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chasineyes

Mortgage Mess/Real Estate

51 posts in this topic

Here is a though about the Real Estate/Forclosure mess...Think about the amount of money that is lost in the transaction of a sale. I'll use myself as an example...We have a house we would like to sell to move closer to work (myself and now my wife work within 3 miles of each other in Bloomington) but here is the delimma. If we sell our home we will lose/pay out over $25,000 in fees, taxes, and yes commission and then about $4500 in fees and taxes to buy the home. So essentially 10-15% of my down payment on my next home is gone. Yes my home would likely be listed in the $330,000 range. Could this be what causes some people to just walk away? Think if I could stay in my home for 14 months (not sure how long the process takes) but I could save about $28,000. Just another though.

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Or you could... find a house that you want to buy closer to work. Change your current homes mortgage to an interest only - thus making it easier for you to qualify for the new house. When you find your new home, just walk away from your current home.

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I am pretty sure most people are not walking away from their house becuase they are reluctant to pay the $25,000 in fees you talk about. Fees and taxes are nothing new to home sales.

If people actually did this they would also walk away from any equity they built up in the house. They would also walk right into a credit nightmare. You can't expect to walk away from a house that then go right out and buy another one, not with the tight credit restrictions out there right now.

If people are walking away from their homes it is becuase they can't afford the monthly payments and they are not able to sell the house before the money runs out. Or they aren't able to sell the house for what the owe on it. Right now it is very likely someone could hold a $300,000 mortgage on a house that is only valued at $250,000. If the house is only appraised at $250,000 by the bank at the time of sale there is no way they will loan abuyer $300,000 to buy the house.

If you are not upside down on the loan then walking away from it is never going to be an attrative option.

People not owning up to the financial responsibility they signed on for when buying a house is a huge problem. If you buy a home then in my mind you sign up to pay the mortgage until you sell it. Not just walk away from the house beucase you don't want to pay the typical fees associated with selling it. This is a case of doing what is right.

If you literally have no money left to pay the mortgage that is one thing, if you have the money but just decide you would rather live somewhere else then there is a problem with financial responsibility.

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People are walking away from these houses and mortages cuz they bought more home than they can afford for an inflated price. Nothing more, nothing less.

People need to buy what they can afford and still have something left over in case something does happen. Common sense plain and simple.

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People are walking away from these houses and mortages cuz they bought more home than they can afford for an inflated price. Nothing more, nothing less.

While I agree with you, there are still plenty of people who lost their job, medical issues, etc. who are having their homes foreclosed on, not just folks who were over extended. I agree our society promotes having all you want to have and not worrying about the "What ifs". I think we are going through a MAJOR correction to prices, values, lending practices, etc. I just hope we start fixing the problem soon.

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I'd also throw in that, while we all should read the fine print and understand what we are signing for, not everybody has the same "skill set" to understand what mortgage brokers and bankers are telling them. Some folks may have been duped, due to their own or other's "intelligence". So to just blame some folks cause they should have known better is pretty easy, but not necessarily fair.

With that said, I agree 100% with living within your means, and I practice that to the best of my ability. However, I just built a modest cabin, and the mortage is more than my house... hehe... but my house is small and old, my toys and vehicels are all paid for, no balance on credit, and I am "thrifty" hehe... ok, I am cheap! smile But as mentioned, a medical issue could change my situation quickly, though I have planned for that as well. My wife laughs at me for my "contingency plans" but I think it is good for everybody to look at all the "what ifs" and plan for them.

BTW - I sold a townhome June 2007, and I am even happier now than i was then to have lost only what I lost then. It could have been lots more... so I can see many angles to this tough time, and I do feel bad for those who are getting the shaft, whoever is to blame for it...

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Quote:
While I agree with you, there are still plenty of people who lost their job, medical issues, etc. who are having their homes foreclosed on,

Can't disagree, but on the other hand those aren't the ones causing the problems and we have always had those.

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I think people just walking away from there home after they buy another one is a bigger problem then we think. And the reason is their homes value plumeted so they go into another home at a lower price and get more. These people that are doing this can afford what they took on.

I was talking to a realitor and this is happening quit often. I know of one person that has done this and it makes me sick that they can get away with this. I dont no how they do this but it is being done.

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I think people just walking away from there home after they buy another one is a bigger problem then we think. And the reason is their homes value plumeted so they go into another home at a lower price and get more. These people that are doing this can afford what they took on.

I was talking to a realitor and this is happening quit often. I know of one person that has done this and it makes me sick that they can get away with this. I dont no how they do this but it is being done.

