Buying again, 2 years after Short Sale – questions for you pros

[SellingMyHome]

[quote=bearishgurl]

I have few questions here for you … to gain a complete understanding of your then-situation …

1) What what the total amount forgiven in your (2010) “short sale?” Did you only have ONE lender at the time of closing your “short sale?”

ANSWER: $124,000, one lender

2) Did you purchase the “shorted” property in 2003 with one mortgage only or two mortgages?

ANSWER: One lender

3) What was the percentage of your downpayment in 2003?

ANSWER: 0%

4) Was your purchase-money mtg (orig 2003 mtg) a VA, FHA or conventional mtg?

ANSWER: Conventional

5) Was your “shorted” mtg a VA, FHA or conventional mtg?

ANSWER: Conventional

6) How many actual times did you refi this property? Do those times include the time you took out the $15K 2nd TD which you state you used for improvements to the property?

ANSWER: Twice, yes

7) What was your FICO score at the time you purchased the property you sold short?

ANSWER: Don’t know for sure, was really good then, 30 years old with 12 years credit history

8) Since you state your (current?) FICO score is in the “low 700’s,” what (fixed) rate and terms do you think you can expect to obtain today if you were to try to obtain another purchase-money mtg?

ANSWER:today, nothing, we still are only 18 months from the short sale, so don’t expect anything yet. I have heard three years after for FHA, unless we have 20% down.

9) What is your current price range for a new home?

ANSWER:$400-$500K

10) What type of mtg do you now hope to qualify for to purchase a property today (ie VA/FHA/Conv)?

ANSWER: FHA in 18 months (3 years after short)

11) What is the percentage of downpayment you now plan to use if you are able to purchase?

ANSWER: 3.5%

12) At the time you decided to “walk” on your old property, did you think that “Lakeside 92040” was somehow a bad place to raise a family or had “bad schools?” And, if so, if you planned on having kids when you bought the Lakeside property, why did you even buy there in the first place?

ANSWER: When getting ready to walk, we then thought our neighborhood and elementary school was not “good” enough. Bought the house in 2003 with no kids planned for about 5 years from then.

13) You state the house was too small. If you knew you were planning on raising a family there, then why didn’t you purchase something bigger (or use your “cash-out” equity to add more square footage)?

ANSWER: Didn’t plan on kids for 5 years, thought we would be making more income by then, plus have some equity to sell and move up. (Yep, I really, honestly, innocently thought that then!!!!)

14) What was the lot size of the property you sold short? If over 10K sf, do you think you can now afford to purchase a property with that size lot?

ANSWER: lot: 7,900 SF, house: 1,800. I would like more lot size (1/2 acre) and about 2,000 SF, but up here in Alpine now.

15) Hypothetically, had you NEVER refied and/or took “cash out” and kept making payments and DID NOT sell short, do you think you will still be underwater today? If so, by how much?

ANSWER: WAY underwater, from $435K to $301K = $134K

16) Are you aware that permits for “board and care” and “group homes” of every kind are obtained by owners in EVERY part of the SD County (even areas encumbered by HOAs) and in areas of ALL price levels?

ANSWER: Sure, but this was bad. My wife is a nurse, dad’s in a nursing home, Mom has Alzheimer’s; nothing against sick and elderly, not a fan of group home that was a normal home before, but was given a 10′ chain link fence around it…

17) In hindsight, if your FICO score dropped at least 150 points by selling short, do you now think it was “worth it” to do so, given the much tougher lending standards of today?

ANSWER: Well worth it. Initial hit did not hurt us. Now only about 100 points below, and still rising.

****************************************

SMH, it just seems a little odd to me that you should have been as “underwater” as you have stated from a 2003 purchase unless . . .

-you put little to nothing down when purchasing it;

ANSWER: Nothing down for 2003 purchase and subsequent refi’s.

-you paid far MORE for it than the nearby “sold comps” at the time you purchased;

ANSWER: Comps were good

-you had an interest rate above 7% on your purchase-money note (and possibly subsequent notes encumbered by 1st TDs) or were paying I/O on one or more mtgs encumbering this property;

-you repeatedly refied “cash out” along the way (whether thru refi, 2nd TD or HELOC);

ANSWER: Did Cash out and rolled in closing costs.

