Options: If you owe more money to the bank then your house is worth.
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?
July 21st, 2008 at 10:01 am
I understand that you have a family to feed and this justifies in your mind that you can let the bank take the loss. But you made the decision to try this investment. You made a bad choice. Whether the bank and builder were in cahoots or not is not the issue, the issue is you signed a commitment to repay this money. I know this isn’t what you want to hear, but this is the reality you are in.
It is likely that the bank will be awarded a deficiency judgment. Worst case scenario is that a lien for the deficiency judgment will be attached to any other real property you own, your credit will be trashed for a bare minimum of 2 years, you will pay more for everything that is based on credit (like insurance and credit cards) and you won’t be making any major purchases any time soon.
Bottom line is no, your other assets will not be safe.
July 21st, 2008 at 10:16 am
These people just do not understand. We got ripped of by the builder called Prime Home Builders. Also the Bank should never give a loan to anybody with out an appraisel. If a good appraisel would have been done or required, then the bank would have realized that the house was way over priced. If all banks would have followed simular rules, then no one would have qualified to buy these homes at such outragious prices. Thus the builders would have had to sell the homes for less, but they would have sold them anyway and today less people would have unaffordable mortgages to pay. Less foreclosures and a much healthier economy.
They get what they deserve, for being greedy. I was not greedy, I wanted to buy an investment and got ripped off by much more powerful people.