Financial Coaches Make Mistakes Too
By Keith Bunn Jr.
June 2, 2013
Good morning everyone, with this weeks blog, I'm going to be a little transparent with you. Some people would think just because financial coaches help others with their finances, that we don't make mistakes with money, that's not true. Financial coaches are humans and we make mistakes just like everyone else, even with money, and in my opinion, any good coach will tell you that. Now, what I'm about to share with you wasn't really a total mistake on our part, but we sure did learn some lessons along the way.
What I'm talking about happened during the pop of the Real Estate bubble. My wife Julie just got a new job in a city which was an hour drive (one way) away from our home. I also worked in that city and we decided that it made no sense living so far away from where we worked, so we decided to move closer to our jobs.
The problem was, we didn't make enough money to pay both the mortgage payment and rent when we moved so we rented out our home. Without going into too much detail on that, renting out our home was a disaster! The renters stopped paying rent, we started the eviction process (which was long and expensive), and we put the home on the market as a Short Sale.
Short Sale, Foreclosure, Deed in Lieu of Foreclosure
For those who don't know, short selling a house is just to the left of a foreclosure. What you are trying to do when doing a short sale is you are trying to sell your home for less than you owe and trying to talk your mortgage company into taking that as payment in full and you have to go through a bunch of hoops with your mortgage company to get one to go through, even if you have a good Realtor, which we had an awesome one. But when it comes right down to it, your mortgage company has the final say whether or not they will take any offers that are presented.
So in our case, our mortgage company was from out of state and had no clue what the market was like in our small town. So when we has a CASH offer, and presented that to them, they denied it. To make a long story short, we were running out of time and it looked like we were about to be foreclosed on, but we had one more trick up our sleeve to try. We offered the mortgage company what is called a Deed in Lieu of Foreclosure. That is where the mortgage company pays the home owner pennies on the dollar to just walk away from their home and it becomes the property of the mortgage company. Now, if a short sale is to the left of a foreclosure, a deed in lieu of foreclosure is just to the right. The thing is, the only way a short sale or a deed in lieu of foreclosure makes sense is if you have it in writing from your mortgage company that there will be no recourse towards you. Meaning, they will not come after you for the difference the house doesn't bring when the house is sold again. Example; if you owed the mortgage company $100,000 and the house was sold for $75,000, the mortgage company can come after you for the $25,000 difference, unless you have it in writing, "short sale/deed in lieu of foreclosure without recourse".
To our surprise, they agreed to our offer and with a quick inspection from the mortgage company and them handing us a check, we walked away. Now did that hurt our credit? Absolutely! Will what happen hurt our chances in getting another mortgage right away? Absolutely, but only for about 3 to 4 years. But we still have some debt to pay off yet and we still need to save for a huge down payment when we are ready to buy again. By that time, the 3 to 4 years will have come and gone. On top of that, we are not really worried about our credit. As I've said before, we don't worship at the alter of the "Great FICO".
Oh! By the way, we just learned the other week that our old house sold for about half of what the cash offer was that was presented to them for the short sale. That's what happens when you have to deal with mortgages companies that are from out of state.
1) Have you ever rented out your home before while waiting on the market to recover so you can sell it?
2) Have you ever considered doing a short sale or a deed in lieu of foreclosure?
The reason I do this is to give people hope and to try to inspire others. To make them think about their finances, whether they are young or old, so they can win financially.
If you have any questions for me about my posts or about your finances, you can call me at (616) 454-2046 or e-mail me at firstname.lastname@example.org. You can also find more money news, facts and ideas, on my Facebook and/or Twitter pages. I'd be grateful if you followed me. Thank you!