A couple of months ago I met with a family in foreclosure who, in addition to a medical hardship, simply didn't have the income to maintain ownership. Without income, they wouldn't qualify for an affordable loan workout, nor would they qualify for a Chapter 13 repayment plan. Without income... they would not be able to keep their home.
These folks had refinanced their home about 6 months earlier, paying off a substantial IRS lien, and a NJ Treasury lien. At the time of the refinance, they did not have the income needed to meet the loan payments, but agreed to the loan terms anyway.
I described both a best case, and worst case scenario for their dilemma. Best case was restored income, and a loan restructure in which the payments could be reduced or at least remain the same. Worst case was the continued decline in market value as foreclosure costs accumulated, the inability to refinance or sell, and the loss of the home to Sheriff's Sale.
They produced an appraisal prepared by a subprime lender used to justify a high LTV loan. The "puffed" appraisal was probably 130% of the actual value then resulting in almost 100% financing. "My business isn't doing well, and I'm looking for a job," the owner said as the foreclosure summons arrived.
Four or five months delinquent at $3,000 per month, plus foreclosure fees, these folks agreed to list their home for sale, and within two weeks received an offer. Although not coming close to the 'puffed' appraised value, it was a fair market value offer, and just enough to payoff their mortgage, closing costs, and a bit extra for moving expenses.
The offer sat for two or three weeks with no response from the sellers. {the sellers were holding onto the false hopes of 1) a higher offer, and 2) an affordable workout with their lender} But the market is dropping, their costs accumulating, and they are losing control. Soon, they will have no control. I've seen this scenario play out hundreds of times. Despite my warnings, despite their presumed understanding and appreciation of the circumstances, it is happening exactly as I've predicted. And it's deja vous all over again.
The good offer was withdrawn. Another offer came in, at a market adjusted price, considerably lower (about $20,000 less) than the first offer. Anticipated proceeds will not be enough to payoff the loan, and a preforeclosure short sale will be required if these folks are to be able to avoid Sheriff's Sale and sell their home to avoid EVICTION PROCEEDINGS.
The second offer sits. The sellers are in the quicksand I warned them about months earlier. They refuse to accept the reality which is there are no jobs to be had for them which will pay what they would need to qualify for bankruptcy, and their market is in a steady decline.
I sincerely hope they wake up and act to preserve their future creditworthiness.
;)
;)
