Tortuous Short Sales: Cheaper Purchases That Aren't Always Worth It

As a buyer, you will be negotiating with at least two parties, the seller and the seller's lender. It can take three or four weeks, even longer sometimes, just to get the lender to say yes or no to your purchase offer. Sometimes they will present a counteroffer, but not always. The lender will get its own professional estimate of the home's market value, in addition to the appraisal you need for your own mortgage application.

You buy a short-sale home as-is. The seller has no money to cover your closing costs, and the lender certainly doesn't want to hear about your needs. The buyer can pay for a home inspection, but that's strictly an exercise in information-

gathering. Nobody's going to pay for repairs.

It's also wise to pay for a title search early on so you can learn whether any other liens have been placed against the property. The second--lien holder needs to okay a short sale, and there can be some negotiating between the lenders over who gets a share of the proceeds as their price for letting the deal go through.

Unpaid property taxes pose another threat to your deal. Some subprime lenders did not require that borrowers prepay their property taxes through an escrow account. If there are unpaid taxes, a buyer may have to write a big check to cover them before the deal can go through. No one gets anything until the tax collector gets his due.

If you have the patience and the cash to cover upfront expenses, a short-sale deal can be one of the cheapest ways to get into a home now. Some lenders aren't too willing to consider short sales yet, but given the price declines in some parts of the metro area, they're probably going to get much more used to the idea.

Md. Firm's Assets Frozen

Maryland authorities have frozen the assets of Metropolitan Grapevine and its related companies, along with the personal assets of its chief executive, Andrew H. Williams. On Monday, the Prince George's County Circuit Court appointed Invotex of Baltimore as receiver for the companies. Invotex has been directed to track down the group's assets and, if any are found, will attempt to create a pool of money to refund to investors and other creditors.

The local company had promised to pay off the mortgages of participants in its Dream Homes program with money it said it earned from the sale of automated teller machines and video advertising.

According to a statement from Attorney General Douglas F. Gansler's office, more than 1,000 people invested approximately $50 million in Grapevine and its related companies. The court found that Grapevine's businesses generated "no significant income," and that they are insolvent, with liabilities of $200 million to $300 million and assets of approximately $2 million, the statement said.

The receiver is still trying to locate assets, including bank accounts and more than 50 vehicles.

Invotex, the receiver, has established a Web site that Grapevine investors can use for updates on the case, http://www.pos-receiver.com. Participants, including those outside Maryland, can call Invotex at 410-824-7139.

Gansler also asked anyone who knows the location of Grapevine vehicles, bank accounts or other assets to contact Invotex or call the attorney general's office at 410-576-6360.

Considering the relatively small amount of assets found so far, compared with the huge sums collected from Dream Homes participants, it looks as if many people stand to lose much, if not all, of the money they gave Williams and his partners. Participants had better be making their own mortgage payments now or they will face delinquency or foreclosure. They also need to be on guard that they don't open themselves to further losses by trusting someone who claims to know a way out of this mess.

The only way to recover money invested with the Dream Homes program now would be through the receiver's office, and the people there are still trying to find out where the cash went.

E-mail Elizabeth Razzi atrazzie@washpost.com.