-you signed up for points and a lot of junk fees with each “refi”;

I understand you decided to exercise your legal right to walk away and that you are not alone.

If there is any more light you can shed on your “story,” it would be very instructive and informative for the Piggs.

And no, I didn’t post this to try to solicit biz…[/quote]

Hope my answers above helps. I may have been less than honest when posting in 2009, as I was still in the middle of trying to get the bank to approve short-sale. There was no reason to leave that house except it was no longer the house we wanted, and felt a bit screwed that it wasn’t worth the money we owed (even from the purchase price).

Some of the other posters think I am still short-sighted or have a lack of introspection. I was short-sighted in 2003, but not now. I did a lot of introspection in 2009, believe me. The short sell was the best option, I do not regret it.

I had hoped for modest price increases, enough to move-up in about 10 years. I never thought, nor still do, that housing should be a money maker. I have had some good laughs watching the death of the flipping shows on TV.

I don’t think strategic short sellers are having as much impact on the market and economy as some think. It was doomed badly when default swaps and such greed outgrew common sense.

I’m here asking questions again to see if and when I should buy again. Like I said, my wife and I both like the idea of owning our own home, she more than me. I like not worrying about house maintenance and repairs anymore, not looking forward to that. I’ve learned a lot from the pros around here, even those with brutally honest assessments. I do prefer those that at least try to pretend they aren’t judging me without knowing my whole story.

[SD Realtor]

I am sorry but I do not think the poster did anything wrong besides making a stupid decision to purchase a home near the top of a bubble. That was lunacy and the seller is a poster child for why we should not have 0 down loans, or for that matter FHA loans. Forcing buyers to come up with equity (in my opinion at least 20%) would lead to a much more stable market.

So given the first mistake that the buyer made, the way that the buyer dealt with the problem was perfect. Haters who want to blame the buyer should blame all of the other entities, including our govt for enabling the buyer. Blame the lender who originated the loan, blame the party that purchased the security, blame the ratings agency that took the security and probably gave it a triple A rating, and blame the govt for promoting all of this. If there was a simple 20% equity rule this person would have never been able to buy the home in the first place.

As for moving forward the problem I see is that nothing has changed. This buyer can still get into a home with a miniscule equity payment, is still going to count on appreciation, and is MUCH MORE ENTICED to enter the market now due to lower prices and lower rates. The probabilities of further market decline ON THE SURFACE seem much less then in 2003. However what happens if after a few years down the line interest rates spike and property values drop say another 20%? What will happen to this buyer and millions of others like him. Some will stay and some will walk again… As much as the haters want to blame them, they are working within the confines of the system that is established. Don’t hate the player hate the game.

It is also probably fair to assume that if someone has done something that is hard to do once, it becomes slightly easier to do later. That is, if the events warrant it, why not walk a second time.

I am not so sure that urging this person not to buy because there is a probability that they will walk again is valid. I think urging them to evaluate their finances and start to save money rather then living without savings is valid. Personally I wouldn’t do what they are doing with regards to buying a place but that is just me. To say that is enough but to project on them and say no you shouldn’t buy because the odds are that you will walk away is not really fair. If they buy and the market craps and they are throwing thousands on a turd asset then they SHOULD WALK AWAY and sell it short… again.

[scaredyclassic]

practically no one buys a house in calif. You get a longterm rental with an option to terminate the lease at any time, at which point you may walk away with your security deposit/down payment and any appreciation minus fees….or zero dollars, whichever is greater.

At the end of the really long term rental , as a bonus, if you live, you get to keep the dump.

Isn’t that what homeownership really is?

[SellingMyHome]

Yes, it is crazy that I will be able to buy again in 18 months with only 3.5% down. With two young kids, I want this to be our house for the next 20+ years. I will spend the next 18 months carefully weighing the decision to buy.

Do you think I am proud of short-selling? Nope, and don’t want to do it again. I may be the minority in my class, but maybe not. I have a feeling the banks will still be willing to lend to me, because besides the short sell, everything else looks good for us on paper.

