The Second Step

The year is 2011.  I have been living in my home for about 3 years, and am relatively happy with the way the it has shaped up under the consistent forging of hammer and nail.  The Real estate market has continued to slip in vlaue from my time of my first home purchase and has settled at what would be almost the exact bottom for the San Diego market.  I am by no means advertising my interest in real estate with a road side billboard, but my circles are well aware that I like the concept of REI.  It's a tuesday afternoon, when I hear a knocking on my door.  My neighbor from across the street in the most casual tone asks me if I would like to buy his house.  My eyebrows perked.  I said yes agreeingly and asked how much he wanted to sell it for.  He told me that he and his wife were divorcing and he wanted to short sell it to me for $50k less than I had paid for my house...of the exact floorplan, but with $100k in upgrades. my jaw dropped.  For me, this was the defining moment, where I would transition from one time home owner, to real estate investor. 

It was a difficult time though.  My first home purchase happened while the market was crashing, and REO/foreclosures were low hanging fruit.  The corrective actions weren't yet implemented, but values were incredibly low.  It was the perfect time to buy.  I used a CalVet loan, and closed smoothly in under 45 days with zero down, and a moderate cost of repairs to satisfy CalVet.  This time around was not that simple.  The red tape was stretching across every pathway, until the deal looked like a 3 dimensional spiderweb of restrictions.  If that wasn't bad enough, the underwriter had to make a determination about my current house that made me aware of a growing market trend.  People were taking advantage of the low cost to entry, and buying second houses, just like I was.  They, unlike me, apparently were buying their second homes, and instead of renting out or selling the first home (tough market to sell a full price home or net enough rent to cover mortgage), they would default and let it go back to the bank with no worries about credit, because they had just upgraded to a home they could afford for the long haul.  This was a "thing".  So after a few mortgage companies turned us down, it became clear to me that buying a house across the street looked like a clear cut "upgrade and run" situation.  Before I ever signed the loan docs on my new home, I already had a signed lease agreement for my current home to satisfy the underwriter.  Fortunately for me, the numbers worked out that I could cover my mortgage with rent.  What a fantastic opportunity!   I can pay off two houses at the end of 30 years instead of one.  What's not to like.

The short sale:  The short sale was not easy, however, knowing what I know about short sales now...It was as easy as it gets.  I owe that completely to having a great RE agent, and Mortgage Broker.  Lori Mason and Mark Hansen.  Great people.  They did great things despite the the opposing agent, who was a snake in the grass.  I cannot say enough about treating people with respect.  The neighbor that offered the house to me in the first place was my greatest advocate, not only because he offered an opportunity to me at the greatest possible time, but because he saw it through.  He was upside down on the mortgage like so many other people.  He was the sole source of income in the family, and the decision maker.   He had it in his mind to sell me the house because I was his friend, and he liked and respected me.  He had a dollar figure in his mind to short sale the house, and he was not budging.  The opposing agent had another agenda.  Reaching out to cash buyers in her contacts list, she attempted to isolate the neighbors wife, convince her that a cash deal was in her best interests and sign documents for the transaction without her (still married) husband knowing or being present.  It was around day 40 when I called the opposing agent to see how things were forming with the bank.  I will never forget what she said to me.  "Lupe is taking another offer.  Sorry.  Bye".  Just like that, as casual and thoughtless as that.  I called my agent Lori, and my neighbor...WTF?  This was a bad move for her.  Not only did she feel the wrath of my neighbor, who hired her in the first place, but she got Lori too.  The following day, we were back on track.   The deal finally closed in just under 3 months, and through the obstacles, we were the victors of what would become a stronghold in the PUD, and over $150k in equity.