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I have a friend who lives in N California in a house thats really worth 2440k, but owes 850k on it. He lost his job and stopped making payments a year ago. The bank keeps sending him paperwork and telling him his house is being foreclosed, yet never have really pulled the house. It's been over a year now and he just got mail from BoA that they lost all his paperwork and they need to start the process again!
Meanwhile he is living for free off a golfcourse in N Ca.
I keep trying to help him find a rental house because he needs a place to live and he doesn't think the bank will ever pull his house. Am I being delusional or is he?
How long can someone live rent free in house thats being foreclosed on?
In some areas folks have lived for well over a year. In others the lender is on top of the situation, the courts are efficient and within a few months of defaulting the sheriff is tossing them out.
Eventually every foreclosure will be dealt with...
He's lucky!! But he is not preparing himself. He has been in this mess for the past 4 years. He is always on the verge of losing his house but he said he hasn't made a payment in over a year and he gets notices all the time to leave but the bank does nothing so he laughs it off. Now he just was told they lost all his paperwork regarding the foreclosure and the process starts all over again. He feels they will never remove him and the market will bounce back and he will be fine.
My uncle lived in his place for nearly 16 months after he stopped making payments, he stopped answering his phone and wouldn't answer the door if anyone knocked. Eventually the bank will take possession of the house and he won't have a lot of time to prepare so he ought to be taking steps now so when the time comes it won't be too tramatic. The market won't "bounce back" and he can't stay there indefinitely so he needs to start being realistic.
Even if the bank lost some paperwork it doesn't mean everything is reset to square one or that the process is going to take another year or more. There isn't just one set of papers in a file somewhere and everything has been recorded and can be regenerated.
I have a friend who lives in N California in a house thats really worth 2440k, but owes 850k on it.
If that is not a typo, then your friend is an idiot to let the house get foreclosed on, since he would have like 1.5 million in equity. If that is true, you find some way to keep the house.
If that IS a typo, then ouch for your friend, and I would do exactly what he is doing. Keep living in the house as long as possible rent free, since his credit is already shot anyway.
The bank will eventually foreclose, but the timeline is different in every state, and vary from bank to bank. Just in my area, I have seen a home go from first missed payment to auction in as little as 5 months and as much as 3 years (one I know of is now at 3 years and still hasn't foreclosed).
In addition, the banks are making a lot of mistakes. I know of one that slipped through the cracks because it was supposed to get foreclosed by Countrywide at the same time as Countrywide got purchased by BofA. The owners moved out, thinking it had been foreclosed, someone came in and winterized the house, and then a year later, BofA started contacting them about their missed payments. Fun times.
Your friend is smart to keep living for free as long as possible. In fact, when they do finally foreclose, they may even offer him some money for moving costs if he is willing to move out quickly.
Do you know if they have even filed a notice of default (or whatever they are called in your area)? The notice that they are going to foreclose, that has to be posted on the front door, sent certified mail, and maybe even run in the newspaper? If so, that starts the clock ticking. If they haven't even reached that point yet, he could have a ways to go still. Honestly, even if he moved out, no one would benefit. The house would just sit vacant, and the yard would die, and you might get squatters, or have frozen pipes, or any number of things.
So yes, you are correct that eventually he will have to move somewhere, but he is correct to stay as long as he can. 30 days before the auction date is soon enough to find a rental. Even then, he could take the chance that it might get postponed, since a lot of them do.
*Edited to say that because his credit is going to be totally shot, it would be smart to have a backup plan of someplace he could stay if he can't find a place with the bad credit right away, especially if your rental market is as crazy good as ours is right now. Otherwise, he might be staying in a hotel for a while with stuff in storage while he finds a place. But with thousands of dollars saved by not paying the mortgage all this time, that shouldn't be a problem for him.
I often read a blog related to RE in the Sierra Nevada. An issue similar to your friend's situation was the topic of discussion a while ago.
