Underwater Investor won't sell

[Kevin Polite]

I've contacted the out-of-state investor several times and asked if he was interested in selling a property I discovered they had a $100k mortgage. In the condition it's in it's probably worth $30-$35K at best. As I have my license I can't do a short sale, but asked if he was interested in selling as a short sale. He was, but not at the price I was offering and wouldn't sell as a short sale. The home is currently vacant and is in no condition to be rented. I asked him what is he going to do with the property and he said wait. I'm not wasting anymore time, but wonder why would someone not just cut their losses.

[Account Closed]

Is this a real question? People don't cut what we perceive as their losses for all kinds of reasons. Some rational, some not. I'm in CA so I encounter the belief that property values will go back up to 2007 prices every day. Some areas, for sure. Not the desert town where the crappy $20K property sold for $100K at the top. Without easy lender money, that game will never happen again.There's also a math problem. People think they are not taking a loss if they can sell for what they paid. But they won't count the cost of improvements, the interest, taxes and expenses they paid for 10 years.

Some people pretend that negative cash flow isn't happening. Some people see their negative cash flow as an advantage on their taxes. Some people will never do a short since it will negatively affect their credit. This is a big one. Some people really care about and need their credit. Running negative on an upside down property is the price they are willing to pay.

If you're an agent, how do you deal with the credit concern? It's not like you can say it doesn't matter. It matters less for the people who already trashed their credit with missed payments. But what do you say to someone who has never missed a payment and has perfect credit? The account will get reported as settled for less than owed. That's a ding. Hard to gloss over that.