I can't imagine how they can pull that off, gotta think that the bank would say you are already tapped out and not put together another loan deal. But with all the carp going on now nothing really surprises me.

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I can't help but think many of these are people that decided it was financially in their best interest to walk. Suppose I buy into a $300K home. Afterwards the market value plummets and I now owe much more than it's worth. I bought it with no money down so what do I have to lose by walking aside from my credit rating, which I can eventually rebuild.

The big, bad, gluttenous bank will get the house and auction it off to the highest bidder so they'll get some if not all of their money back. Besides, they can afford it, right?

Bob

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I think it happens when they put two separate loan organizations against each other and not fully disclosing everything.Via Banks on one hand and a government subsidized loan agency on the other. Being paranoid I would rather not say what that agency maybe. These 2 entities probibly dont talk to each other that well.

When you have money and are well set for retirement most anything is possible if one is selfish enough.

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I can't help but think many of these are people that decided it was financially in their best interest to walk. Suppose I buy into a $300K home. Afterwards the market value plummets and I now owe much more than it's worth. I bought it with no money down so what do I have to lose by walking aside from my credit rating, which I can eventually rebuild.

The big, bad, gluttenous bank will get the house and auction it off to the highest bidder so they'll get some if not all of their money back. Besides, they can afford it, right?

Bob

I think this is one of the reasons we are in this mess, but we all pay in the end. The bank can auction it off, but when they lose we lose.

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I agree.

I personally was in that situation once. Thank God it was only once. Bought a house in 1982 for $36,900 in northern MN. Four months later the mining industry took a dive, I got laid off, and the unemployment rate in St. Louis County hit double digits. I fought to stay above water on less than half my previous income and managed to survive even though my house payment consumed half my monthly net income, which was only about $700.

Four years later I decided to see about listing our house for sale. My loan balance was roughly $27,000 at the time. The real estate agent felt he could list the property for $20,000 and hope to get $18,000. I owed almost $10,000 more than he felt I could sell it for!

Four years after that I went through a divorce, went back to school on student loans, grants, and good old nose to the grindstone. Graduated from Tech school, met my second wife, got hired for $7.50/hr, rented out my home, and relocated to Alexandria.

Ten years later my tenant bought a house and so I found a new tenant. Four months after that my house caught fire because of a burning candle. It cost almost $50,000 to repair the damage. I put the house up for sale and sold it on a C/D for $42,000. That's $8,000 less than it cost to repair and only $5,000 more than I originally paid for it nearly 20 years earlier!

There were many times that I thought about letting the bank have that home but my conscience wouldn't allow it.

Bob

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Originally Posted By: BobT
I can't help but think many of these are people that decided it was financially in their best interest to walk. Suppose I buy into a $300K home. Afterwards the market value plummets and I now owe much more than it's worth. I bought it with no money down so what do I have to lose by walking aside from my credit rating, which I can eventually rebuild.

The big, bad, gluttenous bank will get the house and auction it off to the highest bidder so they'll get some if not all of their money back. Besides, they can afford it, right?

Bob

I think this is one of the reasons we are in this mess, but we all pay in the end. The bank can auction it off, but when they lose we lose.

I agree. We will be bailing the people out that have less money again. Dem thinking IMO, but I still think this needs to happen to save our country....even though it is wrong.

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Its too easy to walk away these days in my opinion. My friend and wife purchased a very nice large home in Lonsdale for $460,000 in 05 I believe. With the correction they are now worth $260,000. He could make the payments but figured whats the point. He left and purchased a house down the road for lows 200s I believe. I agreed with his decision because whoever allows these people to walk away is making it way too easy.

NO MORE BANKRUPTCIES ALLOWED. Especially for housing. Its getting rediculous. People need to be held responsible for this carp.

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Quote:
I agreed with his decision because whoever allows these people to walk away is making it way too easy.

If you leave your door unlocked and I come in and steal your TV it must be ok then becuase the blame is on you for making it too easy for me.

Walking away from a house like that is wrong no way around it.

If you walk away from a house that should mean no purchases of another house for 5 years. Maybe instead of allowing people to walk away we should be working with people to refinance the homes if they can not afford them. Perhaps simply waving the fees associated with refinance would be enough in a lot of cases.

But if you can afford a house but don't like the fact that your home depreciated in value so much then I say tough. Live with your mistake. Chances are if you wait long enough your home will again be worth what you paid you just can't panic and do somethng stupid like walk away from it.

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He could make the payments but figured whats the point. He left and purchased a house down the road for lows 200s I believe. I agreed with his decision because whoever allows these people to walk away is making it way too easy.

