Short Sale FAIL

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barbies to the oven. burning man 2009After eight unsuccessful months trying to sell our Somersett McMansion for $525,000, we raised the price to $572,000. No, we’re not crazy. The bank is.

For those who may not know me, I started this blog in late 2005. I was also a Realtor, a top producer in my office even as the downturn began to take hold, thanks largely to the success of this forum.

But in January 2008, a full pipeline of possibilities dried up almost overnight when banks stopped lending.

Thanks to my compulsion for examining local sales data every month looking for truth rather than happy-talk, a commitment to considering dissenting opinions on my own blog from so-called naysayers, and a curiosity beyond our local market into larger macroeconomic issues… I recognized the wake-up call.

Real estate had hit an iceberg. Reno, Vegas and a bunch of boomtown cities in Florida, California and Arizona were the strike points. Intuitively, it felt like the Titanic. I happened to be on deck watching events unfold, I knew the ship was going down, and if I didn’t find a lifeboat, my family would drown.

As the primary breadwinner for my household at the time, I realized that unless I morphed into Short Sale/REO Listing Queen (not a good match for my skills, interest or sanity) more and more of my time would be wasted, spinning wheels on fruitless activity in a declining market where I’d be lucky to make minimum wage after scrambling night and day. This was not the life for me.

I sat the hubby down for a serious talk. He’s a high-level software development architect who never, ever found employment locally… his periodic consulting gigs and start-up opportunities were mostly Bay Area-based.

I said, look, this market is melting down. I can no longer support us. You need to get back into high tech full-time, even if it moves us to Timbuktu.

Of course our preference was for a telecommuting option that allowed us to stay, but it was more important that he maximize security with a steady job, good pay and full benefits if we were to survive these next few years. Otherwise, I could see it’d be a slow and painful descent into bankruptcy, foreclosure homelessness and destitution.

Real estate agents are independent contractors, not employees. There’s no 79-week unemployment check (or whatever the benefit is now) waiting for us at the end of the rainbow. If business dries up, we have to figure something else out.

We also work on contingency, meaning we work for free in hopes that your best interests lead to a deal that actually pay us for our efforts in the end. It takes a lot of faith, confidence and chutzpah to work like this, not to mention a sharp instinct as to the probability around what might work and what won’t. 

I could only see the odds getting worse.

After a lengthy job hunt, the hubby came through with a great offer from a big, stable, well-managed company working on something entirely new, but the job required that we move back to the Bay Area at our own expense. Telecommuting was not an option.

Since our house was worth significantly less than we owed, a short sale seemed like the right thing to do. We chose a short sale specialist as our Realtor, who informed us that to even get the bank to talk to us we had to be behind on our mortgage payments, so we stopped paying in May.

We listed the house for $545,000 and two weeks later got two offers at about the same time. Both were for around $500,000. We presented the least encumbered offer to the bank. The bank took 3-4 weeks to finally respond. They said they wanted more money. I think they were looking to net $525,000, which meant the price would need to be around $570,000 to cover expenses.

I wondered if they were getting their valuations from Zillow, whose algorithms think my house is worth far more than real people with money will actually pay. But no, an actual appraiser came out and told the bank who-knows-what.

The first buyer said no way and walked. The second buyer also walked. I’m sure they all laughed over dinner. So the house was back on the market in early summer.

We received a couple of other offers as the weeks wore on, but before the bank could respond the buyers withdrew. One because of last year’s earthquakes. The other gave no reason, they just spooked and ran.

By the end of the summer I was thinking this thing would never sell, and it would be Foreclosureville for sure. We formally requested a Deed in Lieu of Foreclosure in writing from the bank but never heard anything back, so I guess they weren’t interested in that option either. 

Then along came Miracle Cash Buyer, who also offered $500,000. And bonus, he could close in two weeks.

I knew this was as good as it gets. If the bank didn’t take this offer, it was game over. Prices would continue to fall, no one would ever offer anything more, and our beloved albatross was destined for the courthouse steps.

Every short sale offer entails a mountain of paperwork for the seller (not to mention the agents), which meant, for the third or fourth time, I had to update numerous forms, provide up-to-the-minute paystubs, financial statements, updated tax returns, hardship letters and other paperwork that had to be copied, faxed, emailed, signed, notarized and mailed with receipts so that we had a paper trail in case something got lost.

