I had asked about. They did and it turns out that they owed a total amount of $270,000. Further more the payoff letter was accompanied by a foreclosure notice. I looked at them and asked if they new what a Short Sale was. They did not. It means Rita and Joe that you have no equity in this home at all. You will need to get permission from the lender to market the home at a sales price of less than you owe.

They finally got the message a few weeks later. I had presented the market analysis to the Lender along with a marketing plan. I listed the home and we were able to sell the home for $245,000. The bank forgave Rita and Joe the difference and let them walk. I wonder when I will here from them again and under what circumstance.

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