[sdrealtor]

Your biggest issue is the strategic default. FHA may require you demonstrate a legitimate hardship caused your short sale. Definitely want to step up the savings as 3.5% may not be in the cards.

[scaredyclassic]

Buy The Tightwad Gazette for savings tips.

Worked for us

[(former)FormerSanDiegan]

[quote=walterwhite]practically no one buys a house in calif. You get a longterm rental with an option to terminate the lease at any time, at which point you may walk away with your security deposit/down payment and any appreciation minus fees….or zero dollars, whichever is greater.

At the end of the really long term rental , as a bonus, if you live, you get to keep the dump.

Isn’t that what homeownership really is?[/quote]

Exactly !

[Coronita]

[quote=SellingMyHome]Yes, it is crazy that I will be able to buy again in 18 months with only 3.5% down. With two young kids, I want this to be our house for the next 20+ years. I will spend the next 18 months carefully weighing the decision to buy.

Do you think I am proud of short-selling? Nope, and don’t want to do it again. I may be the minority in my class, but maybe not. I have a feeling the banks will still be willing to lend to me, because besides the short sell, everything else looks good for us on paper.[/quote]

I don’t care about whether you short sold or not…

The fact of the matter is you have 3.5% in savings for your next purchase is alarming at best…. You have two kids…Your expenses are not going anywhere but up….You do want you kids to go to college, right? You do want your kids to be able to go attend some outdoor activities, right? All these things add up..It might not right now, but as your kids get older, it will..

How much are you going to be really able to keep for yourself after all your liabilities, including this new purchase + your estimated child raising costs?? You do have an estimate of that, right? If you don’t , I think you need factor that in too..While walking away again would be a perfectly acceptible solution, decimating your already low savings is not…I think the bigger concern is you don’t want to end up being in a financial trainwreck 2.0 in the coming years….

It would be helpful to post a breakdown of your monthly expected expenses….Because people here could probably chime in on if you’re missing something or underestimating something….

1. Mortgage monthly =
2. Property tax/12 =
3. Insurance, Water,Electric, Garbage,Nature Gas monthly =
4. Telephone service monthly=
6. Internet service monthly=
7. Cell phone service monthly=
8. Cable TV service monthly=
9. Car payments monthly=
10 Auto insurance monthly=
11.Medical Insurance premiums/deductibles (annual)/12 =
12.Childcare expenses monthly=
13.Child doodad/spendings monthly=
14.Entertainment expenses monthly=

Add err up…!

[SellingMyHome]

[quote=flu][quote=SellingMyHome]Yes, it is crazy that I will be able to buy again in 18 months with only 3.5% down. With two young kids, I want this to be our house for the next 20+ years. I will spend the next 18 months carefully weighing the decision to buy.

Do you think I am proud of short-selling? Nope, and don’t want to do it again. I may be the minority in my class, but maybe not. I have a feeling the banks will still be willing to lend to me, because besides the short sell, everything else looks good for us on paper.[/quote]

I don’t care about whether you short sold or not…

The fact of the matter is you have 3.5% in savings for your next purchase is alarming at best…. You have two kids…Your expenses are not going anywhere but up….You do want you kids to go to college, right? You do want your kids to be able to go attend some outdoor activities, right? All these things add up..It might not right now, but as your kids get older, it will..

How much are you going to be really able to keep for yourself after all your liabilities, including this new purchase + your estimated child raising costs?? You do have an estimate of that, right? If you don’t , I think you need factor that in too..While walking away again would be a perfectly acceptible solution, decimating your already low savings is not…I think the bigger concern is you don’t want to end up being in a financial trainwreck 2.0 in the coming years….

It would be helpful to post a breakdown of your monthly expected expenses….Because people here could probably chime in on if you’re missing something or underestimating something….

1. Mortgage monthly =
2. Property tax/12 =
3. Insurance, Water,Electric, Garbage,Nature Gas monthly =
4. Telephone service monthly=
6. Internet service monthly=
7. Cell phone service monthly=
8. Cable TV service monthly=
9. Car payments monthly=
10 Auto insurance monthly=
11.Medical Insurance premiums/deductibles (annual)/12 =
12.Childcare expenses monthly=
13.Child doodad/spendings monthly=
14.Entertainment expenses monthly=

Add err up…![/quote]

I’m a spreadsheet geek, have all that.

