Surviving a Short Sale

Today’s guest post comes from Trina. She is living the dream as a stay at home mommy to twins and looking forward to holding another sweet babe again in late fall. In between baking macaroni and cheese, reading fairy tales and folding laundry she tries to balance the budget for her sweet family of four and daydreams of a real meal in the shadow of the Eiffel Tower with her amazingly busy husband…someday.

Here it is, the true story of a short sale survivor.  I fully realize that this post will not make me many friends and some readers may feel that my husband and I bowed out of a financial commitment.  But I just wanted to share the ins and outs of what happens during a short sale, that it is not a decision made lightly and it does affect the homeowner on an emotional and financial level before, during, and after the sale is made.  I’m hoping that no one else here has gone through one and maybe my sharing can help you (or someone you know) avoid one in the future.

So, flashback to spring 2006.  There we were, two DINKs loving life and thrilled about my husband’s big work promotion and transfer to California.  We were living in Washington at the time and had been living in our WA home for almost two years (purchased in 2004).   We had actually been thinking of buying a second home in WA as an investment for about a year and had our financial ducks in a row.  Our debts were our mortgage and my husband’s car (which we had planned to pay off by 12/2006).  So when the job offer and transfer to CA came up, buying instead of renting seemed like the right thing to do.  We found a beautiful home in Northern California and found excellent tenants for our WA house.

Fast forward to summer of 2007, my husband completed his ‘training’ 15 months early and was offered another promotion…only this time, back in WA.   Hmmm, what to do?  After living in CA and working at his current position, we realized that this stint was pretty transitional.  We had literally just gotten the news that I was pregnant…with twins, and the big decisions seemed to be coming at us fast and furious.  We decided for him to move back to WA asap, literally 2 weeks later, put the house on the market and I would stay in CA for another 2 months to finish out my teaching position and finalize everything will the sale of the home.   Or so we thought…

The CA house went on the market in May of 2007.  With no offers til November of 2007:  the offer was $75,000 less than we had paid 18 months earlier and our realtor never mentioned a short sale (we did not even know what that was at the time).  We decided to take it off the market and have a property management company rent it out.  Our twins were born on Christmas Eve of 2007 and we heard days later that a family would be moving in for the New Year.  Things seemed to be looking up.

2008 was interesting.  Becoming parents was a learning experience (to say the leastJ), using the rent money and then some (ok, a lot) every month to cover the CA mortgage was more than a little stressful, and learning how to budget for a family of four on one income was also a new skill we were trying to master.  By late summer, looking at the bills we began to realize that something was going to have to give.  Food on the table and diapers on our babies’ bums became priority over the mortgage payment on the CA house.

January of 2009 our CA renters moved out and we missed our first ever mortgage payment.  I literally cried.  I am a rule follower to the T, and deciding to bail on this huge financial commitment was so far from the people that we were…are, that it felt so wrong.  Looking back, we know it was the right decision for our family….however difficult to make.

The next month our two credit cards were bumped from their $5,000 (personal card) and $10,000 (work card) limits, both of which had been paid in full every month for the last 10 years, to $500 limits on each.  Our mortgage company called each of us at least 3 times a week for approximately 3 months asking us to make a payment.  The calls were never ugly or rude, however my husband and I are pretty polite people and we obviously realized that we did owe the bank money.  We had to tell and retell our story again an again about not living in the house any more and the tenants moving out.  By July the bank agreed to a short sale and our realtor was able to put the house on the market again.  This time for $125,000 less than we paid.  We got a couple offers immediately but the bank did not agree to the terms.  Accepting or not was not our decision at all, the bank is in complete control and has (I think) up to 90 days to accept the offer or not.  Finally in September there was another offer, this time for $186,000 less than we paid for the house.   It was accepted and two months later, the day after Thanksgiving, we signed the papers that we no longer owned the home.  It was a day of rejoicing that the nightmare of trying to sell our house had finally ended 2.5 years after we first put it on the market and it was a day of great sadness that our financial life had struck such an unbelievable low point.

