Here my financial statement that is submitted to the bank as part of the shortsale packet to avoid foreclosure. Note, this does not reflect the Utah property that I just sold on the wrap a couple of days ago. But its close enough:

Here is the expenses portion of the income statement. Notice the 20 grand in monthly expenses mostly because of mortgages on 6 houses and huge credit card bills.

Here you can see the balance sheet portion showing assets and liabilities. I have 2 million in assets (value) and 2.2 million in liabilities (debt). The assets are the 6 houses and money in the bank. Yeah right, what money? The liabilities are my mortgages on those houses and my unsecured credit cards / credit lines.

I am $2.2 million in debt but if you subtract the value of the real estate I am actually only about $200,000 in debt… only!

I did not include the cost of liquidating (selling) the real estate. The cost of selling is typically 7-20% depending on how hot the market is.

Back in 2004 you can pay a broker 5% plus some closing costs and you’re done. In a down market like we have now you have much harder time.

First, You have to discount the price by 5-10% unless you want to be on the market for 6 months or longer competing with all the other inventory.

Oh and on top of that you have to make sure you have the cleanest and nicest house or the picky buyers of the down market will move on to the next one. Cleaning / remodeling will add to the selling costs.

Also if this is an investment house and its currently vacant you have to add the holding costs for every month on the market. This includes mortgage payments, utilities and maintenance.

Then, after you pay the 6% commission, closing costs, transfer taxes and other associated fees you will be lucky if you net 80% of value. Of course, if you are a savvy investor and know how to market your property correctly you can usually do better then that, but I’m talking the typical scenario for most people.

So if you adjust my real estate assets of 2 million to reflect the typical 20% selling cost you are talking about only 1.6 million. Subtract 2.2 in debt and I am -$600,000. That’s not fun.

Do you see why I am facing foreclosure?