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during the 2008 crisis,some of my neighbors have bought their houses with a 10% down payment given by HUD,when they lost their job,they sold the house for whatever mortgage they have outstanding.
You know if you income qualified,HUD will give you 10% of the house if you buy one which is under 2 years old and the builders just happen to have houses under 2 years old and their finance co will give you a mortgage with 10% down.
There were also Nigerians who will knock on your door and offer to buy your house with seller financing,their game plan is to rent your house to someone whose credit is not good enough to get a mortgage from the bank,so they rent for a few months,repair their credit score and then they can apply for a mortgage and buy from these Nigerian.
As the original seller,the NIgerian will then pay you off from the sales proceed,their excuse is that you skip the broker commision.
Ok, so renters with bad credit can end up paying more than cost to buy? But then you're dealing with irresponsible tenants, which can spell trouble
no,you the original owner finance the Nigerian,he rents the house to credit poor tenant,it is his job to make sure the tenant does not trash the house and collect the rent money,and use that rent money to pay down the mortgage he owed you.
The tenant moves into the house because he wants to buy that house eventually,so he would not trash a house which could become his some day.
that was in 2008,these guys will walk down the street and solicit to buy your house if there is a for sale sign,his pitch is that with seller financing,you save on realtor commission fee,he would also takeover your mortgage if the rate is low,but his offer is whatever your outstanding mortgage is,you lose your down payment,but then he will say you save on realtor commission.
as to whether the renter is overpaying,well,first he cant get a bank mortgage due to his credit ,second he is renting the house,he needs a place to live,when his credit is repaired,then he would buy the house from the Nigerian who comes up with an asking price enough to pay you off and make some money for himself.
Person buys hypothetical $500k house around 2006-2008. Drops to $400's from 2009 to 2019. What if someone wanted to move between yet did not have any savings. What do people do when underwater for years at a time? What are the realistic options?
Well...the folks that used to own my house moved in with mummy and daddy, and I bought it for half of what they owed on it. I put $1,000 down and took a 30 year note, made the first payment a week later instead of the 'official' 45 days later that it was due. Continued to make accelerated payments, and when the interest rate dropped I re-fi'd to a 15 year note which kept my payments the same but significantly accelerated the pay-off, and I continue to make additional payments on the principal to accelerate the pay-off even more.
You have to manage your money right, so that it doesn't matter what some hypothetical value might be. A little more than 10 years later I have a significant amount of equity and if I had to move I wouldn't get hurt at all.
Person buys hypothetical $500k house around 2006-2008. Drops to $400's from 2009 to 2019. What if someone wanted to move between yet did not have any savings. What do people do when underwater for years at a time? What are the realistic options?
It's going to happen sooner than you think.
The CARES act granted forbearance (they don't have to pay their mortgage) to 3.5 million homeowners, some of whom have not paid their mortgage in a year. The can has been continually kicked down the road, 3 months at a time, but unemployment remains high. And banks remain handcuffed, unable to foreclose.
The handcuffs will eventually come off. Later this year, probably.
When the banks are turned loose to foreclose, many people will list their homes in order to capture the equity they have.
And at the same time, lumber prices will fall as the big Canadian mills resume operation.
All-in-all, I think there will be trouble. Today, there are more realtors than there are homes listed. That may change very rapidly. Prices could tumble and everyone who bought in 2020/21 will find themselves underwater...
Some informed sources predict 2.5M homes will listed. Currently, there are 600K listed. The market is considered normal if 1.8M homes are listed.
I arrived in Texas in 1990, and there were, indeed, people who simply walked away. There are few options for people who must move and cannot sell.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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That happened to a loft of people in the recession, with many short sales, and foreclosures. The only reasonable option was to stay put, as we did. We had refinanced in 2005 with an appraisal at $674,000. In the recession it dropped to $400k. We had been planning to move but instead stayed, and now we are up to $1.1 million. Now we are planning to sell in a year or two, fingers crossed that it continues up or at least level until then.
Back in the 80s when oil price collapsed,homeowners in TX just left the house key in the mail box and left.
They used to call this jingle mail.
Being underwater doesn't matter if you like your house, can afford it and aren't selling. My house has risen over $100K in Zestimate value since I bought it in 2017, but it doesn't matter because I'm not selling it.
There are few options for people who must move and cannot sell.
This is why I don't like condo and townhouse HOAs that prohibit or strictly limit renting out your unit. Renting out your property is one escape valve if you need to move during a down market. If you hit rough times, you may have to beg the HOA board for an exemption. Maybe you'll get it, maybe you won't.
Of course, if the rental ratio is too high, that creates problems as well. Kind of hard to win with HOA properties. But I digress.
I sold a home at a pretty significant loss. I just took the hit; I bought a much nicer place also at a reduced price (the market overall was bad, so between the purchase and the sale, I came out ahead).
You just take out a larger mortgage on the new place than you otherwise would.
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