Lisa Chambers - How to Survive a Short Sale

How to Survive

A Short Sale

Everything You Need to Know

From a Couple Whos Survived 12 ShortSales

By

Alan & Lisa Chambers

Smashwords Edition

Copyright 2001 Alan Chambers

Smashwords Edition, LicenseNotes

This ebook is licensed foryour personal enjoyment only. This ebook may not be re-sold orgiven away to other people. If you would like to share this bookwith another person, please purchase an additional copy for eachrecipient. If youre reading this book and did not purchase it, orit was not purchased for your use only, then please return toSmashwords.com and purchase your own copy. Thank you for respectingthe hard work of this author.

Coverimage courtesy of Feverpitched & Dreamstime.com

Cover by Joleene Naylor

Acknowledgements: Thank you to Brian,who first gave us the idea for this book, and who taught us alwaysto play win-win. Thank you Lee Hartley. Thank you to all of thereal estate agents we have worked with over the last thirty years,especially Cathy Comeaux Goldwasser, Dave Junco and BarbaraWeibel.

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This publication isdesigned to inform and provide general information regarding thesubject matter. However, laws and practices vary from state tostate and are also subject to change. Because each factualsituation is different, specific advice should be tailored to theparticular circumstances. The reader is advised to consult with hisor her own advisor regarding his or her specific situation. Theauthors have taken reasonable precautions in the preparation ofthis book and believe the facts presented in this book are accurateas of the date it was written. However, the author does not assumeany responsibility for errors or omissions. The authorsspecifically disclaim any liability resulting from the use orapplication of the information contained in this book, and theinformation is not intended to serve as legal advice related toindividual situations.

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Dedicated to our wonderfulkids.

Dont make the mistakes wedid.

Losing Our
Real Estate Fortune

We love real estate. Houses, buyingthem, fixing them up, selling them, talking about them, touringthem, we love it all. Perhaps you love real estate, too, though youmay not be feeling so great about it right now. The last couple ofyears have been brutal for everyone. We made our first million inreal estate in our early 30s and built up to a net worth of about$2.5 million at its height. Then came the financial meltdown thatled to our hobby as sellers of short sales.

How to Make a MillionDollars in Your Spare Time

Our story starts over 20 years agowhen we bought our first house, nothing down, using OPM: OtherPeoples Money. It was a dump, a fixer in terrible condition. Welearned to paint, spackle, plumb, insulate, repair, paint, laybricks, landscape, grow grass, and, did we say paint? Two yearslater, we sold the house at a profit of $80,000, and we were on ourway. Three fixer-uppers later, Alan got to design our dream homeand we watched it being built. A couple years after we moved in,two things happened. One, Alan made an offer to purchase thearchitectural firm he was working for, but the deal didnt workout. Two, Alan performed the sad duty of being a pallbearer for thewife of his lifelong best friend. Life is too short. So he quit hisjob and we went into business for ourselves, buying houses, fixingthem up, and selling them. It was a blast and we were good at it,too. Talk about work you love, this was it.

But Where is All Our MoneyGoing?

Then we started to make mistakes. Solda house and exchanged into others, but we didnt fully investigateour numbers and ended up with a huge negative cash flow. Noproblem, just make more money, or so we thought. Then we found afinancial planner who had a novel real estate investment companyand he invited us to invest in it. It was very different and wouldenable us to help first-time homebuyers. We did our due diligence,hiring a private investigator to check his background and havingattorneys review the business plan. When no alarms went off, wejumped in with both feet. We were so excited about this businessthat Alan went to work for the company.

A couple years later, we attended atwo-hour class called Living in the Black about the high cost ofcredit debt. We came home from the class and cut up all our creditcards, determined never to use them again. Further examination ofour financial situation using software recommended in the classrevealed that we were headed for bankruptcy. Bankruptcy?! How couldthat be? We had an excellent income. But we learned that the highcost of carrying all the properties we owned was claiming everydime of that income, and then some. The software indicated that itwould take us fifty-three years to pay off all that debt. That is,if we lived that long! We finally figured out that we were introuble, but we didnt know what to do. Our financial planner keptassuring us that his plan would solve all our problems, but webegan to wonder. Our gut alarm was telling us that something wasntright.

We identified the biggest cash-losinghouses we owned, and listed them for sale. But it turned out oureffort was too little, too late.

A FinancialMeltdown

At our financial planners real estateinvestment company, rumors began flying. Our financial plannerstarted to sound like Bernie Madoff. Then one day in August 2009,the FBI seized all the assets, computers and files of the firm, andshut down the operation. Alan was suddenly unemployed and ourfinancial plan was a financial nightmare. We started listing moreproperties for sale. We moved out of our beautiful custom home andrented a house in another city where, hopefully, Alan could findanother job.

How We Made the Decisionto Short Sell

Then came September 2008, and thevalue of all of our properties began to drop dramatically, leavingalmost all of them worth less than the mortgage. Our income was afraction of what it used to be, and the money wed always held inreserve for an emergency like this was gone, lost in our financialplanners mess. We began calling our lenders and speaking to peoplein the loss mitigation department, something wed never dreamedwed have to do. With much dread, we realized we couldnt makemortgage payments, that wed have to let go of everything wedspent twenty years building, and decided to sell everything.Because the values of our properties had dropped so low, that meantshort selling.

We dropped the prices on homes wealready had listed. Then we started to list our other properties,one this week, another the next. Listing our principal residence,the beautiful dream home Alan had designed and built, wasgut-wrenching. In the back of our minds, we both hoped wed findsome way out of this mess before it sold. Somehow, we thought,there might be a way to keep it. We decided not to list two rentalsthat had a positive cash flow, but several months later, thosewent, too.

It was a tough time, the toughest timeweve had financially in our entire lives. Collectors calling, fiveor six properties in short sale at the same time, trying to figureout how to pay the rent and keep food on the table when we barelyhad two nickels to rub together. We dealt daily with the deepembarrassment of the financial mistakes we had made combined withthe shame of having not only believed in that financial planningfirm, but actually promoted it to other people, and worked for it.It was an overwhelming feeling of regret and shame that is hard todescribe. And as a result, we were in a situation where we had toessentially give away our dream home, and struggle just to put foodon the table for our kids. Life was indeed different.

Why NotBankruptcy?

Declaring bankruptcy began to lookinevitable. Several people advised us to do that, and sometimes itseemed the debt load we were under would bury us. But we read LarryWinget, author of Youre Broke Because YouWant to Be , and he strongly cautions againstbankruptcy. And we talked to two friends whod declared bankruptcy,and they both advised us: avoid it any way you can, because theemotional toll is so great.