He sounds like a heck of a guy! So, he "could make the payments" but figured why should I take the hit when I can pass it along to someone/everyone else? WOW!....And you agreed with that? I suppose if his car falls in value, he could just pull over and walk away from that too. Then he'd really be set! Give my "thanks" to your friend. I'll think of him each time I make my new "bailout" payment. Better we all suffer than those who don't take a contract seriously. Come on....Its not the fault of those who "make it too easy" its the fault of those who do it. Geez!

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Seriously... how does one just "walk away" from a house??

Stop paying and get foreclosed on? Bankruptcy?

Seams like you are setting yourself up for a financial nightmare down the road no matter what the means is.

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Anyone that walks away - screws themselves in the long run. The best thing to do now is to hunker down, buy a gas mizer car and wait for the market to improve. And, it will improve because people still need to have and want a place to live. From my point of view there are many people who are getting a good lesson in prudent financial management.

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From my point of view there are many people who are getting a good lesson in prudent financial management.

THAT is what this society has needed for quite some time, IMO.

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Part of the problem with home sales now is there is no money available. At least none of the lending institution are willing to give out a mortgage. We are trying to sell our house in the cities right now. We have had several parties that wanted to buy but couldn't. Talked to one of the parties yesterday and found out they qualified but could not find a lender willing to finance them. They would only make equity loans up to 50,000 to 60,000 for people to make home improvements but no full blown mortgages. Talked to my agent about it this morning and she said about all that's available for money right now is a few million in various state and federal programs for first time home buyers only.

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Yeah, and it is gonna be that way for a while. But that pendulum will swing back the other way eventually. Lenders can't make money without making loans. But the pendulum was too far the other direction (easy money for all borrowers) for too long...it will take some time for it to get back to center after going so far back the other way (no money for any borrowers).

But...and you probably don't want to hear this...it could take a while. The bad loans need to be written off (or bought by the gub-mint bailout) and then there will be a period where the banks will need to 're-liquidify' (not really a word).

Give it six to nine months and the pendulum will swing back toward center.

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/quote]

Give it six to nine months and the pendulum will swing back toward center.

Six to nine months is very optimistic. There just isn't any money in the system. Easy money is not coming back soon. In the next year or so look for money to be available for people with a high credit score 750 +, and an upfront investment of their own money of 20 to 30%. That is going to limit the buyers pool and keep prices for houses depressed. I think it will take several years for our economy to get back on track. I also think the best thing people can do for themselves is to pay off their debt and start saving. Savings is a banks best source for mortgage and loan money.

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I agree.

I personally was in that situation once. Thank God it was only once. Bought a house in 1982 for $36,900 in northern MN. Four months later the mining industry took a dive, I got laid off, and the unemployment rate in St. Louis County hit double digits. I fought to stay above water on less than half my previous income and managed to survive even though my house payment consumed half my monthly net income, which was only about $700.

Four years later I decided to see about listing our house for sale. My loan balance was roughly $27,000 at the time. The real estate agent felt he could list the property for $20,000 and hope to get $18,000. I owed almost $10,000 more than he felt I could sell it for!

Four years after that I went through a divorce, went back to school on student loans, grants, and good old nose to the grindstone. Graduated from Tech school, met my second wife, got hired for $7.50/hr, rented out my home, and relocated to Alexandria.

Ten years later my tenant bought a house and so I found a new tenant. Four months after that my house caught fire because of a burning candle. It cost almost $50,000 to repair the damage. I put the house up for sale and sold it on a C/D for $42,000. That's $8,000 less than it cost to repair and only $5,000 more than I originally paid for it nearly 20 years earlier!

There were many times that I thought about letting the bank have that home but my conscience wouldn't allow it.

Bob

Are you my Dad? smile

Growing up on the Range, my father went through the exact same employment and divorce scernio you did in the early 80's. He went back to school, got his boilers license and moved to St Paul, where he remarried and retired as a custodian at the School District.

Kudos to you. It's no wonder I enjoy reading your level headed posts on a variety of subjects here.

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Thanks. I appreciate your comments but my guess is that if one would dig he would learn that I am by no means a saint.

Hanson,

Walking away doesn't always ruin one's credit anymore. Not like it used to or should anyway. I personally know people that have filed bancruptcy on more than one occasion only to find out that their ability to obtain credit actually improved for a time afterward. They explained that it is because it isn't possible to file for a number of years (7 years?) and so the banks consider you a lower risk. Go figure.

I don't know the real rules about filing but their explanation does seem to hold merit considering the financial activity I see them engaged in. Personally, I would be totally embarrassed to file bancruptcy because I see it as turning to my fellow tax payers to bail me out. I would really have to be in dire straits to use that avenue.

Bob

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