Attempting the Short Sale...

For the past two years -- ever since the housing market plummeted into uncharted territory, the buzz has all been about the "underwater mortgage" situation (meaning you owe the bank more than the home is worth). Many people were walking away from their homes, thereby foreclosing on it. Others attempted the "short sale" route. If you're not familiar with what that means exactly, it's basically a sale of your home for the current value, with approval by your bank to accept that as payoff versus what you owe. Short sales aren't easy, though. The process is very complicated, and often banks won't go for it. Plus in most cases if you aren't careful to make the mortgage payments up until the very end (and negotiate with the bank to ensure they don't list you in default), it could end up affecting your credit score. We decided just recently to take the plunge and try a short sale, and I thought I'd write about that here.

Now, I have to say that I've never agreed with the people who walked away from their home simply because they owe more than it's worth, or because they wanted to buy something else that was a better value in today's buyer's market. I've heard of those people -- they tend to not have any issues other than the fact that they don't like that their $300,000 home is now worth about $190,000. So they leave... foreclose... and take a hit on their credit -- but not before finding some way to buy another house first (usually with a spouse's credit, or using home equity loan money). I'm not one to judge, but that doesn't seem right to me. The same kind of people often use short sales to get out of their homes, which removes the burden of foreclosure and the bigger hit to their credit, but yet it still lowers the value of the homes in the neighborhood, since it's technically considered a sale. Bottom line is, they don't like that their home has depreciated, and they want out.

Our situation is a bit different. My husband has been unemployed since December. We live in Michigan, and there are virtually no jobs in this state. He has worked for the past 7 years in the construction industry, as a project manager/estimator for concrete work. So far, maybe one job a month pops up in his industry here in the SE Michigan area. Knowing that the construction industry was going to be bad, he decided a few months back to apply for a multitude of jobs -- everything from retail positions at places like Home Depot and Gander Mountain... to seasonal positions like a greenhouse manager and landscaping sales. The only things he hasn't applied for were hard labor positions, factory positions and restaurants. No joke -- he must've put out about 80 different applications and resumes. Do you know that nothing panned out for any of them? Not a one. He has heard from three people over the past four months -- one sent an email saying that they would call for an interview (but never did).... and the other two were "thanks, but no thanks" kind of emails.

So our options at this point are A) to move out of state and B) for him to go back to school. We chose option A because Randy just couldn't see going back to school and learning a whole new field when he's had so much schooling and experience in construction. Plus, chances are construction will be back on the upswing again in five years or so. But the big problem with moving out of state is one thing and one thing only: our condo.

Let me get personal with you here. He bought the condo before we were married for $114,000. Right now, we owe $98,500. Our last tax assessment we received from the city had our home valued at $43,000 and similar condos are selling in the $50,000 range. According to that data, we are about $50,000 underwater on our mortgage, meaning we owe about $50,000 more than it's worth right now. We have tried everything under the sun to get out: swapping, rent-to-own, negotiating with the bank -- all to no avail. We don't necessarily want to hold onto it and rent it out, because nothing is worse than being a landlord living out of state. Besides, what if it remains open and unrented for a while? We won't be able to afford two homes.

We just have no options. Randy's still putting out applications and resumes, with not a peep coming back to him. He's doing nothing wrong -- I've seen his resumes and cover letters, and they look great. He contacted one store in our area to find out if they received his application, and the guy said that they've received about 1,000 applications and stopped looking at them after the first 300.

We've just thrown up our hands over the whole thing. We're down to some very tough decisions here. Do we sit tight, stay put and spend the money and time for him to go back to school? He wasn't that excited over college the first time around, and EVERYONE here in the Detroit area is going back to school. In fact, rumor has it that many of the Detroit area community colleges are already maxed out for spring and summer registration. One career counselor even said, "Stay away from health-care and IT -- everyone is going into one of those two fields, and there's a waiting list."

Or, the other option would be for us to stay put and for Randy to continue to look for jobs. But so far he hasn't had much luck, and the unemployment rate in our state is around 15%. Here in the Detroit area it's even higher than that. Odds are, his unemployment will run out and he'll have to do something hard and menial, like working as a server in a restaurant or on a line in a factory. For someone who's almost 40 years old and who made $70,000 last year, that's a hard pill to swallow.

Finally, the only other option would be to find some way to get out of this condo. It would be too hard to sell it and still owe $50,0000 -- we just don't have that kind of money. We're not ready to walk away and foreclose, but we did decide to go the short sale route. We've hired a real estate lawyer and agent to help us with the process. It's not guaranteed -- the bank still has to agree to it. But it's a start. Living here in Michigan, you've got to do what makes sense, and right now it just does not make sense to stay here.

So for those of you in the same position facing the same issues, stay tuned. I'll continue to post updates on the process, and let you know exactly how each step goes and how it all ends up when it's all said and done. My hope and prayer is that we find a way to make this work, and the bank gives us the nod to go ahead with it. However, just because the bank agrees doesn't mean that there will be a buyer right away, either.

Do you know someone who has done a short sale, or have been in our situation? If so, I'd love to hear from you. Keep us in your prayers!

"In the middle of every difficulty lies opportunity."  ~Albert Einstein


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