In the beginning you don’t mind because you naively think it will all work out, but as time goes on and you hit the bank reality wall of no or inexplicable response, you become ever more grumpy, cynical and less apt to respond as quickly because some large institution staffed by overworked, underpaid employees outsourced to India obviously doesn’t give a crap, why should we?

 I feel for the agents involved. They put up with so much BS from these giant bureaucracies in hopes of getting buyer, seller and behemoth, disinterested third-party together in hopes of maybe getting paid for their services, which they often don’t. I wonder how much longer their good faith will last.

As the bank sat on our paperwork, Miracle Cash Buyer ended up selling his primary residence more quickly than expected and asked if he could rent our house until the bank made a decision, because we all knew this could take forever. At least this way he could settle in and wouldn’t have to move twice.

We said sure. As we’re still on the hook for property taxes, special assessments, the HOA, maintenance, repairs, winterization and all the rest, it would help offset these expenses while the bank spent possibly months making up its collective mind.

But it turned out we couldn’t do this. Nevada Law considers renting your home while in default on your mortgage, fraud.

Okay, I get it. If we collect rent, banks should get all of it (market rent, by the way, would be only about half our mortgage payment anyway).

And yet, as banks dilly-dally around, not responding to live people who want to give them real cash to take losing assets off their books, we the people are still on the hook, waiting in limbo, racking up penalty fees, as they the banks get bailouts from Washington on the backs of us the taxpayers, now and for generations to come.

Oops, sorry, I digress…

After two months of waiting, the bank finally responded. And though five months had passed since the last offer in our steadily worsening market, not to mention moving squarely into the slower fall season, they came back with the same number. They needed to net $525,000.

Their negotiator I guess wasn’t interested in counter offers because she failed to return multiple phone calls from both agents. If Miracle Cash Buyer didn’t come up with their number in seven days then she would close the file, end of story.

Well, you can imagine the MCB’s response. So the house is up for sale again, this time at the bank’s price including all transaction costs, thus the $572,000 price tag.

Our esteemed lender, American Home Mortgage, was one of those high-flying superstars back in the day, and one of the first to succumb to bankruptcy in August 2007. American Home Mortgage Servicing is the servicing arm that collects payments and determines how they’ll work with troubled borrowers, if at all. Go ahead, click on the link and scroll down to the customer comments… that’s the best part.

I’m sure that AHMSI won’t take less than $525,000 because it’s more profitable to foreclose on my house and stick it to the investors who bought my sliced, diced, and tranched-to-the-max Alt-A loan with all the extra fees they can legitimately charge per the terms of their contract. I understand. They’re a business, they survive on profit.

They don’t care about helping underwater homeowners or investors who bought their bankrupt parent company’s crappy loans by liquidating the underlying asset now, while it’s still worth something, as opposed to next year when it’s abandoned, run-down and worth far less to everybody in the transaction and the community. AHMSI doesn’t care because there’s no money in it for them, totally understandable.

So think about that. The real reason lenders rarely cooperate with short sales and generally prefer foreclosures is because they make more money with foreclosures. Read this report from National Consumer Law which explains everything in excruciating detail.

Lots of people get all wrapped-up in morality issues with their mortgages, but really, it’s a legal contract with ramifications for non-performance. Due to economic circumstances beyond our control, we were no longer able to perform on our contract, so we accept the penalties per the agreement. The credit hit on our formerly pristine scores is a painful but acceptable loss.

We will not be able to borrow money to buy a home for years to come, fine. I never want to borrow another cent as long as I live anyway, so who cares. Lesson learned. If I don’t have the cash to pay for something, then WOW, maybe I shouldn’t buy it. 

When you strip away emotion, it’s a simple business decision, a rational choice, much like the commercial property owners who choose not to pay on their obligations to force a workout, or my very own bank that chooses not to cooperate in a short sale for less than a certain amount.

I am not too big to fail. In fact, I prefer to accept my failures immediately, sort them out pronto, take my penalties and move on. Sometimes it’s better to puke it all out.

Right before Thanksgiving, AHMSI finally recorded our Notice of Default, almost three months late. Okay, at least we’re moving forward.

