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Larchmont Foreclosure Sold at $199K after Failed Short Sale

[Banks lost at least $130,000 on me. Talk about my consequences on the show and comments here.]

Larchmont sale MLS screenshot

Some of you already know about this, but the Larchmont REO property was sold by the bank for $199,000 on May 11th. See the provided MLS screenshot. I lost the Larchmont property to foreclosure on February 27th, 2007. I was at the foreclosure auction in person and watched it go back to the bank for $216,000 because nobody bid on it.

A little history on this foreclosure…

I bought this property for $330,000 on March 13th, 2006 with 100% financing. There were two loans 80% first and a 20% second. This deal was put together by another investor and was being offered through the local investment club with the cash-back already built-in.

I just had to pay $7,000 non-refundable assignment fee in order to take it over, which I did. I was going to use the $50K cash-back for repairs and pay a few mortgage payments then sell it on a lease option. Too bad things didn’t quite work out that way…

The $50K carrot…

I rushed into this deal because the $50K “carrot” was just too hard to pass up. I needed the money to float the other properties I was buying at that time. I was buying out of desperation without considering the exit strategy too much.

The monthly payment on 330K with 100% financing was a lot more then I can rent it out for, even with a lease option. I would be $1,000 negative every month if I would rent or lease it. The purchase price seemed a little high too. I knew there was no way I could turn around and re-sell for the same price. Especially since it still needed repairs!

What was I thinking???

Short Sale Attempted…

At least, I did try to salvage the situation later by starting to do some repairs (before I ran out of money and credit). Then I tried to lease option it. When that didn’t work out I tried a short sale. The nice short sale Realtor I hired fought long and hard to get the short sale done for me.

We finally had a buyer at 220k but the bank wasn’t willing to go down that low on a short sale at that point. My agent eventually got the bank to accept that price but the buyer got tired of waiting and moved on!

Banks Could Have Saved 70K on a Short Sale and Avoid Foreclosure!!

The bank could have sold the property on a short sale for 220K. I was even willing to sign a $50,000 promissory note to make it happen. That was the only way they would let the short sale happen.

The first loan was at $264,000. So the offer of $220K plus my $50K promissory note would have given the first lender most of their money back over time.

What was the bank thinking??

Consequences and debt liability…

What’s done is done. Can’t go back and change history. Now all I have it try to deal with the consequences. That’s something I’ll have to figure out.

  • Can the first or second lender go after me for the lost money?
  • What can they do and what are my options?
  • How can I show good-faith effort and try to make amends and/or pay some/all the lost money?

Hear From a Former Manager of the Collection Department Tonight

A loss mitigation specialist and associate of mine (goes by “LossMitPro” on the web) agreed to be on the show tonight. He will help me tackle some of the questions about debt and consequences from foreclosed houses.

He now helps people who are facing foreclosure by negotiating with the banks on their behalf. His experience and expertise comes from being in the collections industry for over 15 years – both as a collector and manager of collection department.

Feel free to call-in and give me any advice or ask questions.

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