Here's a new one: Being too broke to sell (your house)

Most anybody in the mortgage business will tell you that August was a month that will live in infamy: The market was in turmoil, as doubts about the stability of subprime loans spread to other sectors of the mortgage world.

How bad was it? A survey of mortgage brokers suggests that one in three consumers who recently signed purchase contracts canceled in August -- up from just 4 percent three years ago, according to the research firm that conducted the survey for Inside Mortgage Finance, a trade journal.

The cancellation rate undoubtedly was fed by two scenarios playing out: Many buyers couldn't get mortgage approval because lending suddenly tightened; or, financially strained lenders yanked funding from their borrowers at the last minute.

But another factor was at work: Sellers -- not buyers -- were in trouble as their closing dates neared.

"Our office had four sales in one week that failed to close because the seller didn't have the cash," said the real estate agent, who declined to be identified because she feared office repercussions.

It can be negotiated in a purchase contract.

Well, sure - - nearly anything can be negotiated in the contract, but typically the contract will simply specify a seller concession in the form of a flat dollar figure or a percentage like 3% or 6% (of the sale price), etc., "to be applied to buyer's costs".

I have never seen a contract drawn up specifying that a seller will pay for a buyer's title insurance. Of course, my thirty-plus years of experience in the business is all in Pennsylvania. Practices can differ in other states.

Let me be the first to suggest that by next Summer, you'll need a helleva lot more than $7K to get rid of it.

That's kind of what I am afraid of. I am seriously considering just giving the keys to the bank and washing my hands of it since I simply don't need it. I am renting a great house from family for low rent (in a situation that helps everybody out) and I am wondering if the harm of foreclosing on the condo would be any worse than all the money in lost equity, interest, and fees I would lose anyways? Many are saying "rent it out and ride it out" but I am starting to think why wait and also deal with the headaches of being a landlord on top of everything else? Anyone here ever foreclosed on a property before? Is it that traumatic?

This response is a little late, but I’ve been off FR and thought this deserved a reply.

You cannot LEGALLY decline any offer at asking price without risking a violation of federal housing laws. By acting as your own selling agent it’s possible to actually meet potential buyers when they visit the property, and by being personable it’s easy to strike up a conversation with the potential buyers.

Once you determine that you don’t like them, talking the property down to keep people from making offers is easy. Try: “Yeah, if you can stomach the high crimerate and tweakers in this area, the house is a good deal. I keep my cars and tools locked up, and my gun loaded, and have no problem with the neighborhood!” If the potential neighbors look to be potential gangbanger types, use: “This is a very safe neighborhood. The neighbors are very nosy, and we’ve got an excellent neighborhood watch program. Just last week some guy was walking down here we didn’t know and kind of looked suspicious, so Randy (the redneck down on the corner) confronted him and held him until the cops showed up. We had a tagger in here a few months ago too. We caught him and had him arrested.” Investors wanting to turn the place into a rental? “The house down the street was a rental up until a couple of years ago. The people on this street really didn’t like the renters, so they started calling code enforcement and complaining to the owner about every little thing they did. It took him a while, but he finally got sick of it and moved. I was thinking about renting this one out myself, but this neighborhood is such a hassle that I decided it’s easier to sell it.”

Then again, there’s one other very simple (and non-discriminatory/objectionable way) to accomplish the same thing. Mention that the house would be a great investment “with a little bit of work” (true in almost every home sale), and then refuse to permit a home inspection. When the selling agent asks why I won’t permit a home inspection, I can truthfully reply “Because California law requires me to disclose any structural issues with the house once they are documented. I’m selling as-is.” Most buyers will run at that point.

While I couldn’t directly refuse an offer, it’s not all that difficult to discourage people from purchasing it.

All of this is perfectly legal.

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