But given what’s going on in our country, I can’t help but wonder… does this former superstar bank and/or its assigns still have my original note?  They no-doubt tossed my vintage 2006 loan into the MERS paper processor to be sliced, diced, tranched and pooled into some amazing mortgage-backed security sold to big-name investment banks then resold to mystery investors worldwide in a cloak of confidentiality. But who REALLY owns my loan? Can they produce the note? And if not, do they have the legal right to foreclose?

Before Miracle Cash Buyer finally walked, we learned that our second, a HELOC, which was only about a third drawn down for the sole purpose of landscaping the backyard as required by the HOA (SNAP! I should have bought exotic vacations and a brand-new SUV) was unwilling to cooperate with a short sale because they noted on our financial statement that we had some modest retirement savings and a brokerage account set aside for our kids’ college education (both of which, by the way, are severely underfunded for their intended purposes, still working to build those). So even if MCB had miraculously come up to the bank’s number, our HELOC, originated with American Home Mortgage then quickly sold to GMAC soon after origination, would have refused to cooperate anyway.

(Hmm, GMAC, sounds familiar… Didn’t they just get another nice, big, fat-ass American taxpayer bailout?)

Yes, locking ourselves into the purchase of our shiny, new American dream home in 2004, then waiting a year and half for the developer to build it, was a bad financial move in hindsight. We did not see the train wreck coming. We planned to live there for at least 10 years until the kids went to college, but, you know, life has a way of throwing curve balls when least expected.

We lost $100K in real money on this house, which is 100% of our equity investment. I’m not counting mortgage payments, taxes, assessments, HOA, maintenance and the other costs/tax benefits of living there. I’m just counting cash into the deal, not refinanced out.

You might think that given we’ve lost 100% of our investment, the primary lender would be willing to write off 30% to get their 70% back now, before the market further deteriorates. And you might think the second, entirely junior to the first, would take 10% rather than nothing. After all, as I understood it, these were loans were secured against the property as collateral. These were not personally guaranteed loans, an entirely different contractual animal.

But, these are the banks’ business decisions to make, so I must accept them. We’ve tried to do the responsible thing to bring the matter to resolution. If they don’t want to play, so be it.

I guess our next best option, since the primary has refused to accept three good offers in more than half a year’s time, and since the secondary doesn’t see any reason to cooperate, is to request mediation through the new State of Nevada Foreclosure Mediation Program. Part of the process requires that the lender actually show up with the original or a certified copy of the deed of trust, the mortgage note, and each assignment of the deed of trust and mortgage note, with the goal being some resolution other than foreclosure. I’ll keep you posted on how it all goes, but thanks in advance to local lawmakers for even organizing this option… I’m glad someone still cares about the individual taxpayer.

I was taught in the fourth grade that we have three branches of government, each designed to balance and check the other. Unfortunately at the federal level, it seems that the Legislative and Executive Branches of our government have been bought and paid for by big business, lobbyists and other special interests. Maybe the Judicial Branch, that one place still seemingly beyond buyouts, bullshit and bailouts, can stand up for the American people and bring back the integrity of our Constitution.

I voted for change, but I see no change. I fear that we as a country have gone so far astray, only a total and complete economic collapse ala Soviet style will flush the system and allow the reboot that we so desperately need.

Regardless of how my personal situation ends up, however, this blog has saved me, and I can’t thank each and every contributor enough for their insightful conversation over the years. You taught me to question assumption and to see through faulty mental models. You opened my eyes to subtle economic realities churning beneath the surface, pointing out causes that would lead to unimaginable effects, which we are only now beginning to see today. You gave me the gift of insight.

Thanks to you, I now recognize the voice of truth.

Nobody wants to admit that our country is bankrupt, that government spending is out of control, that our debt to foreigners is so large as to be incomprehensible, that we as a nation are losing influence worldwide, that the value of your dollar is dropping rapidly and will continue to drop more and more precipitously as the government prints more money to pay for programs we can’t afford to keep the voters happy so that the politicians will be re-elected regardless of long-term consequences. Nobody wants to admit that an elite oligarchy of government and corporate insiders are robbing the American people blind.

But I say this… The emperor has no clothes.

The decline of the American Empire has begun. You can deny it, mock it, ignore it and eventually go down with the ship, or you can accept reality, make a plan, and do your best to survive and maybe even prosper through the challenges ahead. As we enter the Fourth Turning, I hope you choose to prepare.

As for me, all I want is closure.
Just give me what I lawfully deserve, and I’ll be on my way.