Ninja posted a while back about a ‘financial timeout’ and that is what we are in right now.  Two months after the sale was final we got a call from our credit card company stating that both of our cards have been cancelled due to our ‘high risk’ financial history.  That was definitely a low blow to our self esteem, but I completely agree with the bank’s decision.  Also, I think our credit score is in the gutter right now, we actually have not checked.  We don’t feel the need to since we are not planning on obtaining credit anytime soon.

Lessons learned:  Don’t buy a house in CA in 2006 and move in 2007.  No, seriously, this has been a huge eye opener for us.  I can honestly say that before the purchase of that house in 2006 I thought we were two financially savvy young adults who managed their money very well.  Now, we are a little bit older and lot wiser.  Our priorities are still investing in my husband’s retirement accounts, aggressively paying off our WA home mortgage (yup, the first one we bought in 2004), and paying cash for everything…including the MBA my husband in currently working on, a new car for him next year (I’m hoping that will be in time for his graduation), savings for our kids’ college fund, and travelling the world (a girl can dream right?).

My hope for this post was to share my experience with a short sale and that people who go through this can learn from their mistakes.  This decision was in no way an ‘easy way out’ for us…it was the right decision for our family and we have definitely, definitely, definitely, learned our lesson the hard way.

Any questions, I’d be more than happy to answer.  It was a bummer to live through, but we made it and came out stronger and smarter.

-What is your experience with a short sale?

-Have you heard of it (we hadn’t before this whole process got started)?

-Any family or friends going through this?

8 thoughts on “Surviving a Short Sale

  1. It doesn’t sound like you were dodging your responsibilities at all, given the circumstances. Sometimes life just happens. Everyone’s situations are different.

  2. We all live and learn. As the Mom of twins I totally understand the financial strain children can cause. We were fortunate in that we decided not to buy during the boom. Mainly because it was right around the time we found out we were having twins. That proved great for us.

    The thing that gets me with short sales, aren’t the people like yourself who could not afford to pay. Which by the way you should never feel guilty about not being able to pay when you really try (I know easier said than done). But the people who dump and walk because it is a “bad investment” to own a home with no value. It doesn’t sound like that’s what you did.

    I know a few people who are short-selling because they don’t want to own (their only residence mind you) a home that has lost its value. I have a friend who alone makes 6 figures, before we count her husband’s 6 figures (good salaries even in our expensive area). Surely they can afford their home. But they don’t “want it” because it lost it’s value.

    Great neighborhood, only home their child grew up in, but it is no longer fashionable to own. Those are the people who a new owner like me, is frustrated with, not the family that tried to maintain and just couldn’t.

  3. Thanks for sharing your story about short selling your home. I agree with Young Mogul in that everyone’s life situation is different, and that not making your mortgage payments was the best decision for you at the time. I really admire the fact that you pay everything in cash. This will really help you to stay on budget.

  4. Thanks for sharing, sounds to me like you got the better deal out of it. You got rid of the asset you couldn’t afford and losing the credit cards will in the long run, be a benefit. Credit is the best way to get in over your head ever invented. My family has another 18 months to get all but some student loans and the house paid off. It will be nice to be on a cash basis for the first time in my adult life. Good luck with the raising 2 kids, enjoy the time you have with them.

  5. Thank you for sharing your story, it is hard to tell strangers with all the judgement surrounding short sales and foreclosures. But like Young Mogul said, every situation is different. In my house, we went from three incomes (parents and mine) to one. Dad was in real estate and I was in education, both of which crumbled in CA. The stigma attached is horrible, and it takes a brave person to share such a difficult trial.

  6. Wow. Thank you for the positve feedback regarding sharing our story. I was really expecting much more negative scrutiny. I know so many people are reading about short sales, but (hopefully) not too many people know what goes on behind the scenes. I do hope this post was able to answer some questions and shed a personal side to the situation.
    @twinsmama-I wonder how your friend (and people like her who are ‘choosing’ to walk away as oppossed to that being their only option) are dealing with the repercussions of their decision~loss of credit cards, plummeting credit score, etc.
    Again, thank you for the understanding/kind comments.
    Trina

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