Sad Foreclosure Story

[kinkytoes]

Update: they sold the house to someone for under 300K.

[Narfcake]

Originally Posted by kinkytoes

Update: they sold the house to someone for under 300K.

All we can say sometimes is "I hope they knew what they were getting into."

My personal experience ... one house I looked at was decent on paper, but the layout wasn't all that great - master bedroom has a split level, but neither split was all that wide, so it was essentially two big closet spaces. Even worse off was the roof ... we were glad we looked at it on a rainy day, because you know it's bad when it's a two story house, and it was raining on the first floor! No doubt that fresh paint was to cover up all the mold issues ...

Someone did buy it at the listing price, and it must of been a cash offer as it closed in just 10 days. To each and everyone their own, I guess.

Sooner or later, the right house will come through.

[marmac]

Originally Posted by bentlebee

I guess that house will be sold for a high discount...but that can take a very long time...To me the lady isn't telling the truth or had her application filled out wrong, whatever you prefer the wording to be.

How could she ever gotten the loan if at least the application wasn't filled out with her affording the loan....

Remember, we are only getting told what the OP tells us.

I think there is more to this story ( aka " the rest of the story" )

[Tish Thompson]

Here's the extremely simplified version...there are other things that go on, but basically this is what happens: Banks determine value based on what appraisers report to them. I can't even include agents, because in my experience, Appraisers are like God...whether or not they're familiar with the market. The investors then decide how much of a loss they want to take and a value is set. Believe it or not, they don't just pull a magic value out of the sky and go with it. At the time this persons mortgage loan was taken out, the market obviously supported that value.

Originally Posted by kinkytoes

Here is one scenario:

1. Bank gives loan for an older home to a woman with little monthly income for 700K.

2. Home is large, but has roof issues, older appliances, floors etc dating from 70's. Home has acreage, but is unusable for farming and cannot be subvided.

3. Area is not desirable, so future development is unlikely. Rents in the area are low and dropping (my "landlady" research) and the schools are not ideal (low test scores).

4. KinkyT is in shock, because she has no idea how the bank valued the property at 700K in the first place, unless they never looked at it!

5. Anyway, owner predictably cannot pay mortgage or 10K yearly taxes (because house was sold for such a high price) and defaults. Maybe owner's ARM reset...

6. Kinkytoes sees property. Kinkytoes Likes anyway (very unusual house). Kinkytoes has not kids, so the bad schools are not an issue. Kinkytoes visits property and finds....
Severe property damage because house has been vacant while bank tried to sell it for 500K. Nobody in the area around the house can afford that price, and people who want to spend so much would not live there. Kinkytoes estimates damage repairs would cost 200K.

7. Bank now wants 400K.

This time Kinkytoes did not even try to offer the bank anything, KT just sadly shook head and walked away.

...
Anyway, I'm just wondering what the bank has based the value of the house on? It must the be the last ridiculous loan that they gave this elderly woman. As a SFH in that area, the house would cost 175, but because the taxes are so high, most people who would live in the area would have to pay less to afford the mortgage. 175 is the price for a house in good condition...

The estimated rent as an investment would be $1600 per month, which would put the cost at 160K MAX, because the taxes and insurance would eat any profits.

I'd still like the house, but since I don't have hundreds of thousands to throw away, the bank would practically have to give that house away. Any thoughts? (not spell checkin')

[kinkytoes]

Yeah, I WISH I could have made that up. I had a hard time believing that so many people got unaffordable loans or that banks like Chase and Citibank etc. underwrote them. If you want to convince yourself, you can try the following:
1. Look up a foreclosure - You can try realty-trac (but they charge a fee) or just call a realtor.
2. Look at the house you have chosen and estimate the fixup costs -It will probably be in BAD shape
3. Consider the cost - Asking + Repair costs. Add 10% to your repair estimate.
4. Look up the Original Sale Price - See how much the bank sold the house for. In my state this info is available online. You may be surprised. In many cases, I sure was.
5. Look up the previous owner's details - If you are an enterprising googler you may be able to find criminal history, occupation etc. of the purchaser. I found out about a couple of the "foreclose-ees" by speaking to the selling realtors and my r.e. attorney. Realtors are usually knowledgeable about the situation surrounding the house and/or previous owners.

In order to protect my identity I did fudge the numbers a little since I think I may have still been negotiating with the bank about the house when I wrote the post. Actual numbers:
1. Original (refinanced?) price 600K
2. First Bank Asking - 417K
3. Final Sale price 280K*

IMO the 280K is STILL too high. I have already renovated an old house and I hope the new owner is rolling in dough. The renovation will still be about 200K. If he/she plans to try to rent the place, then it's a lost cause. But if they have a lot of $$ and like the area for a primary residence, they may be very happy.

[kinkytoes]

UPDATE: I decided to search for the property online out of curiosity!

Property - 19 acres...but in a bad school district (that's important in my state), has utility right-of-way diagonally across the property and there are apartment complexes in the area trying to rent at a discount. As a landlord...I say the property is big, but was not valuable.
House was big and had a pool. But lol (anyone who has looked at foreclosure can imagine what I mean) was in terrible shape. The pool was the tiled kind and cracked and leaking. Pipes had been ripped out. The house needed about 200K of repairs. Plus the property taxes were sky high.

Offer - The bank was asking I think ~400K. I offered 50K. Scoff, but IMO that's what it was worth.

Rejected - Not only was I rejected, but somebody eventually bought the place for ~200K. I think it was over 250K, but I can't remember.

On the Market - Imagine my SURPRISE when I did a google search and the same property is now for sale! The buyer did a WONDERFUL job redoing the pool and grounds and the two kitchens and 6 bedrooms LOL. They used high-quality looking stuff, too. It looks wonderful and must have cost a FORTUNE. The structural stuff itself must have been a wallet-killer. LOL now they want 650K for it. LOL I am a real a$$ am I not? LOL I think the place may be going into foreclosure again. Honestly, I wish I could have gotten the house myself...so I'm feeling a little mal-intentioned glee...