 

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86 Responses to Short Sale FAIL

  1. smarten says:

    John Newel states, “in the case of mortgage lending, two years after a BK discharge, debtors are eligible for mortgage loans on the same terms as other applicants with the same financial profile who have not filed for BK. This protection is not available for someone who just did not pay their bills.”

    I’ve never heard of this before John. Is there some mortgage lending regulation you’re aware of that mandates the two sets of borrowers [the one who hasn't filed BK and the other who has] be treated identically more than two years after the latter has filed BK?

    If so, it makes me really question those pushing short sales who typically assert the mortgagors’ credit isn’t as adversely affected as the one the subject of a foreclosure sale.

    TD –

    What you describe are two formerly secured creditors who chose to waive their security [presumably for cents on the dollar], yet NOT release their debtors from liability. Thus as you describe, the indebtedness survives. And let’s assume that liability is turned over to an agency for collection. You realize, don’t you, that collection agencies do more than “hound?” Oftentimes when houding is unsuccessful they resort to…litigation!

    Thus IMO, any RE agent that would counsel his/her client to short sell without securing a release of liability or written acknowledgment of the potential adverse consequences, commits malpractice.

    And another question that has entered my mind. When a RE agent counsels a client as to the benefits of a short sale/negotiates with secured creditors to extinguish their mortgages [with or without extinguishing the underlying obligation(s)], is he/she now practicing law without a license?

  2. TD says:

    Smarten – Thanks for your input and I also agree with your assessment of RE agents counseling on things outside their scope of expertise.

    I personally do not think the banks will simply let all these deficiencies disappear. While the senior lien may only have 6 months from Trustee sale to file for deficiency that is not true for the junior lien holders (or so I’m told). If those junior lien holders now have 6 years to file for a deficiency judgment, due to breach of contract, I can’t imagine those lien holders would simply move onto other things without a serious look at this potential income source. Assuming things are better 5 years from now for the average Joe it would make sense for these banks to come back and squeeze every nickel possible. IMO of course.

  3. John Newell says:

    Smarten,

    I left out a small (but important) piece of information — the above reg applies to FHA and VA loans. At the height of the bubble, many private lenders followed the FHA reg as a matter of policy, but this may not be the case now. Thanks for catching that.

    As for unauthorized practice of law, my observation is that some REALTORS and brokers stray into giving legal advice rather frequently. There is, as I am sure you are aware, a fine line between legal information and legal advice (and NRS Chapter 7 does not define that line in Nevada). If the REALTOR is merely informing the client of Nevada law and what could happen in a hypothetical situation, then it may be merely legal information. If the REALTOR is advising the client how the law applies to the client’s particular facts, I would consider that legal advice (and I believe that the NV Bar would as well).

    I am less concerned about the negotiations with the creditor on behalf of the client, as an agent or an attorney in fact may negotiate financial agreements on behalf of the principal without such negotiating constituting the practice of law; however, if a REALTOR acting as an agent or an attorney in fact advises the client as to the situation specific legal ramifications of the negotiated settlement, then that likely would be the unauthorized practice of law. Personally, I believe that it is a violation of a real estate agent’s fiduciary duty if the real estate agent does not advise his/her client to consult an attorney regarding the possible legal ramifications of a short sale or a deed in lieu transaction.

  4. inclinejj says:

    John Newel states, “in the case of mortgage lending, two years after a BK discharge, debtors are eligible for mortgage loans on the same terms as other applicants with the same financial profile who have not filed for BK. This protection is not available for someone who just did not pay their bills.”

    I’ve never heard of this before John. Is there some mortgage lending regulation you’re aware of that mandates the two sets of borrowers [the one who hasn’t filed BK and the other who has] be treated identically more than two years after the latter has filed BK?

    When I first started in the business it was a hard and fast rule..Bankruptcy you wait 7 years before you get another home loan. Lenders would always change this back and forth..I have personally got people a year after Bankruptcy. After most housing market crashes Fannie and Freddie would go back and look at the rules..

    The main thing is. 2 years after a bankruptcy you must have 100% clean credit..If you had one late payment after a bankruptcy you where toast..

  5. smarten says:

    I agree TD.

