Thursday, January 19, 2012

Seller Contributions to a Short Sale

A short sale occurs when the seller of a house owes more to his mortgage company or companies--the mortgagees--than the house is worth. The seller needs his mortgagees' permission to sell the house, because the mortgagees will not recover all the money owed to them. A short sale does a lot of damage to a seller's credit rating, and it will impact his ability to buy another house. It may also hurt his employment opportunities if a prospective employer uses a credit report as a way of sifting through too many applicants.

I have learned a lot about short sales in the past few years, and some of it is counter intuitive. For example, most homeowners stop making their mortgage payments around the time they put the house on the market as a short sale. Other homeowners stop making their payments and don't try to sell the house until they get the notice from their mortgagee of the looming foreclosure. By withholding their mortgage payments, these sellers can save a lot of money. They can move into a rental before their credit rating is wrecked, and they can get on with the next phase of their life.

The third type of short sale seller, the kind who keeps his mortgage up to date in order to minimize damage to his credit rating, is rare. Many of these sellers are depleting their savings and borrowing on credit cards and from relatives because they have never defaulted on an obligation, and even though their house has lost value, they want to fulfill their obligation to their mortgagee to the best of their ability.

Which seller do you think will have an easier time negotiating a short sale with his mortgagee? The seller who makes his mortgage payments, or the one who doesn't?

In my experience, negotiations will go much faster for the homeowner who is delinquent on his mortgage. While his mortgagee may ask the homeowner to bring cash to the settlement table, or sign a promissory note to repay some of the deficiency after close of escrow, if the homeowner refuses to pay any more, the mortgagee usually backs down.

The homeowner who has borrowed and sacrificed to keep his mortgage current may not enjoy the same forgiveness. If the mortgagee decides that the homeowner can pay, a cash contribution or promissory note will be required. If the homeowner who is current on his mortgage says he can't or won't pay any more on his mortgage beyond what is netted from the short sale, that homeowner may face foreclosure, which will net his mortgagee far less than a short sale will.

Here are some of the reasons a mortgagee may insist that the seller bring a cash contribution to close of escrow or sign a promissory note for future repayment of the deficiency.

1) The seller has a better than average salary, regardless of how many bills that salary has to pay.

2) The seller has a high credit score based on his desperate efforts to keep all his bills current. His credit card debt may be steadily rising because he is borrowing to pay his bills, but this is not taken into account by the mortgagee.

3) The seller may have significant resources in his retirement account. Even if he can't access those resources, the mortgagee may say the seller could pay his mortgage debt by liquidating his retirement account.

4) Investors--people who bought the property as a rental--are usually assumed to be able to afford a promissory note or cash contibution somehow.

I will never tell a short sale seller to stop making his mortgage payments. For some, it's impractical, and for others, it's unthinkable. The damage to his credit will be less severe if he doesn't have late payments compounded by the short sale. However, there does seem to be a trend that keeping mortgage payments current can be detrimental to the short sale seller in negotiations with his mortgagee.

If you would like more information on the pros and cons of short sales, and resources to help you make your decisions about a short sale, please let me know.

Tuesday, January 17, 2012

The Fountain and Bird Bath

The fountain I bought from Zona Fountains hasn't quite turned out to be the wildlife magnet I had hoped it would be. I thought I would be able to lure javelina, deer, bobcats and maybe mountain lions to within 10 feet of our back porch, but it hasn't worked out that way. Maybe they are too smart to come around when I might see them. I certainly see a lot of hoof prints between the porch and the fountain.

One curious result is the appearance of urban birds I hadn't seen here before: Starlings, House Finches, House Sparrows and Mockingbirds seem to be happy to take advantage of anything humans produce that might benefit them. I hope they don't tell their Rock Dove cousins about this.

A Gilded Flicker, rarely seen here, was my first customer. I haven't seen him since. The Gambel's Quail are afraid of the fountain.

I observed that the Mourning Doves seem to be able to suck up the water directly from the fountain. Every other bird I've seen in the fountain scoops water with its bill then throws back its head to swallow.

After drinking and considering the pros and cons, this Northern Harrier (Marsh Hawk) hopped in and took a bath.

I have been interested to see a male Pyrrhuloxia and a female Cardinal hanging out together. At first glance, they look like the same bird. Both have crests, with red caps, but not red all over like a male Cardinal. The easiest way to tell them apart is the Cardinal has a red finch bill and the Pyrrhuloxia has a yellow parrot bill. When these two pose together, as they are here (Cardinal at top, and Pyrrhuloxia on the left), you can see that the Cardinal is olive green, with no red on her chest. The Pyrrhuloxia is grey, with a red streak on his chest.
Okay, now for the test. What is this?

