So last night i hear that a neighbor was just foreclosed upon.
NOT. GOOD. AT ALL. Especially since i was hearing this while watching my 'Skins drop their lead and lose it against our rival Cowboys last night!Talk about a double whammy. One being more important than the other, ofcourse, but equally upsetting ;)
I didn't know this neighbor, but she sure threw some awesome parties! It was like Cinco de Mayo there every other weekend - at least when peering through our window in jealousy. We were never invited, but now we share their pain....damn economy.
I'm not sure of her entire situation exactly, but from what our GOOD neighbors say (the ones who invited us to watch this so-called football "game" last night) it seemed as if their interest rates reset and they could no longer afford their corner-unit with a glam frontview of our LAKE!!! arghh....so they then tried to "short sell" it, only to find out their lender won't except it!!!
Short Sale: A short sale occurs when a property is sold and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed.So while this neighbor HAD an offer on the table to buy the property at a MUCH lower value (i think it was around $300k for a place that sold for $370 two years ago) she just said "F it" and it is now in foreclosure. ARghhhhhhhhhhhh.....
So now, the minute it sells for buttloads less, all of our places will drop in value!!! I don't know the logistics of it all, but basically if her stupid corner townhouse with the f'ing fantastic view sells for, let's say, $200k (God forbid), and our not-*as*-nice places used to be valued at $350k-$370k, then the next buyers coming into town could value our places around $250-$300k or something equally horrendous. I really don't know how it all works out in reality, just in theory ;) What i DO know is that it hurts us either way...and it really pisses me off.
Again, i don't know her specific situation, but it just sucks when you are a good little citizen and pay your dues on time and diligently, yet you lose thousands because of someone else's mistakes! Why again did we have to buy a house so randomly at the peak of the market? oh yeah - to follow the American dream! F to the F to the F, F, F.
Labels: crazy economy, foreclosure, home ownership, rant
posted by J. Money at
11:35 AM
20 Comments:
Oh yikes. That sucks. I don't think it'll drop your value too much, unless others are in the same situation... but regardless, as long as you aren't planning on selling for several more years, it'll be ok...
Interesting, my area house prices are pretty stable, but there are people that just completely bought what they should not.
One neighbor across the street just sold their house they had for about 30 years, selling for pretty much the same as what my house was purchased for earlier this year (never saw any declines in price). Now there is a house 2 over from that being foreclosed. The house has been vacant for about 2-3 months, and then all the sudden over the last weekend about 15-20 people came by to see the house that I saw! I think the house is going up for auction. However, I am not too worried even if it sells for less than the others, I know what mine is worth and we are stable here.
Good luck with your values if you do have to sell any time soon.
paradigmshifted is right, you haven't lost anything until you sell. You still have a roof over your head for a mortgage payment you can (hopefully) afford.
And I can't speak from experience, but it would seem that if the Bank wouldn't take the short-sell offer of $300k, the chances of them taking less when they sell it is slim.
That sucks! I don't think you have quite as much to worry about right now. My cousin is a realtor, and he told me that they are not supposed to use foreclosures for comps for other (non-foreclosure) properties. The bad part is he said that at least where he's at (Colorado Springs) they are working on getting some foreclosures allowed for doing valuations. Don't know the details, but that's what he told me on a short phone call the other day.
hopefully you won't have many foreclosures in your area. if this is the case then when someone comes looking to purchase in your neighborhood, a GOOD and KNOWLEDGEABLE realtor would exclude the foreclosed property from the comps because it's not "ordinary." i guess one could argue that foreclosures are ordinary in this market, but oh well. enjoy your home and ride out the cycle...the real estate market has been here before.
Dude... that sucks for your neighbor.
So I did some research (I'm bored at work, don't tell on me)... and the way it hurts your property value is like this:
Let me put on my tweed professor jacket here...
Some home appraisals don't take into account your actual house's asthetics, only the land, sqft, rooms, etc, and comps.
Comps are comparable houses that have recently sold or are currently on the market.
So, since this neighbor's place will be considered a Comp, when the place sells for cheap, it drives the average Comp price way down, which in turn, drives your house down, your neighbors, their neighbor and so on. That's why they say 1 foreclosure affects everyone within a square mile or something like that.
Taking off the nice tweed jacket...
So yeah... it blows. Unless you're buying a foreclosure... then you win! Bottom line... gotta ride it out... maybe you could pick up her place as an investment property ;).
Wow that really is a bummer. I never really thought about others forclosures and how it effects everyone else, so this was quite interesting to read. I am sorry it has to come from your first hand experience though. That blows. But I agree with some others above, if you ride it out and hope that not many others foreclose hopefully you will see the value of your condo go back up. (I even more so agree with Tom's idea of picking up her place as a property investment. Interesting twist on the situation if that was possible!)
Best of luck!!! =)
I think all of the people commenting on this post are missing the main point; while this was all happening, the Redskins lost to the Cowboys.