    But remember. When your friend’s first and second mortgagees agreed to the short sale, it eliminated the possibility of a foreclosure sale. As we’ve discussed on this blog before, without a foreclosure sale, there can be no deficiency action nor judgment. So you’re right; instead of the potential for a deficiency judgment, but ONLY within 6 months, there’s now the potential for a breach of contract judgment anytime within the next 6 years [so much for "closure"].

    Furthermore, it’s my understanding that in NV a deficiency judgment is limited to the difference between a property’s FMV [as opposed to the amount bid at trustee's sale] and the amount owed. But there’s no such limitation when we’re talking about a straight breach of contract action. So the potential cost to your friend could conceivably be even more!

    So again the question: why a short sale?

    I’m just curious if Diane’s “short sale specialist” realtor went over all of the ramifications of a successful “short sale” that we’re discussing here? My guess is no but I’d be interested in learning the answer [if you're still reading Diane].

  6. DonC says:

    Diane, I’m not a bankruptcy expert and I have no point of view on the issue of bankruptcy versus just walking. Seems to me that ultimately that is a personal decision. In any event, I hope and believe that whatever you choose to do will work out reasonably well.

    I do, however, have a point of view on the morality of the situation, which is that it shouldn’t be an issue. If XYZ corporation borrows money for its operations, and the economy or its business tanks and then can’t make payments on its debt or can’t roll over the debt, no one starts talking about morality. And no one sheds a lot of tears for the lenders which should have protected themselves better — with the possible exception of when the borrower is a car company and there are some political points to be scored. There is no reason why simply substituting “Don” for XYZ corporation should make any difference. And this should hold true whether you were responsible and just miscalculated or were irresponsible or were intending to flip. Doesn’t matter.

    The other aspect of this mess you’re hitting on is just how poorly the capital markets performed. You are absolutely correct in pointing out that lenders haven’t figured out that the services providers have different interests than they do. Duh, how long did it take them to figure this out? And this is just the tip of the iceberg. Some banks managed to “sell” up to a billion dollars of loans a month without even bothering to confirm that the loans existed. http://www.nytimes.com/2009/12/13/business/13gret.html?scp=2&sq=banking%20fraud&st=cse Lenders just did a miserable job of protecting themselves, or, for that matter, running their business with a modicum of competency, so it seems a stretch to expect even above average people to have exercised perfect judgment.

    So do what you need to do and don’t feel that you need to justify what is in your best interest. Take a page for Nike and “just do it”.

  7. inclinejj says:

    Diane

    First of all I wish you and your family well. You have to do what is best for you and your family first..

    Hopefully the lender comes to realize that the short sale is probably best for everyone..

    Good Luck

    Jim

  8. Phil says:

    Dianne,

    Thanks for the story. What bothers me is our leaders still wants us to borrow more. And lets not even talk about the government itself borrowing more and more. I see that they have learned nothing from the past.

    One thing this mess has taught me is to save. No one will get me to stimulate the economy until I see some fiscal responsibility from the leaders.

    Best wishes to your family this holiday season.

  9. CommercialLender says:

    Diane,
    Great write up and thank you for the guts to post it to us all. I empathize with your family’s pain, and I have learned from your example.

    I guess I just don’t understand, but why did you, knowing what you did at the time that values were plummeting and that the short sale process was long at best and massively inefficient, not just up and move early on? Why bother trying to protect an extra $25K of the bank’s money while making yourself miserable in the meantime? I think that’s a real key learning for us all here is that if you are faced with a short sale or eventually foreclosure, getting out from under it sooner rather than later is better. The hindsight reasons to embark on your entire excercise seem limited to a) the bank would not come after you for a deficiency (we are told this risk is non-existent in practice), b) you might find the lucky buyer willing to overpay (which does not matter, as the entirety of the proceeds in your case go to the bank anyway, c) getting a few months of free mortgage payments despite the hit to your credit, d) the goodness of your heart trying to get the most return to your creditor.

    I just don’t get, please anyone help me, why one wouldn’t just walk away sooner and skip the entire short-sale process, given the littany of stories just like Diane’s. Moral hazards/responsibilities aside of which we’ve discussed at length here, if you know you have insufficient savings or current income to ride it out and no appreciable hope of a successful short sale, then is it not best to file BK or walk away as soon as possible rather than embark on a months or year long process?

