Real Estate News From Inman - First Hand Homeowner Stories on Their Upside Down Ownership Experiences

By
Real Estate Agent with Howard Hanna Cleveland City Office

Many of us read Inman on line. They just started a three part series highlighting stories from actual homeowners who are upside down and facing foreclosures. The first part was very insightful, covering several different homeowners: one who lives in her property and finds herself upside down because of the market and the terms of her loan; a guy in Atlanta who said he unfortunately purchased investment homes at good prices in neighborhoods that weren't the best investment areas. You can read the entire article here.

It was sad but insightful to read how they got into trouble because of job losses or not enough reserve money. Here is a quote regarding one homeowner:

"....A painting contractor, Knight has worked to sell off several investment properties at a loss and is working with a real estate agent to complete a short sale on her primary residence. Job troubles and high monthly payments have put her into a foreclosure process..."

One homeowner talks about going into  home ownership with $175,000 in the bank and a 700 credit score. Then, having to resort to putting expenses and bills on credit cards, everything went to hell and a handbasket. And all of this happens quickly. Another quote from the article:

"....[The home owner] recommends that homeowners build up a substantial reserve that can sustain them during times of hardship, such as the loss of a job or a death in the family. She also said that people should research their loans thoroughly...."

While this article details first hand accounts dealing with home owners who are not in the Cleveland area, the principles and results are the same. I've had conversations with homeowners experiencing the same issues for the same reasons. One last quote from the article, because it's rather poignant:

"....  You could easily call it the quiet poverty," she said of the rush of nationwide foreclosures. "It affects everybody. Nobody is coming out of this unscathed. It's wiping out the market...."

I have advised clients who wanted to invest and not live in homes in areas with high foreclosure issues to think things through carefully. One community specifically, had close to 700 homes for sale this Winter when we were shopping for homes. Ultimately this client did not purchase, but truthfully? Not because of my guidance. His job situation changed (thankfully) before he got into a contract situation. He was hell bent on buying in this area. Sometimes no matter how much we provide guidance it doesn't work. Karma stepped in this time.

Once you read this article written by Glenn Roberts, Jr., sign up for the email notification, if you haven't already; Inman is a great place to read about real estate. And there are still two more parts to the story.

September 14th update: Here is an article in Time Magazine that talks about the correlation between our economy and the housing market. Overall it's rather good. There is also one really good paragraph I want to hightlight here; it speaks to our upside down market woes:

'....The main reason for the boom's doom was that in the nation's San Diegos, double-digit annual price increases put most homes out of the reach of middle-income buyers. The mortgage industry and its funders on Wall Street responded with laxer lending standards and creative loans (no downpayment, teaser rate, interest only, etc.) that really made sense for borrowers only if prices kept going up and they could sell at a profit or refinance. When prices stopped rising last year, the edifice began to crumble...."

NOTE: I want to add this excellent article written by David Briggs of the Cleveland Plain Dealer. He's on the same topic, using himself as an example of moving up to more and more expensive homes. Also worth the read!

Peace Out - 3C

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Ambassador
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Thanks Carole.  It's a good article, but I worry when folks use anecdotes.  They may not be representative of the real market.  I don't want to turn our home owners into a statistic, but statistics tell the story too  and it isn't good in some areas. 

Anecdotes and hypotheticals make me nervous. 

Sep 10, 2007 09:26 AM #1
Rainmaker
225,508
Tim Bradford
Cleveland, OH
NMLS 250013
Carole's link should be http://www.inman.com/hstory.aspx?ID=64503 and the artilce is good. 
Sep 10, 2007 09:31 AM #2
Rainmaker
168,977
Linda Davis
RE/MAX Home Team - Gales Ferry, CT
Anyone serious about real estate needs to subscribe to Inman.
Sep 10, 2007 09:38 AM #3
Rainer
111,655
Carole Cohen
Howard Hanna Cleveland City Office - Cleveland, OH
Realtor, ePRO

Hi Lenn: That's really why I like this article; the people have names and real stories to flesh out the statistics.  I was also impressed they included a quote from one home owner who said she had really good experiences with mortgage lenders in the past and they aren't all bad. So maybe this report is a bit more balanced.

Tim, thank you for pointing out my link issue! It should be working just fine now.

Linda you are so right!

Sep 10, 2007 10:14 AM #4
Rainmaker
279,345
Todd and Danielle Millar
Glenn Simon Inc. - Edmonton, AB
Sixteen years of excellence!
This is a really sad article. It must be hard to try and start from a point in your life where you were secure.  Everyone needs a minimum of 3 months salary in the bank personally I believe in 6 months.  I hope things turn out from them.
Sep 10, 2007 10:18 AM #5
Rainmaker
1,142,035
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time
Thanks for sharing this Carole. I'm NOT subscribed to Inman. I guess I need to do that. Anyway there are many sad stories out there right now. I hear them everyday in my market. For every foreclosure we hear about there are many more folks who are just barely holding on. One little bump in the road and they too will be a statistic. 
Sep 10, 2007 10:31 AM #6
Rainer
111,655
Carole Cohen
Howard Hanna Cleveland City Office - Cleveland, OH
Realtor, ePRO

The Millars (I don't know which one of you blogs lol): Very sad story; reminds me of when I moved to DC in the late seventies and commuted via express bus from Rockville Maryland to Downtown DC every morning, striking up conversations with Vietnamese people recently moved to the area -- many were doctors and engineers, now low level clerks starting over. But grateful to have the chance I might add!

BB: Nice to see you, and yes there are way too many stories. Cleveland just had a median wage increase reported....I think it was up to $26k. Not a lot of room for error or mishap in that range.

