April 11, 2011

The Long and Short of a Short Sale

For two incredibly impatient people, the process of buying our new house had us out of our minds for nearly 7 months.  While we're the first to admit that this was an incredible deal for us, having been through it, we still aren't sure that we would ever do it again.  (Thank God we have our Forever House, and don't have to!)  So for those venturing into a possible Short Sale purchase, here's a little (it got kind of long) recap of our process to give you an idea of what you have in store.  Don't say we didn't warn you.

It all started because interest rates were historically low, and we wanted to lock into a new, low 30-year-fixed.  But would we still be in this house in 30 years?  Ten?  Five? It's likely we'd have to move in the near future if we wanted to expand our family, so why not lock in on a 30-year-fixed for a house we planned to spend much more time in.  You know, like forever.  

We started with some casual searching, and found one strange looking house with a great price. We thought, "What's the harm in going to take a look?"  Famous last words.  By the time we left the house we were head over heels in love, named her "The Lodge," and were already considering paint swatches.  It was in short sale, and was going to Sheriff's Sale for foreclosure soon, so it wouldn't be easy, but deep down new that she was the one.

Since the
bank would not take a contingent offer on a short sale property, the only way we could buy The Lodge was to sell our Bungalow.  We toured comps in our neighborhood, and in comparison our little guy wasn't too shabby, with the exception of our main bath which needed a face-lift. We also still wanted to refinance, since once you go on the market, you can't refinance for at least 6 months to a year, and we're too cheep thrifty to lose out on some big savings if we didn't get The Lodge.  We didn't have much time since anybody could put an offer on The Lodge at any time, and we had to beat them to it.  So we made a plan.  It would take 3 weeks to close the refinance, and in that time we would gut and remodel our bathroom. Then the day after we closed on our refinance, we'd put our house on the market. 

We were so excited that we immediately took out our hammers and crow bars and went to work on the bathroom.  4 hours later we were down to nothing but the studs, and we were quite proud of our work.  That's when it hit us- I mean imagine Wylie Coyote getting hit over the head with the dropping anvil hit us- we had completely forgotten that in order to refinance, we'd need to have an appraisal first.  Oops.

Our bathroom looked like this, and yet we'd need to get an appraisal saying our home value went up over $40,000.  Feel free to judge us all you want, because we know that this might have been the Class A, Number 1 stupidest thing we've ever done.  Ever.  Thank God this story has a happy ending.

Magically within 3 weeks we managed to remodel the bathroom, get the appraisal at an even higher amount than we had hoped, donate 12 bags of junk and clutter from our house to charity, stage our home, close on our refinance and put our house on the market.  We had 14 showings in the first week, and a really low offer which we declined, but we were feeling good.  Confident even.  And that's when we found out, someone else had put an offer in on The Lodge.  Cue sound effect: Whop-wahhhhhh.

This would be a perfect place to start cranking some Cinderella, "Don't Know What you Got 'til It's Gone." (Yeah- we're old enough to remember dancing to that at our middle school dances, so what!)  Although we always knew someone could put in an offer, we didn't actually think it would happen.  I mean this baby had already been on the market for 6 months with no bites.  Who else was going to love it as much as we were?  After 3 weeks of exhausting work on our house, all in effort to buy The Lodge, we were completely deflated. 

But after an agonizing week, we got lucky, and the other offer fell through.  Picture Hubby and I jumping in the air like we're in a bounce house with Ryder.  We knew we couldn't risk loosing the place again, so we quickly met with our mortgage broker, and to our surprise, we somehow qualified for both mortgages.  Now don't get me wrong, there is no way that we would EVER have taken on both properties at the same time, I don't care what the bank says.  But we just needed to be able to qualify for both so that we could put in an offer.  So we triumphantly put in our offer, with the plan that we would pull our offer at inspection if we hadn't sold our house yet.  More bounce house jumping ensued.  

And just like that, the other buyers were back.  They apparently had fallen in love with our big dump too, and had a new higher offer to bring to the table.  So began a ridiculous back and forth between us and the sellers.  Eventually... after a painfully frustrating 3 weeks, they declined the other buyers and accepted ours!  It was sent to the bank for approval, and we continued clearing out of The Bungalow every Saturday and Sunday for Open Houses trying to sell. 
Trying to sell our home turned out to be an equally frustrating experience.  We had heard that selling a home in Minnesota over the winter was tough, but we had no idea!  From November 2010, when we first placed our home on the market, until February 2011, Minneapolis received a record 70 inches of snow!  I don't care what your house looks like, it just doesn't show well when it is 0 degrees outside and has 5' walls of snow in the front yard.  In all we had 47 showings, 12 open houses, 3 price drops, and 117 days of constantly keeping the house "show ready". And by the way, getting your house show ready with a 2 year old inside is sort of like trying to drive to work with your car on fire.

After months of no word from the bank, in early February they responded that they had approved the short sale, and we had just 5 days to inspect the property and decline the purchase.  It felt like the ground had fallen out beneath us!  We finally got the house of our dreams, but didn't have an offer on our Bungalow yet.  We begged for an extension, and lucky for us they gave us 2 more weeks.  It was Go Time- we dropped our price, scheduled a ton of Open Houses and crossed our fingers. 

As these things always go, it went down to the wire, with two weeks of punishing bad news then good news, good news then bad news.  Just 2 days before our inspection on The Lodge, we got a great offer on The Bungalow that we were thrilled with.  All that was left was 2 inspections and 2 closings.

I'm not going to sugar-coat it for you, the inspections went terrible.  Both of them.  They found mold in the attic of The Bungalow, and The Lodge had frozen pipes and a broken furnace.  And to add to the already impossible situation, we couldn't get approved for the mortgage without an appraisal, and they couldn't appraise the house without heat and water.  But we couldn't fix the pipes without turning on the heat, and couldn't turn on the heat without a new furnace.  We couldn't install a furnace until we owned the place, which we couldn't do without an appraisal.  Are you following me here?  It's pretty much a Circle of Doom.  With a kick in the pants that was the quote for the attic mold removal.  Bad week = understatement.
But once again, eventually after a three weeks of incredibly frustrating back-and-forth, it all worked out.   The Bank actually agreed to fix the plumbing on The Lodge, since it was their plumbers who winterized it incorrectly, and since they couldn't fix the pipes without fixing the furnace, they did that too.  We were already planning on buying a furnace for The Lodge, so we just took that money and applied it to the mold removal on The Bungalow.  In the end, we actually came out ahead financially. But don't let me give you the impression that it was ok, because it wasn't.  It was weeks of long, excruciating days of back and forth between our buyers and our sellers.  We almost didn't sell or didn't buy at least a half dozen times.  It was like tuning into the Charlie Sheen show- you have no idea what's going to happen next, but it's bound to get worse.

But let's put all that negativity aside, because we have a deal.  We sell The Bungalow to our buyers on April 25th, and the very next day we close on The Lodge.  Between now and then it's all packing, planning and even a little DIY to get ready for the big move.  But we can't contain our excitement, and are thrilled to get to work.

Would we do it again?  Absolutely 100% no.  Not a chance.  Are we glad we did it?  You bet. 

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