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With the current housing and credit crisis more and more people are finding that their homes are worth much less than they owe on their mortgage. I too own 2 homes and my main home that I purchased in 2003 is also worth less than it was worth in 2006 and also it almost getting to be the same value that I paid for it.  Now my other house that was supposed to be a super investment is now worth over 100,000 less than what I owe the bank. That home was purchaced in late 2006 and that is the reason for its failure.

You see true home values probably hit a peak in either late 2003 or 2004. Then every price after that was based on a fake speculation and the prices were pushed up too high. The prices never could account for a purchaser to have a positive cash flow by renting it out. This is where all the banks went wrong. They should have realized it back then and this whole mess would never have happened.

This is something that all of the great real estate gurus always tell you. If you buy Real Estate, always make sure that the rent that you can get for it is enough to pay your mortgage each month, this also includes the escrow for taxes and insurance. But we all did not listen to this advice. We just went out and got those mortgages with those 1 percent teaser payment rates because our Real Estate agents assured us that we could flip it in 6 months or so. I still remember that smile on my agents face.

And then the flip that never happened. It was not possible anymore. By the time I closed on the sale of this pre-construction home, it was already worth $30,000 or $40,000 then what I had paid. The problem is that none of wanted to admit it. We did not want to admit that we screwed up. So we waited longer and longer and now we are so deep in debt to the bank that we have 2 choices left. One is foreclosure and the other is for us to wait 15 years until the 2003 prices increase 150 percent - at 10% a year. So forget about it. What is better? 2 years of bad credit or 15 years of misery?

Have you seen the latest 30 year Fixed rates? They are almost at 6.5 percent. The Fed rate is still at 2.0 but Banks are really taking major advantage of the difference. Also the Fed rate is going to be adjusted upwards in the next meetings, because of too much inflation. Meanwhile with housing values still declining and people that still have to pay taxes and insurance on homes that are not worth it. Homes that do not produce positive cash flow even when rented. Even I have one of those. At this point I think that we might as well just give them back to the greedy banks anyway. So I can definetly see more and more foreclosures on their way and I am also glad because I think the banks deserve it. Why did they give us these mortgages without appraisels? We are in a recession and we will be in it for a few more years to come. Meanwhile watch the 30 year fixed rates as they will keep rising, that is beacuse the banks are so greedy. So guess what if you were planing to refinance now, its too late. You missed the boat! Don’t do it unless your desperate. And good luck!

Have you seen the commercials for John Cummuta. He claims to have a system where your debts can make you rich. Well I have a lot of debt, thanks to my failed investement in Homestead Florida. I am looking into a way to get rid of my debt too. I have found that there are actually companies that do loan restructuring negociations with your Bank. But first you have to be behind on at least a few payments. So does that mean that I should ruin my credit? Hopefuly not.

I mentioned in another post about 2 weeks ago, that I feel like I should just walk away. But since that time, I have sent the $6200 check to pay for the taxes and $800 for another year of insurance. I am giving this deal 1 more year to get better. My plan is to keep my credit good, long enough to refinance my principal home. I am also waiting for 30 year interest rates to drop back down to 5.5 % and it is getting close. All we need is a few more bad stock market days and poor economic indications to be posted, mayeb one that says that we are officially in a recession and hopefully We’ll get the 5.5 percent rate to come back for one more time. I will be closing that very same day.

By the way I use this link to keep track of the rates:

http://origin.bankrate.com/wsj/graphs/graph_trend.asp?product=1&prodtype=M&ad=mtg

Once I get to refinance my main house then I will do whatever it takes to sell that other house. Either a Short Sale or a loan restructure. The way I see it, my option arm payment will eventually go up and I will have to miss some payments. When that happens I will be elligible for a loan restructure and the bank will have to right off some of lost equity or principal. Or I will Short Sale this house for a 100 K loss.

As for paying of all my other Debts in 7 years. That remains to be seen. The idea behind that program is simple. Get rid of or reduce payments one at I time. The less bills you have the more you can send to the principal and the faster you can get completly out of debt. I am not sure if I can do it in 7 years, but I will try.

What do your think is better for your credit? a Loan restructure or a Short Sale?

Please post your comments below.

I am sure I am not the only one who is asking this question. Should I give my failed investment property back to the bank? I have 2 houses: One that I live in and the other one that I bought from a greedy Home Builder as an investment. This builder must have made killer profits. They even invented an extra tax call CDD.