On a serious note, I completely agree with Tom, in that it sucks right now, but all it really means it that you have to ride out the storm and try to find ways to take advantage of the bad situation.
hahahha...YES What the hell were the Skins thinking!!! haha..oh man, that was totally not what i thought you were gonna say! thanks for that :)
You guys are right - as long as we stay in our place for a while we're a-okay. Here's the problem though (which is a whole 'nother post in itself), i wanna get the H out! haha...i mean, i LOVE our place, but i seriously need to get closer to the city and have less space - 3 furnished levels is way too much for a cple w/ cats only...but at least they're in heaven :)
so in that regard, it was pretty foolish in picking it up anyways - but then again, my financial status would still be in la-la land and this blog wouldn't exist. *gasp* so i suppose it's all meant to be.
all that being said, i PRAY that it's not gonna be used in comps once the time comes!!! and you make a good point Scott - if they bank didn't want the $300k, maybe they have something better up their sleeves?
all i know is that the whole thing is pretty scary, and i won't be saying "Hah! that'll never happen to me" anytime soon...this economy is making all sorts of people bonkers.
I feel your pain J. There were a couple of houses in my subdivision that were foreclosures and they sold them for approximately 25% less than to original price.
On the other hand, why doesn't she just go to the government for a bailout.
Your graphics rock my world, J. Hang in there with your house and I'm going to send some good vibes to your neighbor and everyone else going through this!
Although it sucks that your neighbors house was foreclosed on, perhaps if she were not spending goo-gobs of money throwing parties every other weekend and saved her money she would have been able to afford her house or have money saved to pay the closing costs on a refi at a fixed rate.
I'm sorry, but I don't feel sorry for people who take out too much loan or an adjustable loan that they know they can't afford in two to five years. Did they really think their income would magically double or triple in that time and they would be afford their houses?
Sorry bout the skins, but even more sorry for your neighbor. But I agree w/ everyone else, as long as you aint selling and you can make payments, you are cool.
That really sucks. :( I have to say, if they couldn't afford to keep their home, what were they doing throwing wild parties all the time?
man, i have noooooo idea! but i gotta say, those parties sounded freakin' awesome! like w/ live bands and everything...it did suck trying to look for parking on those nights, but guess we don't have to worry about that anymore.
Glad you liked the graphic Nicole :) this one was super easy for me to put together - straight from the heart baby! haha...
@SingleGuyMoney - i heard she was actually next in line, right behind GM, for the bailouts...lucky bastard.
J. Money,
I was thinking about this situation during my Real Estate Law class last night. While I still stand by my questioning the bank's logic to turn down the $300k offer, I was reminded that the original terms of the sale could have a major effect.
For example, if your neighbor actually purchased the home with a mortgage (vs. a Deed of Trust, which is what we typically refer to as a mortgage), your neighbor would have signed a Promisory note. The Promisory note is the buyer's personal guarantee on the loan. As such, the lender (bank) would be able to go after your neighbor's personal assets as compensation for the debt due after a foreclosure sale, including any retirement investments.
If this is the situation, then the bank may not care if they lose money on the foreclosure sale as it's possible they could be made whole.
Either way, you still have your place. And unless you're forced to sell in a down market, this should ultimately have little effect on you.
Keep up the great work!
Amen brother :) A Real Estate Law class, eh? That sounds pretty tight - probably pick up a whole mess of good skills from that. I was once a realtor for 3 months, but I have obviously forgotten about everything. oops!
I used to work in Loss Mitigation for a Mortgage Bank. Usually it isn't the bank that isn't okaying the short sales, but rather the investors who own the loan. Our goal in loss mitigation, like the name says, was to minimize the amount of money that would be lost on a bad loan. Unfortunately, we were often tied by the wishes of the investors (often Fannie Mae, Freddie Mac or FHA.) If they didn't want to play ball, then we couldn't do any of the creative things that could be done to lower the losses.
If the house goes to auction, a representative from the mortgage company will be there to bid the current balance of the mortgage. Assuming she's only lived there a couple of years and had a small down payment, the bank will probably end up owning the house (which they don't want) because they're bid will be the highest. They can then try to sell at the current market rate, which is probably less than she owes, or rent. However, mortgage banks didn't get into business to be property managers, and financially they're not really set up to be owning a lot of houses. Eventually they will sell it for a closer to current true market value price, but depending on where you are that is probably less than it was a couple of years ago.
Yes, they can go after her for the difference, but it is often cost prohibitive. If she can't pay the mortgage, she probably doesn't have tens of thousands of dollars sitting around to pay the foreclosure costs that the bank has incurred. They can file for a judgement, but that just costs them more money that she doesn't have to repay.
Good luck - hopefully just one foreclosure won't hurt your property values too much!
So while this neighbor HAD an offer on the table to buy the property at a MUCH lower value (i think it was around $300k for a place that sold for $370 two years ago) she just said "F it" and it is now in foreclosure. ARghhhhhhhhhhhh.....
This person probably couldn't accept that offer because she didn't have a spare 70K lying around. So it's not like she decided to screw you all over as much she didn't have any other choice at that point.
I don't know enough about this person (and probably neither do your neighbors) to judge what led this person to this situation, but a little sympathy her direction wouldn't hurt.
@Kate - thx for the insight! the whole thing sounds pretty complicated to me. all i know is that it's not good for the community, nor her (the one who dipped out), or the investors :(
@Lise - this is true, i could have given her more credit than i did. i don't know her (or her situation) at all, so it's a lot easier and quicker to be upset and thing more negatively about the situation. I'm sure she has her reasons - like not having the 70k to make up the rest - but the idea of someone just "giving up" and walking away upsets me...*if* that's what she truly did. you're right though, i need to be a bit more sympathetic :) $hit happens to the best of us, and it's best to be helpful and positive. good lookin' out.
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