The call came at 9 a.m. sharp.

“Hello, Mr. Cotter?  My name is Lorraine and I just got your letter about short sales–my husband and I–and, well, we just don’t know what to do.”

“Thanks for calling Lorraine, what’s your address?”

“They posted a notice on our front gate, like we were common criminals or something. Wouldn’t even slip it in our mailbox or ring the doorbell.”

“Lorraine, what’s your last name?”

“I guess they want to sell our house, a foreclosure. We’ve lived in San Clemente 15 years.  Moved up here from La Jolla. Built a home there – on the beach. We need to talk to someone. Your letter seems nice.”

“When would you like to meet?”

“Do you have time today? Not at our home… They’re going to sell our house in a few weeks.  Could we meet at your real estate office?”

“How about 2 o’clock?”

“That’ll be fine.”

Lorraine and George Smith (not their real names) met with me for a half hour and made an appointment to visit an Orange County attorney specializing in short sales. They asked me to go with them.

The next day the attorney explained their legal alternatives.

“You are three weeks away from a trustee’s sale,” he said. “Do you remember when you received a notice of default? It would have been about three months ago.”

“We just can’t lose our house,” was all Lorraine and George could say.

The attorney explained that a short sale is a sale for less than is owed on the property, and requires lender approval.

“Your home apparently has a market value right now of about $700,000, and you owe approximately $1.2 Million in first and second trust deeds,” said the attorney, who had a very comforting bedside manner. “You are many months behind in your mortgage payments and curing the default right now would take about $40,000. If you do nothing, you will lose the house very soon and your credit history will suffer. But if you can get a short sale approved by the lenders, you can delay the process, be more in control of when you move, your credit report will suffer less, and you could theoretically be back in the house buying mode in two years. No guarantees of course.”

“We don’t have the money,” said Lorraine. “Our income has been cut in the last few months. We’re retired and I’m afraid someone took advantage of us.”

“A foreclosure is imminent,” said George.  “Let’s do a short sale, if we can.”

The property was listed immediately in the Multiple Listing Service as a short sale.

(The MLS is the catalog real estate brokers use to see what homes are for sale.)

A couple of dozen agents and buyers came through the house over a four-day period and three offers were obtained within a week. George was resigned to moving, but Lorraine was continually teary-eyed throughout the showings.

“Everyone says our home is so beautiful,” she said.

The best offer was selected and I called Lorraine and George to arrange a time to sign the contract, and send it to the lender for approval.

My phone calls weren’t returned for three days.

Finally, Lorraine called to cancel the short sale.

“We just can’t lose this house,” she explained.  “Everyone says it’s so beautiful.”   

Lorraine wasn’t sure how she and George were going to save their home, but mentioned that a relative might help them with the $40,000 in default. She acknowledged that even if that were to happen, the debt owed on the home was still far in excess of its market value, and prospects for increasing their income were nonexistent.

I wished her and George good luck, and told her not to hesitate if they needed to call me.

For more of the latest market news and statistics on San Clemente real estate, visit my blog at SanClementeRealEstateBlog.com or MCotter.com.