  10. bob_c says:

    decent people use bankrupcy as a last resort
    (and from what i’ve read in this case it is
    warranted)

    i had posted earlier that the 2 year process to get to bankrupcy (or other) and the three years after to heal is what a decent person endures when faced with this monumental event

    i don’t consider having ice in your veins as a virtue

    let the healing process begin and best of luck diane

  11. Gina says:

    Thank you Diane. You do have chutzpah, and you will get through this and to the next stage of your life sooner than you can imagine right now.

    I don’t agree with your bleak outlook on the state of the nation, however:

    “I have heard people rant and rave and bellow
    That we’re done and we might as well be dead,
    But I’m only a cockeyed optimist
    And I can’t get it into my head”

    And for you:

    “When the demon is at your door
    In the morning it won’t be there no more
    Any major dude will tell you”

  12. tow says:

    good job on COMPLETELY missing y point smarten. Anyways, I hope you and your wife enjoy your house for a LONG time. I know for a Fact that My wife and I will enjoy our condo for the foreseeable future.

    I could of bought a house in reno OR Iv for $900k cash.. but I opted to have money so that I could retire in 10 years at age 38.
    Pretty sure we can both live comfortably off $1.5 million in our cute little condo ;)

  13. Robb says:

    Diane,

    I fully understand and feel the pain of your situation. I am carrying two mortgages on a home in Sparks that far exceed the current value of the home. I have had to take a job in a different city in order to make ends meet.

    You are correct in many of your comments and this is an ugly mess. One comment I would like to put forth however is that you are correct that this is a legal contract and you agreed to the contract. Had the price of homes continued to rise, you would have been happy to sell the house and take the profit. You knew the risk of the transaction as did the bank when they made the loans. It is now your responsibility to pay your contract as you lost in the transaction and you are not happy about it nor am I in having to pay mine. But we must realize that this is the gamble that we took.

    We still have the choices to make. We can continue to make the payments and wait out the market and hopefully someday make a profit. The lender would only get their agreed upon interest rate not the profit. So why should they get the loss? Did we not agree and promise to pay the loan amount. We did not promise to pay only if the value of the house remained about the loan amount or if kept our jobs or if we made money on the house or if whatever. We promised to pay. If the lender decides to foreclose, and many times it is driven by the legal documents more than a logical decision, then they take on the risk of further market decline or potentially market gains if they hold the property until such corrections occur, if ever. That will be their risk.

    Or we can choose to sell the house and pay the lender what we agreed to apy them and take the loss. Again we took the gains for many years and now we have to take the losses. You can choose to take it sooner than later if you think the market is going to coninue down or you can wait for it to recover.

    For me it meant living in a very small home with my in-laws after and two grown children to reduce my over head. It meant changing my spending habits. It meant keeping the mortgage current so that I could rent the house, even though it is not enough to cover the existing mortgages, it helps to cover the rent of the new home. But this is a personal choice. But it was not the bank’s fault that I chose to build a home in Sparks Nevada in 2004. They did nothing more than agree to the contractual terms that I made with them. They honored their part of the deal.

    They did not agree to take on the market risk. If they had, the terms of the deal would have been significantly different at that time. I got the potential upside and I got the risk of the downside. I owe them the money because i made teh promise to pay…no matter what. I can take the outs that you and others have talked about including bankruptcy and short sales or just walking away. It is a business and personal decision.

    But for our country to really flush itself out and to get back to what makes us great, we all need to take personal responsibility for our actions and not blame others for our situations. We are all real happy and more than ready to accept the results when they work out in our favor, now it is time to show our true character and do the same when they are not in our favor.

    Sorry to be a dessenter and I do understand and feel the pain of your situation. I know that you would pay if you could pay. NAd How the bank is hanbdling the short sale may not make sense. But it is their decision to make. They should not be in a loss position as you promised to pay them.

    Think about it. If everyone that promised to pay had paid, we would not be in the position we are becasue there would not be the foreclosure meltdown that we are in. Yes the lenders made loans to people that did not qualify on terms that did not make sense. But we all knew it and we all were ok with it because we were all making money. The builders, the homeowners, the realtors, and everyone else for that matter wer emaking money and we looked the other way so long as it worked. Well when it came undone, we all want to balme someone else, the bad bankers or whomever. Well we should have all said no way and not taken the profits back then as we knew it was not going to last. We knew about the house fliippers who were making too much money but did we do it anyway. You bet. Now we pay.

