Special offer

Upside Down-

By
Real Estate Agent with Century 21 Adams-Walker

I recently received a call from a person seeking info on a listing my office has. She was very nice and very eager to know all about this property until I told her the list price. She said that the house was perfect, but about $100,000 more than she wanted to spend. No problem! I asked specifically what she was looking for and told her that I would be glad to fax, email, mail or deliver the property info that met her criteria. She gave me her address and phone number and said that she and her husband preferred to preview the neighborhoods alone, but she would contact me if they like any of the houses. I, of course, mailed the info ASAP.

A few days later, she called me and got more detailed directions to one of the properties. A few hours later she called me to say that she may want to make an offer on the house! Great! I asked her if she had spoken to a lender (no). I asked if she currently owned a home (yes).  Is it on the market or under contract (no) It is a FSBO, but they have not put up a sign or advertised it yet.

The listing she loved is a bank owned property. I advised her that she certainly could make an offer, but needed a pre-qual letter and since there would be a contingency regarding the sale of their current home, the bank could require more earnest money or may not be willing to agree to that contingency.

She then wants me to list her house! I set up a listing appointment. I asked her what ball park figure she wanted to list the house for. $170,000 she replied.

I went to the tax digest to find the house was valued $75,000 less per county records. Warning sign. It was purchased three years ago for $114,000. Upon completing my CMA, I found the listing price range would be only $125,000 to $135,000 for the property.

Needless to say, the listing did not happen.  They decided to stay there until they built equity back up.

YIKES!!! How many homeowners are "upside down" because of inflated appraisals, eager lenders, and home owners wanting to "cash out"? This situation is far from uncommon. Do you think the 40% of homes in some way touched by mortgage fraud (inflated appraisal in particular) too high or too low? 

It scares me to death! Many of the closings I had over the past year have been 95% to 100% loans. Has this fraud (by other transactions) set my clients up to be "upside down" in 2009 or 2012?

I am certainly not a gloom and doom person. I see the bright side of almost every situation. Would any of you like to show me the pot of gold at the end of the rainbow on this?

 

Comments (3)

Anonymous
Tom Garcia

Beth,

The situation is very similar out west in Las Vegas,  The lenders were passing out money like candy a couple of years ago, on top of that throw in specualtion from California investors flush with cash, and you have our situation where we lead the country in foreclosures.

We also have an evolving high-rise market that is unique, but also in a state of uncertainty.  This will definately not be a V shaped bottom, when it comes.  All the calls we get from buyers now are from bottom feeders looking to steel a property from someone who has no choice but to sell.

 

Apr 10, 2008 04:22 PM
#1
Lynda Eisenmann
Preferred Home Brokers - Brea, CA
Broker Associate ,CRS,GRI,SRES, Brea,CA, Orange Co

Hi Beth,

Yep, there are too many folks in this same situation now, seems like almost everywhere. We've really seen our activity (numbers of offers/sales) go up since Feb. but all at rock bottom prices. Sales up, prices still down...I think we're going to be in this for the remainder of 2008.

Apr 10, 2008 04:32 PM
Tony & Darcy Cannon
Aubrey and Associates Realty - Layton, UT
The C Team
Beth, we saw the same thing in Southern Utah as well.  Our market a couple of years ago had so many buyers with large down payments that they were meeting the owners list prices whether the appraisal was there or not.  That led to property value increases, where I am not going to accuse lenders or appraisors of loan fraud, because there were comparables to justify the price increase to an extent.  Now reality has set in, and many if not all of those homes are worth a lot less than they were 2 years ago.  I am in that situation myself, we bought a the wrong time, and it's a good thing that we like the neighborhood for we are going to be there for several more years. 
Apr 12, 2008 06:15 PM