Ok this may be somewhat controversial.  I realize that some good, honest , hardworking people are losing their homes due to foreclosure.  I also realize that some buyers were taken advantage of during the hot real estate market of 2004-2006.   And yes even some real estate professionals and lenders may have taken advantage of some people that probably had no business buying a home.

But there is another side to the story and I hear and see it almost daily.  I do several Broker Price Opinions (BPO) every month.  I pull up the tax records on the properties for information such as sq ft, beds, baths, etc.  I can also see the Mortgage activity on the property.  Below is a common example:

The home was bought in 1998 for $82000.  Even in todays market is it worth almost double that.  The problem is that in October of 2005 the home owners borrowed $285,500 against the property.  Then in November 2006 they refinanced it for $280,000.   So why did they borrow all that money?   I do not know, but I have seen this time and time again.  Maybe they fixed up the home a bit, but most likely they spent it on something else. Maybe a new car or two, or a boat, or a pool, or vacations.  I see that all the time. people using their homes as ATM machines.

Another common scenario I see and hear about is people that bought in the hot real estate market.  They bought with nothing down, 100 % financing.  Usually they had a very low teaser interest rate.  So they make their payment for 6 months or a year or two then the payment goes up.  So they have lived there for a year or two paying not much more than they would have paid for rent and they get a little tax break.  So now they can't pay their mortgage.   Finally after 3 to 6 months or more the home is foreclosed on.  So what are they really out?  They didn't put any money down, the lived there the last few months for free.   I have spoken to people that to them it's no big deal, they just walk away.

A couple weeks ago I met a gentleman at one of my listings. He lived across the street.  He wanted to know what the home was listed for.  He had a similar home in the neighborhood that he paid about double what we were now asking for my listing.  He wanted to know if he could buy one of the brand new homes nearby that are twice as big as what he now owns and cost less than his current home did.  He asked if when he bought the new home could he just let the bank have the old home back.  I told him I could not advise him to do that and that his credit would be trashed with the foreclosure.  He said he wouldn't care about his credit then because he would be in a new home. 

These are just a few examples of what is going on with all the foreclosures.  The media tells us all about people being thrown out into the streets and being taken advantage of, but there are some people out there that are learning how to take advantage of the situation too.