    I congratulate you on your position about future debt. If we all take this approach then we wont need banks will we. If we only spend what we can afford then we will not have a huge debt and we will not have foreclosures. But I may also argue that this is causing the current economic recesion as well. AS people stopped spending, the economy slowed. Remember I just said we all benefitted from all the home sales and growth etc. It supported the economy.

    If we use less debt and have higher savings the economic recovery will be very slow, but I contend will be real and sustainable. And if we can get our government to not borrow any money, well then we would really have something to cheer about.

    Anyway, good look and I wish you only the very best.

  14. saved by this blog...thanks says:

    I was about to pull the trigger on one of the model homes in Somersett. I was planning on relocating from LA. Made a point to visit Somersett a few times checking out the neighborhood. Everytime I went there I kept asking myself the same question. WHERE IS EVERYONE? No people walking around, no kids playing (or spray painting as they tend to do here in LA), no cars driving. It was like the fake town they set up before they explode a nuclear device. Once I got home I searched online and eventually stumbled onto this blog. The posts on this blog reinforced my initial hesitation. Where was the bottom? I decided to wait. Thank goodness I did. Actually thank you guys, all of you.

  15. Sully says:

    BTW saved: you won’t generally see many people out, unlike California, that’s the first thing I noticed when I moved here and nothing has changed.

    Every neighborhood you drive through looks like a ghost town, especially if they park in the garage!

  16. saved by this blog...thanks says:

    Here’s a relevant article in today’s WSJ:

    http://online.wsj.com/article/SB126100260600594531.html

  17. billddrummer says:

    to save & Sully,

    I think it’s because Reno families like to stay either indoors or in their backyards.

    I had a next door neighbor that I didn’t see from the day they moved in to the day they moved away, about 3 years later. I know they were in the house because I heard the garage open and shut, but no block parties, over the fence chatting, or anything else that would suggest a sense of ‘community.’

    Now that I rent, I know all my neighbors. And that’s not a bad thing.

  18. Irv says:

    Too much ice-cold wind in Reno to spend much time in the yard.

  19. arfbiz says:

    Diane- Thanks for sharing your experiences and am glad you are of the survivor mentality- Your message here was so powerful I felt it needed to be shared with a broader audience. I have posted your link and a short excerpt on the site TickerForum- perhaps others may be able to learn from your growth. Best Wishes.

    http://www.tickerforum.org/cgi-ticker/akcs-www?post=121963

  20. Here is ahttp://foreclosurenv.wordpress.com/2009/12/18/why-short-sales-will-end-the-las-vegas-real-estate-crises-in-2010/ an interesting article on the history of short sale principal reductions and mortgage litigation in Las Vegas.

  21. John says:

    J.R. Nyquist published a recent article titled ‘The Truth’ http://www.financialsense.com/stormwatch/geo/pastanalysis/2009/1218.html Full of great quotes one that seems a fitting reply to your recent post is this: The historian William Lecky said, “Truth is scattered far and wide in small portions among mankind, mingled in every system with the dross of error, grasped perfectly by no one, and only in some degree discovered by the careful comparison and collation of opposing systems.”

  22. longerwalk says:

    Diane,

    Best of luck to you & your family. Try to maintain a more positive attitude, or your children will grow up bitter. Only hope and the positive action that derives from that hope will save anyone.

    Robb’s post above has merit, though contracts have to made in good faith to survive. I regret that–as a whole–buyers stampeded to the cheap rates that large banks/mortgage brokers gave, rather than the more modest regional or local bankers. We suffer for our greed.

    The large banks did NOT make these contracts in full good faith–they were just in it for the business, the cash, the goods. The liar loans took two sides to create . . . and only one side it taking it in the shorts.

    I think Robb’s point, that something can be legal, but not ethical, is well taken, but it cuts both ways.

    Our government’s actions in shoring up things will only create more problems in the long run as those who were less responsible are rescued, while those who were temperate are ignored.

  23. Educated Guy says:

    Diane. Congratulations. You are now, officially, an entrepreneur. Welcome. We take you in, arms extended.

    Sure, it’s personal (very much so). However, let me give you these words of advice (however hard they will be to swallow?!?). Don’t let this event define your life.

