Good News - Bad News on the Short Sale Purchase

My misadventures in purchasing a condo in short sale goes on. Like life, there are ups and downs. And for every good news I get, it seems to have a twin of bad news.

Goods news - I was approved for a conventional loan. I locked in a 3.875% interest with 20% down and 2.125 points. The lock is good 'til 1/20/12 (or so).

Good news - The appraisal for the property came back at $365,000. My accepted offer was $342,500.

Bad news - I noticed a $3600 State tax lien on the condo in the preliminary title report. When I reviewed the 1st mortgagee's consent to short sale letter, it gave an allowance of up to $6,000 to satisfy any liens on the property. The consent letter specifically identified the HOA lien and and the 2nd mortgagee's lien but nothing about the State tax lien. I brought this to my agent's attention. Apparently, the Seller neglected to disclose the fact that she hadn't paid her state taxes on her HUD-1.

The Seller is now scrambling to get a partial lien release from the State. According to the State of California website:

A partial release of lien releases a state tax lien from a specific piece of property. However, the lien remains in effect and will encumber the transfer of title of any other properties owned or subsequently acquired by the taxpayer. Reasons to request a partial release of lien include a need to transfer the rights to the property when there are insufficient funds to fully satisfy the state tax lien or the party with the lien has no rights to title of the property.

As part of the request, the Seller requested that I forward the appraisal (that I paid for) to the Franchise Tax Board. I gave specific instructions to the escrow company that it is only authorized to release the appraisal to the FTB and not to anyone else.

Hopefully, when the FTB sees that the condo was appraised $83,000 less than what she owes, it will release the lien off the property. I am hoping that the State does not demand that I increase my offer to cover the lien.

Bad News - Due to the deadbeat Seller's failure to disclose her State tax delinquencies, I probably won't be able to close on this condo before the end of the year, much less before the 2nd mortgagee's consent expires on 1/15/2012. My locked interest rate will likely also expire and knowing my luck the rate will probably increase. Oh... did I forget to tell you that this Seller will get $3,000 bucks if this deal goes through? Yes, you read that right. This woman who took out a "Liar's Loan" and hasn't paid her taxes will get $3,000 from this sale. I'm really starting to resent this Seller and I will be pissed if I end up paying her State taxes.

Inspection Result of the Short Sale Condo

I had the short sale condominium inspected last week. As expected, the inspector found additional issues that require repairs. Many of the repairs are due to neglect and lack of maintenance by the Seller.

Before I go on to discuss the repair items, I learned something about the Seller that somewhat irritates me. The Seller purchased the home in 1997 for $180,000. In 1999, she was let go from her job that she had for 17 years. She was unemployed for 2 years until 2001. Her next employment only lasted 1 year. The Seller was then unemployed for another 3 years until 2005, where again, she was only able to maintain a job for 1 year. She's been essentially unemployed (or "self-employed") ever since.

In August 2006 (hopefully during the time she was gainfully employed), she refinanced her home to the tune of $375,000. In March 2007 (during her unemployment period), she took out a 2nd mortgage in the sum of $73,000, probably via a NINJA ("no-income, no-job application") loan.

I know I have no right to judge the Seller because I don't know her entire story. But considering that she's had a spotty employment history since 1999, I can't help but to think she was either greedy or irresponsible for refinancing, rather than selling her condo. Personally, if I wasn't confident about having a steady income to repay my mortgage, I would sell my condo. I certainly wouldn't take out a 2nd mortgage during a period of unemployment.

Had the Seller sold in 2006 or 2007, she could have easily sold for $483,000 - $508,000 and broken even or even made a small profit. The Seller instead chose to live off of borrowed money despite her unstable income. She spent $0 on maintaining the condo and it shows. Every repair item that I know I have to make due to "lack of maintenance," sticks in my craw. I guess it infuriates me because I should've asked for a bigger discount during the negotiation. *Sigh* Live and learn, I guess.

Oh... and did I tell you that the Seller is going to get rewarded with an additional $3,000 from the HAFA program? Oh righty. I'm finished ranting and raving.

Anyhow, here are some of the issues the inspector found:

• Broken garage door hardware;
• Corroded pipes underneath all of the sinks;
• Chipped kitchen sink and broken garbage disposal;
• Damaged fire door;
• Leaky bathroom faucet;
• Dirty and unmaintained air conditioning unit;
• Dirty and unmaintained heating unit;
• Unsealed platform at heating unit;
• Rusted and discolored burners at heating unit;
• Vent pipe at water heater stained;
• Various locations of drywall damage;
• Various locations of ceiling damage.
  

The inspector surmised that these repair items total about $2,000 or so, assuming I don't need to replace any of the major items like the AC or the furnace. Even assuming that those items need replacement, I can just choose not to turn on my AC and central heat. One of the benefits of living in a temperate climate like San Diego.

I'm a bit nervous now that I've underestimated what it would cost to make my unit "move-in" ready. I'm getting a dose of home ownership reality before I've even closed.

I'm Officially in Escrow - - Budgeting for The Expiration of the Payroll Tax Cuts

Good news: The second mortgagee, Wells Fargo, consented to the short sale on 11/30/2011. Although the first mortgagee, BofA, has not agreed to extend its consent that expired on 11/25, I'm told that this is common and that it will likely do so later. Once a bank consents to a short sale, it is highly unlikely to refuse an extension, especially when there's a willing buyer. Or so I'm told.

