Offers Received: 3
Deal Killing Obstacles Overcome: 4
Flexible Positions My Seller Contorted Herself Into to Make the Deal Happen: 7
How Sure I Was The Sale Would Not Go Through: 85%
Last week one of my listings closed escrow. Did you see that big beautiful rainbow that appeared over Phoenix and seemed to end right at the I-17 and Greenway? That was Heaven’s indication that it had granted a miracle on a townhouse there.
Don’t get me wrong, this property was actually a lovely, well kept home with a really great amount of space for a fabulous price. Unfortunately, it was also a townhouse purchased by my seller in 2003, attempting to be sold in a market rife with short sales and foreclosures looking to knock it from it’s price-perch and lenders who shudder at the thought of providing financing for a property whose HOA has a delinquency rate higher than 15%.
My client is one of the good guys who’s been stomped on and kicked in the gut by the economy and the housing bubble. She purchased a home well within her financial abilities and took amazing care of it. She did preventative termite treatments (who does that? Smart savvy gals, that’s who) and paid to have roof work done even though the roof maintenance is technically covered by the HOA. She wanted to protect her investment. She made payments above her minimum monthly mortgage. In a fair world she would get a nice medium-sized check at close of escrow when she sold it for her efforts.
Alas, real estate is not a fair world. Recently, my dear seller met her Prince Charming and got engaged. PC had also bought a home within his financial means, but he did it closer to the peak of the market. When I met with the two of them to discuss their options about consolidating their assets, I started in with a talk that’s become standard for me, “Hello, you owe more than you can demand for your property(ies). Rent? Short sale? Stay put?” and quickly learned these two were of a different stock. They explained to me that short sale and foreclosure were not an option for them. They would pay the banks the difference to eventually sell both of these properties and buy their big dream house in Chandler. No, they didn’t have buckets of cash in the bank with which to do this, but they had some and were willing to jettison the easier of the two first and then work on saving up to pay the considerable difference on the other one in time.
We started with pricing this property to get them out of it in the black, but barely. The comps didn’t support our price, but they also weren’t nearly as nicely kept, placed or move-in ready, so we started with our best case scenario and worked from there. We had slow and steady traffic but no offers for a couple of months. Finally we got a low-ball offer that would leave my client out of pocket several thousand dollars. Smart lady that she is, she did the math and realized that because they were carrying two properties, it would only take her a couple of months to make up the out of pocket cash by not having to make the mortgage payment. Rather than dwelling on the principle of the loss she was taking (which oh so many people get caught up in), she decided to bite the bullet and accept the offer.
This offer held firm for just a few days before the buyer’s financing fell through due to improper qualification. Because my seller had already resigned herself to being out of pocket and her wedding was quickly approaching, we dropped the price a minimal amount to wake up the buyers and show that we were willing to deal.
This was a successful tactic, our traffic picked up a bit and quickly we had the promise of another offer. Not an actual offer in hand, but a buyer who wanted to write one. The agent just had a few questions for the HOA about the default rate they were currently experiencing. Apparently this buyer had been bitten by this issue before, with a deal that got to the very end, and then was rejected in underwriting because the HOA default was more than 20%. I put the agent in touch with the HOA and it turned out the HOA for this property is in about the 18% delinquency range. It also turns out the magic number this particular buyer’s lender was looking for was <15%. And thus, offer #2 blinked out of existence.
Of course, at this point my client’s wedding was almost upon us. She called on Wednesday to say she was gearing up for the rehearsal dinner and the big event, and that her place was a touch more cluttered than usual, but if someone wanted to see it, that was still ok. ‘Selling the house is the big priority,’ she told me (dream client!). In real estate, big events, or trips out of town are signals for the governing gods to send in a well qualified, highly urgent buyer with an really great offer. So I got a call about an hour before her rehearsal dinner was scheduled to begin that I was getting a full price offer which would need a response within the next 12 hours.
So back under contract we went. It was a dream offer for my client, but I had my serious concerns. Number one was the appraisal (the spouses of listing agents know to expect night terrors ending in cold sweats and desperate screams of, “oh, no… oh no!! Not the APPRAISAL!!! OH THE HORROR!” in about the middle week of escrow). Number two was the nagging HOA delinquency issue. Both are potential problems that are difficult to head off before their time without raising alarms or waking sleeping beasts. You don’t want to give a buyer a reason to get cold feet, so generally speaking, a listing agent has to do a certain amount of wait and see.
So wait and see we did. Number two stayed sleeping monster (and I continued to stress about it until the actual call from the escrow officer that title had changed hands). Number one woke up and chomped right down on our windpipe. The appraisal came in $12K under value. I actually don’t at all blame the appraiser in this case. He did all that he could. It was an FHA loan and his hands were tied with the totally inflexible binds of FHA regulations.
Negotiation commenced, and my client ended up dropping $9K, the buyer brought $3K extra to the table and we made the contract ‘As-is’. It was ugly for my client’s pocketbook, but she was willing to take the loss to move on to married life in her husband’s home.
Loan documents were slow and we ended up closing a few days late (another frustration for my poor client as she had rushed to get out of the house on time), but amazingly, that little $90K sucker did actually close. And let me tell you, to me, it was as exciting and relief-inducing as any of my bigger closings. Real estate doesn’t pay based on effort and amount of maneuvering, but pride of the catch pays out on just that scale.