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This is a story on Forsyth County. There is a California investor who has 7 properties there, all nice single family houses, which are all now going into foreclosure.
I am wondering . . . is the same thing happening here? The reporter states that there are other out of state investors with homes going into foreclosure in Forsyth and it seems to me if it is happening there, it is probably happening here.
The houses are being rented out, and the renters have no clue that they are getting ready to be evicted, til the Sheriff's deputy shows up at their doors.
The man's name who owns the houses in this story is Adiel Gorel, owner of ICG, who has made a reputation as an "investment guru."
Anyone know how much of this type of thing is happening here in Charlotte?
I have looked at homes in Longview that were for sale, and I know for a fact that there has been an "investment group" that has bought 3 houses in there and currently are trying to buy another one. All of these homes were foreclosures. I was told that this investment group is buying a bulk of a 100 homes throughout the country for investment purposes.
I wouldn't want to part of that investment group if they are only buying the upper end homes. Don't know if this group is related to the one in Forsyth County.
I have looked at homes in Longview that were for sale, and I know for a fact that there has been an "investment group" that has bought 3 houses in there and currently are trying to buy another one. All of these homes were foreclosures. I was told that this investment group is buying a bulk of a 100 homes throughout the country for investment purposes.
I wouldn't want to part of that investment group if they are only buying the upper end homes. Don't know if this group is related to the one in Forsyth County.
Dear me. Why would anyone be betting on folks eventually buying $1M and up homes? Seems darn risky to me!
The folks that were involved in the investments in Forsyth were evidently buying up houses in a much more realistic price range - under $300K or so. It is sad those houses are going into foreclosure. I would think it would be better to lease them out w/ an option to buy - and not let them go into foreclosure.
I feel awful for folks renting these houses with no clue that the owners are getting ready to default on the loans.
I can't imagine that it isn't going on here in Charlotte/MECK. I would be doing a search on the deed/title and find out who actually owns a home b/f renting it - or check it out now if already in a rental. It would be awful to be slapped w/ a notice to evict and have to quickly pack up and find another place to live. And I guess these folks are losing any downpayment they made, too.
Some people, actually a lot of people, who are fully employed and can make the payments are choosing to walk away from homes that have dropped significantly in value vs what is owed on it. i.e. Why keep paying on a $450K mortgage on a home that now is worth only $250K. So rather than be stuck in this situation, they are going to take the hit on their credit rating and just move out. Bank ends up foreclosing to settle the legal stuff.
Why doesn't everyone who has a car loan do the same thing you suggest?
It is a depreciable asset right?
Well, it's a valid question as the idea is the same. My answer to this would be that everyone buys a car knowing the moment they turn the key and drive it off the lot, it's worth less. This is an assumption when buying one.
On a house, everyone expects to sell it for more than they made. But even forgetting this, when you are all of the sudden in the hole for $100s of thousands of dollars that you are also paying a lot of interest on, the business decision would be to terminate the contract with the bank as outlined in the contract. i.e. You forfeit all previous payments and they get the property back. It's perfectly legal. Bank will also ding your credit for doing it.
It's becoming so common there is a name for it now: Strategic Mortgage Default. There is even a topic going on here on city data about it.
On a house, everyone expects to sell it for more than they made.
So, if they think the value never goes down, then they use the "equity" like an ATM machine, right?
sound familiar???
Well, not everyone expects or expected to get "rich" off their home. Some people actually thought their home would appreciate slightly modestly (sounds crazy, doesn't it?). A home is a LOUSY financial investment. I've said this for almost 3 years on this site fighting w/sunshiners and realtors about this. Yes, some got luck and timed the housing market very well, but when you "flip" and the cards come crashing down, you lose. On average a home "appreciates" right around the inflation rate at best.
Look, I'm not arguing AGAINST you on this. I know about defaulting on the loan. If the banks were stupid enough to give out loans where people could do this, then they get what they deserve.
Again, to me its the principal of the thing....whether its $1 or $100K, you invested in a DEPRECIABLE ASSET and you should pay what you agreed too....
I was not making a moral judgement for or against this activity. I am simply stating this is what people, a lot of people, are doing that is leading to some portion of the foreclosures. I also offered up a possible rationale, since you asked, for why it is happening.
So, we pocket the "gains" but refuse to pay the contract we signed if the value goes down? I get it....a win-win right....?
Why doesn't everyone who has a car loan do the same thing you suggest?
It is a depreciable asset right?
A car is 20K while a house in several hundred thousand so it's a much larger different. Also you pay a car loan from 2-5 years while a home is 30 years.
The problem with strategic default is, if people aren't careful, they can get sued for a deficiency judgment.
Mortgage lenders pursue homeowners even after foreclosure - Yahoo! Finance (http://finance.yahoo.com/news/Mortgage-lenders-pursue-cnnm-3107909798.html?x=0 - broken link)
It would actually be better imo for society if these people can get rid of these huge debt burdens. The quicker it happens, the quicker society can get back to normalcy.
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Some people, actually a lot of people, who are fully employed and can make the payments are choosing to walk away from homes that have dropped significantly in value vs what is owed on it. i.e. Why keep paying on a $450K mortgage on a home that now is worth only $250K. So rather than be stuck in this situation, they are going to take the hit on their credit rating and just move out. Bank ends up foreclosing to settle the legal stuff.
It's happening a lot more than one would think.
There are also people who are continuing to pay on a mortgage where the home value has dropped 100-200K because they either are waiting it out or still can afford it. What stinks is when they do try to sell down the road, be it next year, 5 years from now, 7 years or whatever, they won't be able to sell. Since they are so far underwater and will still most likely be underwater at that point, (Especially since a person pays interest in the beginning of their mortgage loan), they will either foreclose or short sell. So this mess will likely go on for a long time...
I had read an article by Dr. Hudson who was saying they should just erase everyone's debt burden and start over like they did in the Babylonian times. The solution sounded a little over the top at first, but I think it would help and get society/economy back on track again much more quickly.
Well, Sheenie, I sure got my assets wiped out in the blink of an eye, lol!!! One day the computer shows all these digits and the next day it shows nada. So it would seem to me if assets can be wiped out by the big computer in the sky, it would seem anything on the other side of the ledger sheet could go >Poof!< just as easily, lol.
It's all just numbers in a computer, when you think about it.
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