Posted on 10/01/2007 12:51:04 PM PDT by 2banana
You’re right about the expectations regarding first homes. VA and FHA had upper limits on the amount they would finance. When I bought my first home (with an FHA mortgage) the maximum allowable loan amount was about $44,000 so we had to look for a home within that range. We got an attached 2-family for $44,000 that we sold seven years later for $128,000. Good deal all around.
But nobody is going to make me give up my BMW.
1995 BMW 525 with 128,000 miles. I bought it new and have kept it in top condition. Also haven’t made a car payment in eight years. Looking to keep it another 12 years.
Shame on any broker who will not work out some kind of a deal for commission rather than kill it and harm his client. In thirty years of creative real estate, I never let a commission stand in the way of a deal. I have negotiated the amount, taken paper, sometimes even taken personal property. After all the work, the broker has a choice of taking nothing or working out a deal.
I’m a first time homebuyer too, and I just extended an offer, so I am waiting to see what they come back with. Nice neighborhood, quiet, great little house for the dog and me. :-)
HUGE mistake, IMO.
Let me be the first to suggest that by next Summer, you'll need a helleva lot more than $7K to get rid of it.
There might be a few isolated great deals on new-build homes if builders are going belly-up or need to liquidate that last property.
Um...what, a cardboard box? There are a few isolated places in the COUNTRY where real estate is that cheap and that was true before the recent run-up...unless you want to live in a neighborhood where you're likely to be shot.
Not exactly true.
Unless the buyer is paying cash with no financing contingency and not asking the seller to share in any closing costs or transfer taxes...a seller can reject any offer less than full price.
Is that near Shipbottom? My aunt used to own a home there a block off the ocean.
I have no sympathy for people who bought a house they couldn’t afford just because they thought they could make easy money. These speculators are going to damage us all.
“Banks can hold homes in their inventory indefinitely without taking a loss.”
Not possible, a vacant home that’s not being maintained will always require substantial work when finally sold or made ready to sell thereby costing the bank money. In addition the bank is still liable for any property taxes (annual or otherwise) owed on the home.
I’ve already seen numerous banks lose money on foreclosures in our neighborhood and the house I’m speaking of will be no different.
Another house down the street carried a mortgage of $250,000. When the owner stopped paying the bank foreclosed and evicted him. A short time later (and during the winter) the former owner entered the home and broke off all the shutoff valves under the sinks thereby flooding the home. Nobody knew what was going on until the water started to pour out the front of the home but by then it was too late. The basement was full to the ceiling and the bulk of the ceilings on the first floor had come down. In addition the wood floors throughout were ruined.
After trying to find a buyer for over a year who was willing to pay $166,000 the bank was forced to sell the home at auction and they got $140,000 for it.
The bank lost a minimum of $110,000 (they had to have an environmental company come in to pump the water out) and would have lost more if they hadn’t sold when they did.
Banks cannot hold homes in their inventory indefinately without taking a loss, there are annual taxes and associated upkeep costs that make that impossible.
Since when do sellers pay for the buyer's title insurance?
Well that's basically what I meant. If someone offers the full selling price without imposing any additional requirements on the seller then the seller can't reject the offer. Of course very few offers would be made that couldn't be rejected - everyone likes to bargain at least a bit.
In 2002, when I bought my current home, I got hit by this — for a day.
The previous owners had bought the house a few years earlier using a wraparound second mortgage. That is to say, he got the first at 80% of his buying price, and took out a second mortgage to cover the other 20%. He did this so that the first lien holder would not require mortgage insurance. Frankly, I suspect there was more than a whiff of fraud in the deal, but that was over and done with three years before I got there.
Then he got his Ph.D. in education — which meant he could become a principal. Only there were no principal jobs within driving distance. There must be a cash-in date or something on education degrees, because to achieve his dreams he took a job in a small town north and west of Fort Worth — pretty much McMurtry country, far, far from the Texas Gulf Coast. So he buys a house up there without selling the one in the Houston area first.
This is where it gets fun. He asks for 10% more than he bought the house for in 1999. Only problem is following the dot-com bubble and 9-11 real-estate prices stalled. So it sat.
Now he is paying two mortgages. And cannot afford it. Months pass. Finally he drops the price to his buying price. Another problem is that this clown used his homeowners insurance for minor repairs. Made five claims in three years, collecting a grand total of $200.00 after deductibles. Problem is that this labels the house as a “problem house.” No one will insure it except to someone with Jackquelin credit, and a demonstrated history of not abusing homeowners insurance.
My wife and I come along. We can actually qualify for the house. We can get insurance (a result of paying every bill for the last 30 years without once bouncing a check). We offer him $5K less for the house than his asking price.
He takes it. Turns out he has not been making mortgage payments on the place, and it is going to go into default if he does not dump it. And — since he is living in small-town Texas where principals are still expected to set an example in their personal lives — he could lose his current job if that happens. And he can cover all his losses if he sells it to us.
Comes the day of closing. He does not show up. Turns out he needs to pay another $5K to sell the place, which he had not anticipated. That second mortgage had a termination clause. If you cashed it in before 5 years, you had to make up the interest lost by the mortgage holder — $5000 worth.
My Realtor was distraught. After she told us the whole sorry story I told her not to worry. It would get settled the next day. It did and we closed.
Afterwards she asked me how I knew we would close the next day. I pointed out that if the house defaulted, the first lien-holder would recover their money, but both the owner and second lien-holder would take baths. Those two had to work something out or they would lose everything — and they did.
Sorry but I have seen it differently.
In general banks do not lose money in foreclosure with respect to the value of a house. They take a hit to their mortgage payment revenue stream but not to value.
So their balance sheets remain clean while their income statement and cashflow get adjusted. One way they compensate is by taking advantage of Fed offers of relief.
I know some small banks will occasionally take an actual loss by auctioning off houses. This does happen but overall a bank will ‘manage’ its inventory by holding some and selling some. They will base their decision on how it affects their balance sheet first before their income statements because their income is often highly dependent on the Fed or member banks of the Fed that serve as intermediaries.
It can be negotiated in a purchase contract.
An 80/20 loan isn't fraud in and of itself...did you think something else went on?
“An 80/20 loan isn’t fraud in and of itself...did you think something else went on?”
The fraud was in using the second mortgage to avoid mortgage insurance. By the mid 1990s primary insurers were requiring buyers to have 20% equity in the property to avoid mortgage insurance. That meant YOU put in $1 for every $5 they lent you — not that you borrowed an additional dollar for every one they lent. Doing that might or might not have been outright fraud in 1999, but it was on the shady side. Deep in the shade.
That’s not fraud at all. I’ve been originating mortgages since 2001. As long as the first mortgage lender knows about it and their guidelines allow it, a 20% second mortgage is perfectly legitimate as a way around mortgage insurance. The interest rate on the second mortgage is higher as a function of higher risk.
I find this really funny, in a fun way.
There are probably 20 plus million people/investors/waiting home buyers etc just waiting until they think prices have leveled off...And as soon as this happens, we're all going to see massive buying event...It's going to happen.
And then guess where prices go again? lol
Up, since there will now be a shortage of homes for sale.
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