Note: This article is the third part of a three part series:

Part One: Buying My First Home
Part Two: The Hidden Costs Of Home Ownership
Part Three: The Home Equity Loan, The Foreclosure Notices, And Renters That Never Paid

Suddenly Out Of Work – Time To Dip Into The Home Equity

Work had been going through some major changes. I was in a good job, had a good resume, but after the tech boom jobs paid less and I couldn’t afford to do anything other than make more money. I was facing layoffs with only the next two weeks of pay to show for it.

It was now or never to put my license to work. First things first, money. I went to the bank to ask for a home equity loan before I was techically out of a job. I had just hit the one year mark a few months ago and could now draw into what equity and appreciation may have built up.

I was approved for ten thousand. Which would cover the bills for about two and a half months. Not a lot of time, but at least I had some time. I signed up for Keller Williams and started my training. Turns out new homes are very hard to get into. Sitting in a chair while people come to you and agree to give you commissions for things they already want to buy is a hard gig to get into apparently. Residential real estate is much easier, but it doesn’t mean you’ll make any money in it.

And I didn’t.

After the first missed payment in order to keep the cars paid so we could work, we began to receive notices from the bank. Home prices hadn’t shot up yet, so we were on a relatively normal growth pattern regarding appreciation. This was unfortunate because what programs there may have been out there that required a refinance were no longer options after you figured in the fees and home equity loan. We simply owed too much.

Our neighbors had parents looking to move to the valley. They worked with a real estate agent and mentioned something about a short sale. I spoke with the agent and he said he could likely find an investor to buy the house and then resell it to the neighbor’s parents. This was the light at the end of the tunnel!

In order to pay back some money owed, we moved out into a smaller apartment so that the house didn’t continue to suck up money for cooling, heating, and the cost of fuel to drive to work and back. The renters moved in and we gave them some time to get adjusted and for us to clean up and move.

But when it came time for the first rent payment. It never came.

Instead one of them came down with cancer and was going through treatment. How do you evict and older person with cancer? How do you evict an older person with cancer who happens to be the father of your neighbor!

The Foreclosure Notices Keep Piling Up

I met with an attorney and filed for Chapter 13 bankruptcy in order to keep the house from being foreclosed and to keep our cars from being repossessed so that I could still work. By now I had found work in the timeshare industry and was doing relatively well, but the debts were insurmountable. We needed to be able to afford to make less.

My attorney worked with the agent when needed to make sure documents got to the bank and back. It turned my stomach knowing that we had renters not paying rent but living in our house. They would have to be asked to move out and evicted but the possibility of any rent in the coming months was better than a vacant house. Especially since they had already painted it and improved upon it before the brain cancer diagnosis.

I chalked it up to karma and hoped I’d be repaid someday – I couldn’t afford to live in the house and they weren’t bums so I let them stay until the proceedings and short sale were completed.

Eventually the short sale was complete and I was released from all responsibilities involving that dreaded house. What was a blessing and a wonderful experience, turned into something that burned my heart and kept me from getting sleep.

Rebuilding A Young Life Now In Ruins

I stayed in real estate until another job opened up that eventually brought me full circle back to technology – but on my terms and with much knowledge in hand. Given the recent market changes, I will chalk that up to karma repaying me for my previous kindness. When you’ve been through what I’ve been through.. you take what you are given.

Now finishing the bankruptcy up after almost 4 years, the creditors have finally been paid, I can work on rebuilding my damaged credit score, and hopefully move on. If there’s one thing that bankruptcy taught me, it’s that living a lifestyle where you can’t get credit anymore can be a great thing. You learn to save cash, spend less, and keep reserves. Something young Americans aren’t taught to do anymore.

I like to think I’ve gone through two decades of experience in a quarter of the time. Sometimes, mistakes made young can be the best mistakes you can make.

Karma wasn’t done with me yet though. Because the short sale occured after my bankruptcy, the 3 year window which needed to pass before being able to borrow again after the short sale isn’t up for a couple more weeks. Six months ago when I was looking at homes to buy, this bad news turned out to be the best news I could ever have gotten in hindsight. The home I was prepared to buy, has dropped in price by over $40,000 in the past 6 months and has still not found a buyer yet.

What happens when you combine an inexperienced buyer like myself, with a market where anyone can buy a house with $700, and home appreciation that far outpaces salaries and general affordability?

Apparently you get today’s market. The Arizona Housing Bubble.

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Comment by John Graff
2007-08-12 01:50:26

Did you have to pay any out of pocket fees or did you make anything from the house when it sold?

Comment by MG
2007-08-12 09:26:30

Nope, it turned out to be a good market and good deal for the investor. I needed to get out so I got out with a (very) small amount of pocket change, started living debt free, and chalked it up to youthful exuberance. It wasn’t easy to walk away from a financial standpoint, but sometimes there are more important things than greed.

2007-09-15 14:14:26

I short sold my home earlier this year. It’s definitely not an easy process by any means. Even once I had a offer on the house, it still took nearly 3 months to finally close the deal. I was lucky and had a real estate agent with alot of short sale experience so that helped a ton.

I think doing the short sale was a good move though, but I started the process early and had good support. Good luck to anyone facing a short sale, make sure you have someone (family, friends, etc) that you can share your thoughts and frustrations with.



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