Sep 10, 2007 10:36 AM #7
Rainmaker
317,751
Monika McGillicuddy
Berkshire Hathaway HomeServices Verani Realty - Hampstead, NH
Southern NH & the Seacoast Area
Ugly times Carole. We're seeing the vultures circling up here too. Very sad.
Sep 10, 2007 10:59 AM #8
Ambassador
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

 

Carole, the biggest problem that I have run into is with people that no matter they want to purchase the house that they have fallen in love with, and they will do what ever it takes to do that.  I have had some that I sit there and repeat the monthly payment to over and over, hoping that what they are opening themselves to will sink in, but all they want to hear is that they qualify for the loan.  It does not matter that they will not be able to put gas in the car or food on the table, they qualify and that is all that they hear. 

You stated it extremely well when you wrote "He was hell bent on buying in this area. Sometimes no matter how much we provide guidance it doesn't work."  The sad thing is that if you decline to do the loan and they qualify, you are then opening yourself up to a huge law suit for discrimination.

Many times it isn't until mistakes like this are made that people come to realize what they have done, but by then it is too late.  It seems that common sense is often ignored, when the I want it and I want it now mentality blinds people to everything else.  

Some of the problem can be attributed to bad Loan Officers, but bad Loan Offers would have a much more difficult time doing what they do, if people were not blinded by their desire to have what they really can't afford.   It would be nice if this would be the end of  stories like this, but  I think we are going to continue to  hear a lot more of them.

 

Sep 10, 2007 11:01 AM #9
Rainer
62,574
Nick M.
Certified Residential Appraiser- West Palm Beach Real Estate - West Palm Beach, FL
Realtor-Appraiser in West Palm-South Florida Real Estate Appraiser
Hi Carole,. seems like a common thread, low financial IQ is more common than we may expect. or is that common sense? i dunno anymore! i hope the worst is behind us, for everyone.
Sep 10, 2007 11:01 AM #10
Rainer
111,655
Carole Cohen
Howard Hanna Cleveland City Office - Cleveland, OH
Realtor, ePRO

Hi Moni: I'm sorry to hear it's affecting your area too; I doubt that many areas are unaffected though.

Nick: Hi, and yes let's hope the worst is behind us.

George: here is your quote worth repeating: "....bad Loan Offers would have a much more difficult time doing what they do, if people were not blinded by their desire to have what they really can't afford...." 

Sep 10, 2007 11:12 AM #11
Rainer
139,950
Jay McGillicuddy
Berkshire Hathaway HomeServices Verani Realty - Exeter, NH
Real Estate Broker
Glad to see ya back posting, we miss a lot of the great stuff you always write. These times will soon pass and this will be old news, everything works in cycles but this cycle I think is a little different than the previous cycles. I just hope it pases sooner than later.
Sep 10, 2007 11:57 AM #12
Rainer
111,655
Carole Cohen
Howard Hanna Cleveland City Office - Cleveland, OH
Realtor, ePRO
Hi Jay: Thank you - you are too kind - and it's good to see you too. The one thing that still heartens me is the fiscal responsibility I am seeing in my younger buyers. That warms the cockles of my heart.
Sep 10, 2007 12:59 PM #13
Rainmaker
338,442
Gary Bolen
McCall Realty - South Lake Tahoe, CA
CRS - Lake Tahoe Real Estate Information

Carole,

We're doing well in spite of the slow market, but we definitely have a hunkered down mentality. Most we know do these days.

For some reason, and I'm not sure why, I've got mixed feelings about Inman News. We're set up on their blog map, but are not getting their news feeds directly. Rather than that being a question, I need to figure out why, and get on with it.

Thanks for your post here, and lets hope the Fed, whatever it does, affects all of us positively next week.

Best... 

Sep 10, 2007 03:24 PM #14
Rainer
111,655
Carole Cohen
Howard Hanna Cleveland City Office - Cleveland, OH
Realtor, ePRO
Gary: thanks for commenting; hunkering down and doing well. I echo your thoughts. There are plenty of buyers here, we just have a lot of inventory to show. May your business stay busy.
Sep 10, 2007 11:26 PM #15
Rainer
41,968
John Klassen
M & T Bank - Kingston, NY

The fiancail IQ comment is so acurate. In the middle of the boom people were tellinmg me how they were going to use credit cards and home equity loans o buy and flip themselves to the top. Turned out many went to the bottom. This isn't the case with the people in your post, but in many cases green jumps in and it is a powerful drug.

Home Ecomiocs classes need to be taught to our kids in school. Not cooking and cleaning, no teeager can do those things, but a budgeting and a financial awareness class would give them a base of knowlede to work off of.

Afterall, the credit card companies have no problem teaching us how to swipe.

Sep 11, 2007 09:37 AM #16
Rainmaker
597,421
Mitchell J Hall
Compass - Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

Hi Carole, I guess I need to subscribe to Inman. Last night I googled something I needed nformation about an article came up from Inman but it only let me read the headline said I have to subscribe to read the rest. Is it free? I don't feel like paying for another subscription.

Yes it is sad about all these people that might lose their homes.

Sep 11, 2007 09:38 AM #17
Rainer
111,655
Carole Cohen
Howard Hanna Cleveland City Office - Cleveland, OH
Realtor, ePRO

John, you are really good, I love that comment 'teaching us how to swipe.'  I used to teach, and there were a few school systems with economics classes that taught the basics. Problem is, what has been modeled at home? Most people from my generation were swipers to the max.

I also love your comment about green being a drug. How true! 

Hi Mitchell! It's been so long since I subscribed to Inman, but I am fairly sure it was free. They have an upgraded membership with a monthly fee. But I have the basic one.         

Sep 11, 2007 10:05 AM #18
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