Banks aren’t the only ones being hit with foreclosures, but there is a difference – NO BAILOUT!

By
Real Estate Broker/Owner with Respect Realty LLC 200311024

 

foreclosureOver the past 6 years I’ve been in real estate, I’ve done a lot of owner financing and lease option deals for owners and buyers. But until this last summer I had never had a situation where a property was given back on a lease option or a home owner had to foreclose on a buyer.

But, there was a difference with the buyers and sellers of these properties versus the ones that were in pre-foreclosure with the banks. The sellers (who also were the bank on these sales) were willing to listen to the buyers and their situations and if they could help they did. A loan modification took only one day and wasn’t full of false promises and the seller did exactly what they said they were going to do and so did the buyer.

In one case the sales price didn’t change, but the amount they were paying each month did, the seller lowered the amount they were paying and extended the length of the loan 10 years and lowered the interest rate for the buyer by 1%. The seller was happy, they didn’t have to foreclose, and the buyer was happy, they were keeping their home, it truly was a win-win!

But, what happens when the seller does have to foreclose? I had this happen this last summer as the buyer had lost their business and was filing for bankruptcy. The buyer called the seller, the seller answered the phone, and guess what, they talked it out. The buyer was willing to move out as long as they promised not to put the foreclosure on their credit since they had been paying up to that point. (A deed in lieu of foreclosure.)

The buyer was out in 30 days with their credit in tact. The seller had two years worth of payments totaling $48,000 and the property had only lost $23,000 in equity during that time and they got a $10,000 down payment when the person bought it. From first phone call to being back on the market was a total of 13 days! Net loss to the seller was a big zero, because they acted quickly and worked with the buyer for a win-win for everyone.

But, what if the seller had to take a loss? Let us say the property value went down more than the amount paid to them had been? What then? Would they have taken longer to make a decision? Would they have called their congressman for bailout money? Why should the banks get bailout money, while the government talks about ending owner financing? These owners weren't predatory, they were just trying to make money like the banks were, the only difference was they didn’t have red tape and stupidity on their side when things started to go south on the payments.They didn’t tell the buyer that they couldn’t help them until they were behind on their payments, they didn’t say sorry can’t help you now your credit has been ruined.

Maybe the government should learn from the private sector and stay out of business and let business take care of itself as the private home owners have.

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Ambassador
893,938
Larry Bettag
Larry Bettag - Cherry Creek Mortgage - Saint Charles, IL
Regional Vice-President

Home Run dude....the government needs to back out and quit ruining things.  Today's news????  A second ""stimulus package?""  Come one!!!!

Jul 09, 2009 01:52 AM #17
Rainmaker
76,237
Ronnie Margolis
KW Kauai - Kapaa, HI
Kauai Realtor - CDPE, ABR, RA - On Top of the Aloh

Keeping the dialogue going is the best way to achieve a positive outcome. The government has good intentions but is mired by the ineptness of the bureaucratic processes.

Jul 09, 2009 01:55 AM #18
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Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

Great work on your part. For the same reason I stay more involved pon local politics and local charities because as individuals we can make a difference. Insitutions set rules that sometimes seem like we don't care about your shape, we are going to force you down the round hole. I wish as local professionals we were trusted more so that the type of success you are having can be a bit more global.

Jul 09, 2009 02:53 AM #19
Rainmaker
216,150
Sally Dunbar
Lyon Real Estate, Fair Oaks CA (Sacramento Area) - Fair Oaks, CA
Fair Oaks Realtor - Fair Oaks Homes for Sale

Great share of your experience.  Not having done much seller financing, this was good to hear.

Jul 09, 2009 03:01 AM #20
Rainmaker
1,030,545
Fred Carver Personal Real Estate Corporation
RE/MAX Camosun Victoria BC Real Estate - Victoria, BC
Accredited Real Estate Consultant

Hi Todd...Great Post, Congratulations on yet another Gold Star...can I get you to write my Posts too:O))

When a Home owner and Mortgage company come to terms on giving back a home, the Sellers signs a Quick Claim to move the change of ownership quickly and saving the mortgage holder the time and costs of a foreclosure..

Talking does help.

Cheers, thanks for sharing :O)

Jul 09, 2009 03:29 AM #21
Rainmaker
297,690
Kathy McGraw
CELLing Realty - White Water, CA
Riverside County CA Real Estate

Todd....what a great Post for my first read in weeks :)  Communication cannot be stressed enough, and you are right if the Banks and Big Business listened to us instead of the high paid experts things might be different :)

Jul 09, 2009 03:47 AM #22
Rainmaker
2,328,954
Rebecca Gaujot, Realtor®
Perry Wellington Realty, Adam Conrad, Broker - Lewisburg, WV
Lewisburg WV, the go to agent for all real estate

Todd, simply stated and so true.  I love Richard's comment on "common sense:.