Someone on the site recearched NODs, NOS's and foreclosures. They found something of interest that prompted discussion. In short, it seemed that foreclosures on properties under 500K were being handled in a somewhat expeditious manner - at least from the bank's point of view. They were being completed.
However, when the owners defaulted on properties over 1M, the process was taking much longer. In fact, many were sitting in limbo with the owners remaining in them, even though they defaulted long before the owners of houses in the 300, 400 and 500K range with completed foreclosure actions. It was evident by the numbers pulled from county records.
As usual, there was a variety of discussion, including some off the wall comments and conspiracy theories. However, the line of thought was that there was some kind of benefit leaving the 1M+ house/loan as a non-performing paper asset, instead of taking it back, dinging whatever security had taken the loan and then realizing a real loss when it sold at a significant discount against the original loan.
Now it's easy to say that your friend's house is worth 2.44 Million (2440K in your post), but if your friend is trying to sell it at that price and it hasn't sold, that tells you it's not worth that amount. It's a dream because the seller doesn't determine value. The market determines value, which is set once a buyer is willing to pay a certain price. Then again, the full picture isn't available, so it might very well be worth the amount quoted.
The fact of the matter has been that the higher priced markets are especially hard hit in this market. That brings to light a reason that I think a bank might be willing to drag their back sides on completing the foreclosure action. Think about it. Why would they want to take the responsibility for maintaining the expensive property, just to watch it fall into disrepair and get vandalized because they are not there? The damages can really add up in a higher end house, which will significantly affect the ultimate value of the property.
Instead, the bank could leave the non-performing previous owner in the house to at least keep the rats out of the attic and vandals out of the house. The house may be worth less than the loan or previous value, but it's not incurring additional losses through damage, theft, water intrusion, or whatever you think could happen in a vacant house. When the market turns and begins to pick up in the higher priced houses, that's the time they would kick him out. They would have less exposure to the vacancy issue in that market.
Quote:
Originally Posted by Cupcake77
How long can someone live rent free in house thats being foreclosed on?
After all of the above, I failed to answer you question. So, here it is: Someone can live "rent" free in the house where they're not perfroming on the loan as long as the lien-holder allows.
it's no typo, he bought the house for 450k, a few years later he lost his business and was sued. So he had to take out a loan on his house but at the time it went up for 800k. House value dropped, he couldn't make the payments. he owes more on the house than it's worth.
He is holding on hoping the market will come back up, but he already filed bankrupsy, he said many times the band was taking his house yet he is convinced nothing will happen.
He has not packed or looked for another place to stay in over a year.
it's no typo, he bought the house for 450k, a few years later he lost his business and was sued. So he had to take out a loan on his house but at the time it went up for 800k. House value dropped, he couldn't make the payments. he owes more on the house than it's worth.
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I'm confused. You say the house is worth over $2.4M, but owes $850K. How can he owe more than it's worth when there is apparently $1.5M in equity? If the market value is really $2.4M, he should be able to sell it for more than enough to cover the loan. Or is $2.4M wishful thinking? Or was it really a typo and you meant $240K?
I'm confused. You say the house is worth over $2.4M, but owes $850K. How can he owe more than it's worth when there is apparently $1.5M in equity? If the market value is really $2.4M, he should be able to sell it for more than enough to cover the loan. Or is $2.4M wishful thinking? Or was it really a typo and you meant $240K?
oops sorry I meant worth 450,000, that's what he paid in 2000, he now owes 850,000. But looking at his house anywhere else it would be worth 240,000. it's really not that great and no yard, except it's in N Ca which I suppose makes it more expensive.
oops sorry I meant worth 450,000, that's what he paid in 2000, he now owes 850,000. But looking at his house anywhere else it would be worth 240,000. it's really not that great and no yard, except it's in N Ca which I suppose makes it more expensive.
OK, thanks for clearing that up. Lacerta above offers good advice.
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