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Old 04-13-2010, 08:30 PM
69 posts, read 221,488 times
Reputation: 55


Originally Posted by housingcrashsurvivor View Post
...From what you just said, it sounds like the previous owners did well, house-wise, if not wisdom wise, earning more like 7%/annual on their original purchase price, exemplifying that it is not just when one sells, but when one buys.
Except for the fact that they didn't walk away with a dime. They refinanced the property for nearly double what I paid, so at closing, all of the proceeds from the sale went to the brokers and the bank.

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Old 04-14-2010, 08:43 AM
1,500 posts, read 2,932,348 times
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That's one way of looking at it. Another way is that they got more than their money's worth because they had use of the original mortgage money (leverage), plus, as you note, they took off with all of the illusionary equity, an amount far and beyond what you know the place to be worth.

There was a time when real equity was the difference between what a place cost and the price of its sale. It didn't used to be and it is no longer the difference between what a place cost and what debt, in theory, an appraiser in cahoots with some realtors in cahoots with some flippers in cahoots with some bankster thought they could sell to the likes of Iceland. Just try getting a home equity line of credit today.

As I noted above, I'm investigating the properties in this area to see if I care to risk more money here. I found one particularly relevant to this discussion. A neighbor paid between $300 & 400k cash for his house at the bubble height which peaked in this part of Tampa in 2006 (it was really 2005 in south Florida, right after Wilma, though some nonsense continued after that). Then the bubble crashed. Two years later he got a home equity loan (while banks were still doing that) for more than $300k from a TARP-saved bank. The county has the house currently appraised for just under $200k though in this market it would likely fetch about $260k, right about where the county appraised that property in 2008, when the bank gave the guy access to 15% more than that. Now, I don't think the guy will walk, because he's still got a lot of his own money in that house, even if he were to cash out his equity line. But what was the bank doing issuing that much "equity" after everything crashed? And what was he thinking when he took out such a large equity line. Illusions and nonsense.

There's a saying that if a good deal does not exist tomorrow then it was not such a good deal today. Conversely, if a thing does not exist today, then yesterday it was just an illusion. As reality is more substantial than that.

Also, while it might look like they did not get a dime from you, you'll still have paid those crooks through the nose by the purchasing power of your savings being inflated away, by how much more time it will take for your investment to ever gain momentum (it could take a generation) and by having less opportunities in employment since all the crooks crashed this system, etc. So, um, yeah, they got your money, even if, relatively speaking, it looks like you got a great deal.
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