This is for the Waterstone Community in Homestead. I have to pay an extra $1500 a year for this tax.  This is the South Dade Venture Community Development District (CDD) I think this tax should be illegal. If anybody knows a way that I can out of paying this tax. I will pay you money! Please let me know.

Well here is my situation I am loosing about $200 a month on negative equity. Also I do not see the prices in the area rising for at least 2 or 3 more years. I also have to pay over $6000 taxes a year. Part of this is the CDD tax.  I payed over 300 K for this house and it is not even worth 240 at present. So I lost over $70,000 already.

I am expecting about $5000 Federal tax refund this year. Instead of enjoying this money with my family. I will have to use this to pay my tax bill prior to April 1st 2008. I have a wife and 2 young children. They are the ones who have to suffer. We have to live like poor people. Sometimes we do not even have money to buy extra food or gas or even to eat out. But in reality I make a decent income, but it is jsut not enough thanks to this failed investment. I also have a high FICO credit score close to a 780. But is it worth it? 

Now I am trying to convince my wife to just stop paying the mortgage for this House. She thinks it is unethical and that it will ruin our credit for a long time.

We still have our primary home and it has a lot of equity. We can quickly refinance that one and lock in a low 30 year fixed rate of 5.9 percent, so this way any future credit score status will not be able to affect us. Or can it? I really need to know.  I also enjoy cheap auto insurance and a zero percent credit card, due to my excellent credit. But I am willing to sacrifise that if I can know that my credit will be restored in about 2 or 3 years. Is that the time frame for a foreclosure? I don’t think my bills will go up over $200 a month or will they?

Also consider that this is my second home? Won’t my good payment history on my primary home and all of my other bills, out shadow this?

I really need to know. And if nobody can answer these questions. Please just post the name of another blog or forum that can help me. I need to know this before I waste my money on that stupid tax bill.

Thanks in advance.

Please post your comments below.

What you can do about it? Well for starters, look at history. The last time we had a Real Estate Crash in Florida it was about 1920. Well it took over 10 years to clear the dust. The same thing happened in Japan several years ago and it took over 12 years to recover. The current Bubble burst in the Summer of 2006. So we are not going to see the bottom until late 2009.

So what does that mean? If you own a home and want to sell it, you have to offer it for a lower price than the competition. I am in the same boat. I bought a house in Homestead Florida Pre-construction and I closed in the Summer of 2006. What a big mistake.

I would have been much better off walking away that day. They would have kept my 30,000 deposit which I lost anyway. Well that is unless I am willing to keep this house for at least another 6 or 7 years! And then I payed over 20,000 closing costs and now the property went down even further and I will have to short sell it for $30,000 less than I owe the bank. So if you are interested in paying $250 K for a house that cost me over $325 K, you can have it. The builder won and I admit it.

The same thing goes for you if you are about to close on any type of Pre-construction property, house, condo etc. Go to another Realtor and pretend that you want to buy the exact same type of unit. If you can find one for a price that is less than your price that your contract says. Well that forget about your deposit. It is lost, unless you have 6 or 7 years time to wait for the Real Estate Market to pick up again. I mean some Miracles do happen, but don’t let that builder or Realtor leave you to believe that the Market will be back on track next year.

I say no way my friend. It just aint happening anytime soon. Not until 2010 or so. 

If you are reading this post. Do not feel alone. So many people bought over priced homes from builders between 2004 and 2006, and now they are stuck with them because they are impossible to sell, unless you are willing to loose at least $75,000 or more. I know this is true, because I did it too. I bought a house in Homestead Florida and you can even see some pictures in my previous postings.

Well the reason for this post is, that I am wondering if anybody can help me to sue my builder or bank for having granted a loan for such an over priced property.

One idea is: Why can’t we force the builder of new homes to take back a house that they know was sold at an overpriced value. 2 years ago, I bought a house from Prime Home Builder in Homestead Florida. They sold me a house for over $300,000, but the real price should have been no more than $200,000 and even that may be too much. Well they somehow persuaded my lender to give me a $260,000 loan to buy this house. So why can’t we force these builders to take back these houses 2 years later, even oif they give me only $260,000. they can keep my deposit. But since average sale prices are about $250,000 K and nobody is buying they should be forced to buy it back from me. They were the Scammers! I also was tricked in to paying the builder almost $25,000 in bogus closing costs. 

But first I need to know if the laws are in our favor or will the government that writes these laws favor the big builders instead. If I find out that I can start a class action law suit. I am sure many other victims will want to join in. So let me know what you think about this topic.