I was referred by a friend to talk to a young couple who own a house in an older neighborhood of Stead. This house looks like an adorable cottage from the outside. Houses that were built in the 1950s in an older neighborhood do not benefit from a planned community where schools, parks and shopping are close by. For this property schools and shopping are five to 10 minutes away. Once inside, you are standing directly in front of their TV, which means the living room space is small and limited. There is a small apartment-size kitchen with old metal cabinets and enough space for a small table. There is no dining room to speak of. Down the hallway there is a full bath and just two bedrooms. With limited living room space, no dining room and only one small bath it is difficult to have friends and family over. It is even more difficult to sell because the property is deemed by most buyers as undesirable. Most first-time homebuyers want a three-bedroom house with two baths. Most move-up buyers desire four-bedroom homes, more baths and more garage space. Most buyers want to buy homes that are newer and in desirable school districts.
When the homeowners and I sat down to review the comparable sales of this property, they were not shocked that their small house is only worth $55,000 today — a mere 25 percent of what they owe to their banks (two loans). Apparently they are keeping up with the sale prices of all the homes in their neighborhood. Next, I asked them why they want to short sell their house. Much to my surprise, one of the homeowners did not want to sell at all. This homeowner has made improvements to the house, including vinyl windows for better insulation, tile flooring in the small kitchen and tile showers, etc. I scratched my head and continued:
Annie: “Why am I here if you don’t want to short sell?”
Homeowner: “Well, I recently applied for my general contractor’s license and was denied. They ran my credit and discovered that my house’s value is way negative and therefore I was denied my general contractor’s license. I was told to either short sell my house or create an LLC for my business. I have already invested over a $1,000 for my application. To create an LLC for my business, it will take another $3,000. I want to get rid of my house so I can re-apply for my license. “
Annie: “So what you are saying is you need to be financially fit to own/run your own contractor’s business according to the Nevada State Contractors Board in Reno?”
Homeowner: “Yes. That is basically what the general contractor license board says. To be approved for my license, I have to be financially fit.”
This is true for many professions that require a state license. The prospective state licensee needs to provide advance proof of income, which is a bank statement to prove that they have income to sustain the business for six months. In the state of Nevada, many contractors have been denied the renewal of their licenses due to bankruptcy, foreclosures, collections or judgments that will make them financially unsound/financially irresponsible to own/run a business.
Homeowners who want to pursue a short sale but need to maintain their good credit ratings may want to stay current on their mortgage payments until the house is sold. It is a difficult situation, since staying current means spending money that might otherwise be needed to pay for a business license to make money. This can apply to students, too: One homeowner client of mine is going to the University of Nevada, Reno full time and is on federal student loans. If his credit is less than what is acceptable, he will be denied further loans. In that case, it also makes sense for him to stay current during the entire short sale period.
Starting over is easy once you can see the pot of gold at the end of a miserable trip. Choose to be financially fit in 2012.
Annie Christian is a real estate broker and owner of The Annie Christian Real Estate Group. She helps with everything from buying and selling to foreclosure and short sale. To submit a question, call 351-5117. Her website is www.anniechristian.com.