    This exact scenario has happened before, right here in the US. Circa 1986 and nearly every farm owner (farmer) was upside down. It was such a big deal, that there were days when counties and states opened up everyone’s land for “highest bid takes”. In the case of a relative of mine, it happened at the Serviceman’s Club in Blooming Prairie, MN.

    Mediation is a good thing. You want to look POOR!!! Make sure, you look POOR (can I stress this sentence again? LOOK POOR!!! A lawyer will (either metaphorically or actually) put your assets and liabilities on a chalkboard and say “looks like there’s not enough to go around”.

    “And…I think, with her current salary, she can only afford a house worth $XXX,XXX.” (Husband’s job will, unfortunately, hurt you in this respect).

    Sure, this road can take many different paths, but once farmers who were well off saw the deals that were cut in mediation, well, let me just say that everyone wanted to mediate.

    Again, don’t let this define your life. Just dot your I’s and cross your T’s in a legal sense. Get back on your feet (I would STRONGLY suggest that you avoid bankruptcy, if you can – anyone who did this in the 80s lost everything and never returned). Hope for a good mediator. A somewhat crooked appraiser could help a bit (crooked in your favor).

    Anyway, put on your game face and enjoy the ride. Hope it all works out in your favor. Under the right circumstances, it could be the best thing that ever happens to you financially.

    ps – I pretty much agree with all your points you make above. Thanks for your candor.

  24. ursula says:

    Thanks for your story and for this blog, Diane!
    I always admired you for having this blog up and not deleting all the “reality” posts!

    We have all learned!

  25. ursula says:

    BTW, thanks for bringing up http://www.fourthturning.com

    I trust the Millenials more than fighting boomers.

  26. Vicki Simon says:

    Hello Diane-

    Great blog and what a smart well written saga you penned about your house. Where in the Bay Area are you relocated to? Do you still practice real estate? I also know Mike McGonagle from way back in my architecture days. Is he in NV or CA?

  27. CalBoomer says:

    I haven’t read the blog for a while. I had long since given up on Reno. I was very saddened to read about your travails. You are a good person and tried to do the right thing. The financial system makes me sick. Good luck to you and your family in the Bay Area.

  28. Pingback: Reno Realty Blog: Reno Real Estate, Market & Trends, Nevada » Loan mod runaround

  29. Diane Cohn says:

    UPDATE: It turns out we’re not eligible to participate in the Nevada Mediation Program as we no longer live in the house. I thought that maybe having a family member there might count, but it didn’t. So, it’s going to foreclosure for sure, just waiting for the Notice of Sale.

    Although I understand lenders haven’t traditionally gone after borrowers for the deficiency as is their right here in Nevada, as Bloomberg points out, this may be changing: http://www.bloomberg.com/apps/news?pid=20603037&sid=aIf_vUQZFt.s

    Can anyone recommend a good, local attorney with an outstanding grasp of foreclosure law? Thanks in advance…

  30. Azimuth T. Schwitters says:

    Diane,

    You may want to check out this blog to read up on short sale and deficiency issues:

    http://ameglegal.wordpress.com/2010/01/22/tgif-legal-tip-new-addendum-to-short-sale-listing/

    Bank’s suck. Nevada’s Legislature sucks. Best of luck.

    Cheers!

  31. inclinejj says:

    Diane

    Check your email….

  32. mat says:

    Diane, thank you for RRB and this post! If you haven’t already hooked up w/counsel, I recommend Judy Otto/775 827-6886. She’s a smart, experienced, no b.s. local real estate attorney. She won’t take you on if she can’t add value.

    Good luck, keep writing.

  33. skeptical says:

    Another wrinkle in this whole foreclosure mess, and a possible partial answer to the shadow inventory riddle:

    http://www.ritholtz.com/blog/2010/02/strategic-non-foreclosure-becomes-official-policy/

    Apparently, banks are officially not foreclosing on defaults for reasons previously discussed on this blog. Perhaps Diane could have just squatted, and would still be living in her Somersett home. Seems as if she has more integrity than that, though.

  34. as says:

    asdfffffffffffffffffdhhhhhhhhhhhhhh

  35. What a great post, I actually found it very thought provoking, thanks

    short sale specialist

  36. Sara Lee says:

    That is very important indeed. It is the people who do not take advantage of that who are the ones who normally do not succeed. If you stick with it and learn the ways, this industry can earn you a lot of money!! Good article, nice work .

    ~Sara~
    (G.O.R)

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