Death of a Short Sale

I didn’t used to believe that the short sale was the bane of the housing market. But that was before I tried to buy a house from a guy who was underwater on his mortgage. In February, I made an offer on a house in Kensington (that’s a neighborhood in San Diego). I offered less than the owner paid for the house but I figured something would be better than nothing for him and/or his lender.

But last week, after four months of watching the seller and his money lenders fight over small change, my wife and I gave up. We withdrew our offer to buy the house and moved on.

In the case of this short sale, the homeowner had seen his business go south and he defaulted on two mortgages. The primary lender was trying to get the second one to accept less than 20 percent on a loan that lender #2  foolishly gave the homeowner at the height of the housing boom. Lender #2 was determined to get as much as possible and eventually hired a collection agency to go after the homeowner. Going after him meant going after as much money as they could get out of me as I sought to buy the house.

Eventually, the short sale negotiator (the only person we were dealing with who actually had a name) was fired and there was nobody left to talk to. I assume the next step will be foreclosure. I just wish it had happened before I wasted four months trying to buy the house.

The housing market has had its gyrations and I guess we all hope we can hold onto our homes long enough to see the ups and downs come and go. We also hope there will be more ups than downs. The California housing market has been kind to me. I was lucky enough to move to San Diego and buy in the late 90’s when housing prices were still reasonable and were headed upwards. That’s why I’ve got enough equity to try to buy something bigger.

Had I moved here eight years later I would have been one of those unlucky folks who went underwater.

Home ownership is a peculiarly American thing. I was speaking to a friend about a family she knows in Germany. The family has lived in the same rental apartment for two generations. Why does that seem strange to us? In the U.S., ownership is the thing that gives us a proper relationship with an inanimate object like as a house. Without ownership, your house will belong to somebody else and will therefore be alienated from you and not be a real home… or so we think.

I believe in the American dream because home ownership is a great way of saving money. If you are forced to invest in a house every month eventually you’ll have something to show for it. Someday the house may actually be paid for. But prices don’t go up forever, even in California. If you do become submerged, mortgage-wise, hopefully your house will still be your home and still be a good place to live.

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