Jul 09, 2009 03:52 AM #23
Rainer
75,744
Joseph Cacciapaglia
BMC Capital - Houston, TX

I hate to disagree with everyone, but I really think it's unfair to lump all banks together.  I've found that if you approach most banks properly, you can get great results from many of them.  I will admit that there are some that are TERRIBLE to deal with, and that most take longer than I would like, but in general it is not as bad as all the hype.  I've even had some short sales, deeds in lieu, and loan modifications approved in as little as a few hours.

Jul 09, 2009 04:18 AM #24
Rainmaker
547,203
Tim Maitski
Atlanta Communities Real Estate Brokerage - Atlanta, GA
Truth, Excellence and a Good Deal

Todd,  your examples show you the beauty of the free market.  There was no government interference and these people worked it out.  That's why I'd like to see government downsized to it's Constitutionally stated functions.  Most of the time government interference distorts the common sense solutions of the free market.  Thanks for the great post.

Jul 09, 2009 07:00 AM #25
Rainmaker
592,757
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

Wow! Todd,

"Maybe the government should learn from the private sector and stay out of business and let business take care of itself as the private home owners have."   That nails most of the problem!

Your comparison between home owners/sellers and banks gets most of the rest. Even the rest came about because of government demagogy! There was a time when bank officers had responsibility and made decisions. Government interference forced a change now no one has any vi sable authority.

Bankers hide behind committees, nurmous layered committees so that one one person is identifiable as rresponsible, the home owner can make a quick decision because they speak and think for themselves.

Great post!

Bill

Jul 09, 2009 07:03 AM #26
Rainer
74,325
Dan Magstadt
Paramount Residential Mortgage Group, Inc - Lake City, FL

I definitely see eye to eye with you - The more we can keep the government out of our affairs & work things out on a private/preofessional level the better!

Best,
Dan

Jul 09, 2009 08:16 AM #27
Rainmaker
316,376
Liz Loadholt
Liz Loadholt- AgentOwned Realty- Covering SC - Mount Pleasant, SC
Realtor--Broker-in-charge - Trainer--Relocation Director Covering SC

Todd -- "Maybe the government should learn from the private sector and stay out of business and let business take care of itself as the private home owners have."  --- Amen --- Congrats on your feature -- hey, we both got features --- mine was yesterday.

Mama Liz's Signature

Jul 09, 2009 09:03 AM #28
Rainmaker
238,410
Angelia Garcia
Pure Realtors - Dallas, TX

Finally something positive coming out of seller financing.  Usually you hear the stories about the home they are supposed to be purchasing being foreclosed on.

I spoke to such a buyer not too long ago.

Jul 09, 2009 11:24 AM #29
Rainmaker
262,073
Christianne O'Malley
RE/MAX Realty Affiliates - Reno, NV
Exceptional Service - Delivering Results in Reno!

Todd - It's sad to think, but oh so true, those of us who are entrepeneurial in spirit can and will get things done in a faster, often easier way, to the mutual benefit of all parties. It's because we're not bogged down with rules and bureaucracy that solutions can happen. A smaller government would be a good start, but how do you foster the desire to be an entrepeneur and be in charge of your own destiny? It seems to be a message lost on future generations...

Jul 09, 2009 11:33 AM #30
Ambassador
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Erica Ramus
Erica Ramus - Ramus Realty Group - Pottsville, PA - Pottsville, PA
MRE, Schuylkill County PA Real Estate

It is a rarity to see a BANK making a decision that makes sense. Perhaps if the decision makers had skin in the game and it was THEIR loss or their house, they'd care more and make smart decisions.

Jul 09, 2009 01:24 PM #31
Ambassador
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Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

Common sense doesn't come FROM government... it is forced UPON government.  It is getting closer to the time they are going to have that forced upon them soon...  I hope, anyway.

Jul 09, 2009 01:26 PM #32
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Jennifer Fivelsdal
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY
Mid Hudson Valley real estate connection

Todd common sense seem to escape many these days.  I am sure both your buyers and sellers are happy to have you and your negotiation skills in their corner.

Jul 09, 2009 03:48 PM #33
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Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

Todd,

Why does it seem the owner financing has so much more common sense?  Is it because they know they can't go running to Uncle Sam?

What would happen to the whole housing market if this could happen with the banks?

Jul 09, 2009 04:39 PM #34
Rainmaker
483,703
Trey Thurmond
BCR Realtors - College Station, TX
College Station , Texas Homes

Todd

Recently I had to forclose on a property. We were fortunate enough to get it back and recoup all of our losses and do a cash sale the second go round wihin a couple of months. No government help here.

Jul 10, 2009 03:24 PM #35
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Respect Realty LLC
Respect Realty LLC - Milwaukie, OR
Brokers - Oregon / SW Washington Real Estate

I think the government would be better off listening to the people on the street rather than the bank executives and the lobbiest that got us in to this mess in the first place, but like we said, that isn't the governments way.

Todd Clark - www.LivingBeaverton.com

Jul 12, 2009 02:13 PM #36
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