Negotiating Through a Short Sale (With Multiple Lien holders!) and Ending Up in a Cohousing Community
Back in university, I fell in love with a co-op house full of fellow earthy-crunchy folks. Unfortunately, I wasn't able to move there but the idea of an intentional community really stuck with me. Cohousing is a type of intentional community that balances public and private space, allowing you to fully own your house and the parcel of land it is built upon but also allow you to co-own communal property and resources. What it came down to was this: I imagined it to be where I could tell my kids, "Go out and play." These days, kids are stuck at home in front of the tube or iPad, and I definitely did not want that for WarriorPrincess.
When EyeDot and I first moved to Southwest Virginia, to a small university town of about 40,000 people, our first friends were a community of Malaysian and Indonesian international graduate students. After a couple of years however, we learned just how transient a university town can be when many of our friends started to moved away!
We needed a quick, easy solution to create community as friends continued to leave the town. That's when I stumbled upon a cohousing community.
The community consisted of 33 houses, the owners of which co-owned 33 acres of land. The houses were clustered on 5 acres of land with a large clubhouse. After convincing EyeDot that we should consider buying there (even though we had just bought our first home, a 1280 sq foot, 3-bedroom townhouse for $135,000) we ended up getting a tour. I immediately started getting a little house horny, as the couple behind Millennial Revolution would say.
Soon after our tour in September of 2012, I found out about a house for sale. Only, it was a "Short Sale." Essentially, a short sale is one step before a complete foreclosure where the lender seizes the home and auctions it off. The owner of the home was way behind on mortgage payments, and the lender (we'll call them Bank of Horrible) was now calling the shots.
In mid-October of 2012, we put in a lowball offer and Bank of Horrible responded a few weeks later with a counter of $240,000. That was not a big deal for us since the price was still reasonable and below the appraisal value. We agreed and thought it was a done deal.
Since EyeDot works full-time, I generally handle long-term logistics and planning in our family, so she was happy to take a back seat and let me do the work of figuring this out. Weeks passed and I hadn't heard anything when a one line e-mail from the Real Estate agent appeared in my inbox. "The owner's ex-wife has a lien on the property."
At this point, I didn't know what a lien was, but I was about to get a serious education! In short, the house couldn't be sold unless the lien was satisfied. It was in the tens of thousands of dollars.
I started asking questions to our mortgage broker, our real estate agent, and the title company (luckily all housed in the same building!). I even started talking directly to the listing agent. Nobody seemed to be stepping up to explain or take the reins, so I asked if I could speak to the ex-wife myself. While it wasn't common, I learned that it was perfectly okay for me to cold-call the lien holder. My goal was to try to negotiate her down, since A. we didn't have that kind of money, and B. she probably wouldn't be getting tens of thousands of dollars if the house was to go into foreclosure anyway.
By the time I got her phone number, it was January 28th. I was scared, but I prepared a statement to read from and called her anyway. I earnestly explained that EyeDot had also dealt with divorce and knew how it felt. I also told her of WarriorPrincess and how I ached to tell her, "go out and play." Then, I offered her one-fifth of what she was owed. After a pause, she agreed to my terms, and I was ecstatic!
That is, until EyeDot received a call a day later that there was another ex-wife with another lien on the property. There was only one difference. This one had a lawyer. I called her, and she refused to speak to me until her lawyer got back into town from Florida. While we waited, Bank of Horrible set a closing deadline of Monday, February 4th at 8:00 am, which in realistic terms meant by close of business on Friday the 1st. According to our real estate agent, a Bank of Horrible representative would also try to play weird, childish games with the people facilitating this sale, by saying things like "I'm going on vacation, but I'm not going to tell you when." When asked why they weren't being more professional since the short-sale would lead to Bank of Horrible receiving money, the representative explained that there was no incentive for them. Regardless of what happened to the house, they themselves wouldn't receive any more money. This added another layer of stress onto a complicated process. Hence, Bank of Horrible.
That Friday evening, after she spent days stalling, I called ex-wife #2 one last time. She put her husband on the line and he simply said "We can't help you," and hung up the phone on me. After putting in all that work, I was devastated.
You might be asking, "Devastated? Javed, it's a house! You are the one who talks about not being attached to things!"
There were a few reasons why I was so house horny over this place:
- My mother-in-law was going to visit from Malaysia for a month, and she doesn't do stairs. This house, unlike our townhouse, allowed for complete one-level living with a bathroom downstairs and the ability to make her a bedroom on the first floor. I may not care so much about my comfort, but I wanted her first visit to be as pleasant as possible.
- I really attached myself to the idea of WarriorPrincess playing outside. Nostalgia is a very strong motivator for me, and I yearned for the next generation to get to 'be home by dinner' like I was told and not be stuck to a screen.
- EyeDot was due in early April with WilyKit, and I was 'nesting.' I had already attached myself to the idea of our baby in the new place.
- I feel comfortable calling this place my dream house. Two porches, huge windows overlooking a million-dollar view, open-concept, and perhaps most importantly, no lawn to mow!
- A cohousing Community often means shared resources. As a result we wouldn't have to spend money buying tools or kitchen gadgets or things we could borrow from our neighbors or common areas.
- Like many things in life, I have 'gut feelings' about things that just 'feel right.' It sounds silly, but those visions or gut feelings about my future often come to fruition.
Back to the action...
It was hard to sleep that night since it felt like the deal was dead. On Saturday, at 10 AM, I received a surprising phone call from ex-wife #2. She would accept half of what she was owed. This was within our budget, and we agreed, and I promptly e-mailed all of the agents, the broker, and title agent.
Finally! Some relief!
"We're going to get this house!," I thought. Monday morning, the morning of Bank of Horror's deadline came around, and the phone rang. It was my mortgage broker.
"Javed, I have some bad news, but I have a way for you around it."
"What is it, Scott?"
"There is another lien-holder. It's a credit card company for around $6,000."
I started laughing that laugh you get when the world is so insane it is the only coping mechanism you have left:
"Scott, What the?! I DONT HAVE ANY MORE MONEY!"
"Javed, listen, you have done a great job building a relationship with both of these ex-wives. Call both of them, tell them about the new lien, and ask if they'd reduce their payments by $3000. That way you don't have to pay any extra"
"Scott, you're a genius. I'll do that now."
The first ex-wife reduced her payment by $3000. The second ex-wife reduced hers by $2,500. That 3rd lien only turned out to be only $4,200, so we actually reduced the total payout to the lien holders.
Ultimately, we ended up paying $20,000 more for the house ($260,000), which ended up being what it appraised for anyway. On top of that, we got some good karma by paying off someone else's debts and helping out two women who had been swindled out of some money. We also benefited from a great start at the co-housing community, because we saved the house from going into foreclosure.
We finally closed on a Friday in March, but Bank of Horrible sent some corrupt documents and the title company hadn't checked if there were any more liens on the property. As a result, we had to wait until Monday to know if we actually owned the house. Thankfully, there were no other surprises, and we moved in 2 weeks before WilyKit was born.
So much for a quick, easy solution!