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We're looking at a short sale/fixer upper; bank has set a purchase price with no hassles/haggles. Looking at price history of the home, current owners bought it back in 2002 for $25K less than that price.
How is it possible to owe more on a home than you paid for it 16 years ago? Looks as though the home has been in default for about a year, but I could be wrong about that.
How is it possible to owe more on a home than you paid for it 16 years ago?
Easy. Buy a house in 2003 for, say, $300,000. The real estate market crashes from 2006 to 2012 and the property value drops to $150,000 and maybe now it's worth about $200,000 while you maybe owe $250,000.
Thanks for your response. I don't think what you mentioned is the case with this house though. I expect that it would appraise for the bank's approved price or for the 2003 price at the very least. Prices in our town and in that neighborhood specifically have risen close to 2006 peak prices.
I guess we were thinking in terms of of second or third mortgages? Or back taxes maybe? Could all that possibly add up to the original price of the home? Or is there anything else that can be rolled into a short sale price other than those 2 things?
They may have refinanced and pulled cash out when values rose in the following years, or there may be a second mortgage, or perhaps they did a bunch of workouts (loan mods etc) which always lead to fees and extra principal being tacked on the loan.
We were scratching our heads on this one, but that does make sense. I just plugged in some numbers into a mortgage calculator. It looks as though at the 2003 purchase price, assuming no money down and that they've borrowed maybe $100K against equity at some point, then that would come close to the bank's approved price.
I think you’re fixating on the wrong thing. What the owners paid and/or what they owe now is immaterial. Is the current asking price in line with comparable current sales, with adjustments for condition (if that’s a factor)? That’s all you need to worry about.
^^True. We were mostly just curious about how that could happen.
And, after having seen the home twice now, it's clear little has been done to maintain the home in several years. We would need to re-do both bathrooms and finish the basement as we'd need the additional space. The roof will need to be re-done and the home repainted within the next 5 years. It has a tiny back yard, no garage and no room to build one. And who knows what an inspection may uncover?
It is probably overpriced at current price, given the condition it's in and square footage; we are now skeptical that it will increase in value much over the next 10-12 years (when we will likely move to a warmer climate), given the work we will no doubt have to put into it. I seem to have this knack for loving older, quirky homes that need a little (or a lot!) of love.
We're looking at a short sale/fixer upper; bank has set a purchase price with no hassles/haggles. Looking at price history of the home, current owners bought it back in 2002 for $25K less than that price.
How is it possible to owe more on a home than you paid for it 16 years ago? Looks as though the home has been in default for about a year, but I could be wrong about that.
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