I have a government pension, so I’m set on that end. I even used to put money into my 457. Wife has a 401K maxed out, and SS, so fingers crossed there. We put money in 529 college fund for kids…

[bearishgurl]

SMH, The parts of your story I find most troubling are your apparent inability to save much money (even when renting), why you didn’t try to sell at the peak (it was NOT 2003, btw) and why you were charged so much for refis. It leads one to believe that your credit wasn’t so good from the get go (even though it may have been). Also, I truly believe you may have paid too much when you first bought the property, considering it was on a smallish lot for that area. I haven’t actually researched this but wonder if the 2003 SFR sold comps in 92040 were actually closer to about $188 sf at that time.

Thanks for allowing us Piggs to peer into the mind of a “strategic defaulter.”

[SellingMyHome]

So, more questions about rent vs buy.

See the calculator on:
http://www.washingtonpost.com/real-estate/tools-calculators/rent-or-buy-home/process.html#results

What should I put for:

Rent: Annual rate increases (%)

Home:
Annual appreciation rate (%)

Other:
Before tax return on savings (%)
Assumed annual inflation rate (%)

****

Big differences on outcome if I change the rent increase from 1% to 3%.

What are the realistic expectations for the above four rates? Is that a whole topic for another post?

I guess I could model the alternative scenarios and see which ones I like, then use that. Just kidding, that is what happens in government projections….

[SellingMyHome]

[quote=bearishgurl]SMH, The parts of your story I find most troubling are your apparent inability to save much money (even when renting), why you didn’t try to sell at the peak (it was NOT 2003, btw) and why you were charged so much for refis. It leads one to believe that your credit wasn’t so good from the get go (even though it may have been). Also, I truly believe you may have paid too much when you first bought the property, considering it was on a smallish lot for that area. I haven’t actually researched this but wonder if the 2003 SFR sold comps in 92040 were actually closer to about $188 sf at that time.

Thanks for allowing us Piggs to peer into the mind of a “strategic defaulter.”[/quote]

I may have paid too much (in hindsight definitely). I also should have sold at the top, dumb me. I did probably pay too much for refi. I have learned a lot here in the last two years, 8 years too late!

I do hope my story has helped others see inside the evil mind of a strategic defaulter…

[moneymaker]

Don’t forget about car repairs, unless you have the tools and ability to repair and maintain yourself. Personally I think if you take the lowest income between your wife and yourself and add a minimum wage income to it and then can still afford the mortgage then now is a great time to buy. I don’t buy sdrealtors analysis of inflation causing future default as rents will invariably go up as well, and you gotta live somewhere,right! Just my 2¢.

[sdrealtor]

[quote=threadkiller]Don’t forget about car repairs, unless you have the tools and ability to repair and maintain yourself. Personally I think if you take the lowest income between your wife and yourself and add a minimum wage income to it and then can still afford the mortgage then now is a great time to buy. I don’t buy sdrealtors analysis of inflation causing future default as rents will invariably go up as well, and you gotta live somewhere,right! Just my 2¢.[/quote]

It wasnt me! Wrong guy

[SD Realtor]

That was me. Really? You don’t see people walking away from an asset that has substantially lost value? Yes people do have to live somewhere so why would anyone choose to live in an overvalued asset that is losing value, pay property taxes on it, pay homeowners insurance on it, possibly pay mello roos and HOA on it, while it loses value daily?

Look around you right now… The cost of basic food goods, utilities, water and fuel has gone up WAY WAY WAY more then annual rents. You can have inflation without strong rental rate increases. Similarly people with large cashpiles will make a KILLING on real estate when (NOT IF) when rates rise and real estate drops. It may be 2 years away, maybe 10 years away, maybe longer… However to think that people will not walk away is foolhearty. I am not saying it is not a good time to buy now, certainly better then 03 but the sytem we have in place promotes home ownership that is nothing more then a rental. By that nature it can behave in a more transitory nature because we enable it to be that way. You create a much more stable market buy demanding a much harsher equity stake.

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