I guess this means we're now officially off to the races. I just paid $315 for an inspection and another $400 for the appraisal. I was hoping to close by the end of the year, but looks like the target closing date is 1/15/2012.

Bad news: Interest rates are inching up right now because the stock market is doing gangbusters for whatever reason. I managed to lock in an interest rate of 3.875% (2.125 discount points) for the next 50 days. Knowing my luck, the rates will subsequently dip. *shrug* I'm okay because I doubt it will go down by much. I'd rather have the peace of mind of knowing what my rates will be for budgeting purposes.

Speaking of budgets, I've estimated that my paycheck will be approximately $95 less per pay period. The reason is two-fold: (1) my out of pocket costs for health/dental/AD&D insurance is going up by about $15/paycheck, and (2) my pay will decrease by $80/paycheck if our moron Congress members fail to come to any consensus regarding the Social Security payroll tax cuts. I will be flabbergasted if Congress makes a decision one way or the other by 12/31/2011.

I personally don't like to see my pay go down approximately $200/month, but I can absorb it. After all, when the payroll tax cut was implemented, I decided to hoard it rather than spend it. I wasn't a very good citizen since I didn't use the tax cuts to stimulate the economy.

Do you think the Social Security payroll tax cut will be extended? If so, are you preparing for this possibility?

I'm Starting to Think Short Sales Aren't Worth The Hassle...

I finally got the Short Sale Consent letter from the first mortgagee (BoA). But it demands that the property be closed by 11/25. 11/25 is the Friday after Thanksgiving, not to mention only gives us 2 weeks to fund, douche-bags.

When I pointed this out to my genius real estate agent, she said the Seller's Agent will seek an extension of time. The only problem is, the Consent Letter clearly states that if an extension is sought, interest will accrue and either the Buyer or the Seller will be responsible for the interest. Uhhhh.... yeah. The deadbeat Seller is really going to have funds to pay the interest. Uh-huh. I'm not going to agree to pay interest on a loan that I had no involvement in taking out. Mea culpa -- If an extension is sought, the Consent Letter does not say that the Buyer or Seller would be responsible for the interest if an extension is requested. Only the Seller would be responsible. My real estate agent assured me that if the Seller can't come up with the money, the Short Sale Lender will eat it. Not so sure about that...

And here's another thing - - the Consent Letter states that it will give an allowance of $1485 to pay outstanding HOA fees. I previously inquired about outstanding HOA dues with my real estate agent and her response was a flip, "You're not responsible for it so don't worry." Ummmm... unless the HOA agreed to write off outstanding amounts in excess of $1485, I doubt it's going to give up its lien rights and the Seller won't be able to give marketable title. I again, requested my genius real estate agent to look into this.

Finally... the first installment of the real estate tax is due 12/12/11. If not paid by the due date, penalties will attach. Again... I doubt that the deadbeat Seller is going to have the funds to pay the penalty, much less the first installment.

I can't help but to feel that my real estate agent just wants me to sign to everything and get to the point of no return when they spring these "surprise" costs at me at closing. I have no faith that my agent has my best interest in mind.

I'm so over this stupid short sale.

Short Sale Whiplash - Update

My agent called me last Thursday to tell me that she got verbal confirmation that the Short Sale Lender approved the short sale at our offer price. My agent seemed excited but I was less than thrilled since: a) I was on a business trip and was tired and b) I don't believe it until I actually see the Short Sale Approval letter.

At the risk of sounding like a broken record -- what an idiot this Short Sale Lender is. Had they countered even slightly less than their original counter, I would have (probably) increased my offer slightly. Instead, they countered twice with a comp price that is (probably) no longer applicable in this market. Their arrogance sufficiently pissed me off to make me want to walk away from this property.

If this is how most Short Sale Lenders negotiate, I have little hope for the housing market and the economy rebounding any time soon. These banks won't be getting these defaulted properties off their books quickly enough and they won't be negotiating top dollar either. Ay, ay, ay...

Short Sale Whiplash -- Lender Reconsidering?

While I was in the old country placing my father's ashes into the family grave, I got word from my real estate agent that the short sale lender wants a "live signature" (as opposed to an electronic signature) on my offer of $342,500. I'm told the short sale lender will then submit the offer to an investor for final decision.

I re-submitted my written offer but I'm not holding my breath. Knowing these greedy idiots, they'll probably counter back at $375,000 for the third time.

You know what's funny? Had these idiots countered at, say, $360,000, rather than holding firm at $375,000, I would have seriously considered increasing my offer. Now, I'm more motivated than ever to stick to my line in the sand. I am not the desperate one at this party. I'm not the idiot that lent $450,000+ on a condo that's never been renovated since 1991.

Short Sale Fail...

The Short Sale Lender countered again. And they countered with $375,000 -- the same figure they countered with before. Stick a fork in me, I'm done. The Short Sale Lender is clearly telling me that $375,000 is its bottom line.

Seriously, BofA??? You want me to pay the same amount that someone else paid for another pristine unit? This unit has dingy carpet, old paint job and crappy appliances.

No thanks. I'm not going to bid against myself for a fixer upper. I'd rather pay more for a move-in ready unit. I'm walking.