One of my fellow agents came in my office to brainstorm how he might help a client. The conversation went like this:
Agent: "My poor buyer - she got a divorce and her husband was supposed to be making the house payments but quit and now the bank is foreclosing. Is that going to hurt my buyer's credit?"
Me: "Yes, if she is on the note. Why don't they just do a short sale?"
Agent: "She is on the note. We did try to sell it last year, but since she was living there free, she was not motivated to move, which meant she never cleaned up - so it showed terrible - most of the time, I couldn't even get in to show it. As a result, we never got an offer. I went to the bank to discuss a short sale, but because the house payments were not late at that time, they would not consider it."
Tragically, this is a common story - a case where none of the parties came out even, much less ahead. Being the big mouth that I am, I expressed to my fellow agent that his client was getting her just reward. She may have thought she was helping herself and hurting her Ex by sabotaging the sale, but now, she, like her ex-husband will have damaged credit, and they both will have to wait for at least 2 years before they can obtain a mortgage loan.
The other loser here is the lender. By January 2010, most lenders realized the short-sidedness of waiting for delinquency before allowing a borrower to initiate a short sale. Now, I recommend struggling sellers initiate the short sale process BEFORE they are late. Once a borrower hits 91 days late, most lenders will begin foreclosure proceedings.
Divorcing sellers should take the following steps to insure the preservation of their credit:
•1. List your home at the market value. Your REALTOR will show you comparable sales and more importantly, your competition. You may dream of putting cash in your pocket, but in this market, the prudent thing to do is get out from under the house before your credit suffers.
•2. Clean up, clean out, fix up and keep it that way! This goes for BOTH parties. In this market, condition is MORE IMPORTANT THAN PRICE! THERE IS TOO MUCH COMPETITION!! This is no time for spiteful emotions to rule. Put all your anger, hurt, frustration aside and just BE SMART!
•3. NEVER REFUSE A SHOWING! And I do mean NEVER!!! When I go out to show property, my goal is to sell a house THAT DAY. Much of your (smart) competition (i.e. other sellers) plan for my people to buy THEIR house THAT DAY! They have their home clean, staged and ready. If a seller calls and says we can't come THAT DAY, often times we never make it back because the buyer sees something they like that day and buys it! NEVER REFUSE A SHOWING - you may have just kissed your buyer goodbye!
•4. Finally, when the offer comes in, try to make it work. In this case, the seller occupying the home didn't have sense enough to see the gravy train would not last forever, and probably wouldn't have wanted to even consider anything less than full price. Once again, logic and reason must rule here. Put the emotions and pride aside. Look at the numbers and see what you can do to make the offer work so you can move on with your life. After all is said and done, you will be glad you did.
Divorce is an emotionally devastating thing to go through. It is the shattering of your hopes and dreams. However, it does not give you permission to throw common sense and your good credit out the window! For a confidential consultation, call me, Karen Pannell - All things Real Estate in Owensboro, KY - 270-903-2167
Text or Phone: 270-903-2167
Owensboro, Kentucky 42301