December 2011 Residential Sales Statistics

The Tucson Association of Realtors has published the Residential Sales Statistics for December 2011.

Average sale price in December was $161,471, which is 13.37% less than the previous December, but 1.92% more than November.

Median sale price in December, the price at which half the houses sold for more, and half sold for less, was $120,000, a decline of 13.94% from the previous December, and 1.64% lower than in November.

Number of properties sold in December was 961, an increase of 5.95% from the previous December, but 5.32% lower than in November.

The Worm Chronicles

I have been putting most of my food scraps in the worm composting bin I got from Melissa at the Community Food Bank in November. Whenever I bury some food, I look to see whether the worms are still alive. I usually only find a few, and they are short and skinny. It seems that the population is too low to consume food scraps at the rate I produce them.

Melissa told me that I might see the worms mating. They are hermaphrodites, and they reproduce by rubbing those bands around them together. Oh, so that's what those bands are for.

So, I was checking for worm survival last week, and I pulled up a handful of dirt containing two worms with those worm bands, and they were wrapped together! I hastily apologized for intruding and told them to carry on. I hope this means that the worm population will be increasing soon.

Also, note that the squash seeds I put in the compost bin have sprouted. If only I had my raised planter beds built, I'd have a place to place these squash sprouts.

Monday, January 16, 2012

Fab Four

Normally I wouldn't have any interest in seeing a pop revival group, but my brother and sister have seen the Fab Four several times and they absolutely insisted that I spend an evening under the magical spell of the Beatles. So Steve and I saw the Fab Four at the Rialto Saturday night.

As we were sitting down, we realized my favorite escrow officer, Paula Trimmer, was in the row in front of us. I told Paula if these Beatles impersonators can get us to scream, we will know they were good. As it turned out, part of the screaming was generated by "Paul's" tee shirt toss, and Paula was the winner.

The boys opened with their first appearance on the Ed Sullivan show. I was immediately struck by the attention to detail. "Paul" was playing a left-handed Hofner bass. The backdrop was the Ed Sullivan set I remember so well from that February night in 1964, those huge arrows pointing to the lads. "John" stood with that bent-kneed, wide stance of Lennon's. "George" usually looked intense, and only occasionally flashed a quick smile that put vertical creases in his cheeks, just like The Quiet Beatle. Did these guys have plastic surgery or just a lot of makeup to get these effects?

When "George" wasn't frowning or grimacing, he affected the snarl that George had. "Paul" was always looking up at the balcony, his tilted head wide-eyed and angelic. "Ringo" was slightly hunched over, teeth clenched, shaking his Beatle hair cut like a bobble head. Their singing voices, accents, mannerisms and costumes were quite convincing. I was very impressed.

I thought I found one deviation from authenticity. I thought Ringo played drums with the traditional grip. I asked Steve, who learned to play traditional grip in the '60s, and he thought Ringo played traditional grip, too. This "Ringo" was playing match grip. I just looked it up, and found that Ringo was one of the innovators of match grip. When he started playing that way, the rest of the drumming world followed.

The Ed Sullivan impersonator was great. His skits were taken directly from the Ed Sullivan "Shoe". He introduced the "youngsters from Liverpool" and waved a congratulatory telegram that had been sent to the show by Elvis and his manager "Colonel Sanders". "Ed" showed us how Ed got that stiff-backed demeanor when he pulled a wire coat hanger from the back of his jacket.

"John" announced that the music was completely live and all performed on stage, without CDs, which prompted "Paul" to ask, "What's a CD?" During the Sgt. Pepper set, "John" and "George" played synthesizers, but I can't believe they got the whole orchestral effect of "A Day in the Life" with a synthesizer.
Here's "John", playing "Imagine" in the Army shirt he wore on The Dick Cavett Show.
Steve didn't know about John's Dick Cavett appearance with Yoko Ono (who was played by Tom Hanks in "Forrest Gump"). Steve said John Lennon wouldn't have worn an Army shirt during the Vietnam War. I told him I had a Navy pea coat and an Army jacket from War Surplus when I was in junior high in Massachusetts. He said the only thing he bought at War Surplus was camping equipment. I was surprised to learn that New England was ahead of Steve's trend-setting L.A. with the ironic War Surplus fashion statement.

Here's a neat trick. The Fab Four wore the Nehru jackets that the Beatles wore for their Shea Stadium appearance. While a movie of Paul playing "Yesterday" was projected on the backdrop, "Paul" played "Yesterday" on the same model guitar, matching Paul gesture for gesture.

Neither of us saw the Beatles, and we didn't feel that this was at all the same as the real thing, but it was still wonderful to be immersed in memories of a more optimistic and thrilling time. We're glad we went.