NYT: “How a financial pro lost his house”

[bearishgurl]

[quote=sdrealtor]I knew exactly how the new construction tract would turn out. The area was booming and about to take giant leap forward in desireability which it has. There had been little to no new construction in this range in my area in almost 2 decades. There was huge pent up demand for newer homes between 2000 and 3000 sq ft which was obvious to me. When I bought the price of a 20 yr old resale less a mile away in dire need of updating was selling for the about same price. those homes were smaller and bordering on functional obselescence. Those sales comps more than justified our price. We got the nicest recreational amenities in Coastal North County for about the same HOA fees that the older neighhborhoods paid for minimal facilities. We had a brand new elementary school being built in a neighborhood that was sure to be a magnet for young professional families. That school now ranks among the top 10 in the county.

As for the asumable feature it doesnt seem to be worth much anymore. The buyer still has to qualify to assume it. Why would a buyer want an adjustable loan when they can get a fixed loan for the same rate and minimize risk. Assuming yours they would have to have a big down if you have equity and/or take out a 2nd loan at a higher rate also. It doesnt make sense unless rates skyrocket which i dont think they will.

I keep my HELOC because I earn a higher return on the assets I have to pay it off. If that changed I would liquidate those assets and pay it off. Sorry, no risk there at all.

If you are certain you are moving in a few years why not go for 5/1 or 3/1 arm with rates in the low 2% range? You could make additional princincipal payments with the savings and pay your balance down even faster. I think I know why. You have stated many times you cant qualify to refinance because you cant document income. Why are you singing another tune now?[/quote]

What is the interest rate on your student loan, sdr? Why don’t you pay that off with your HELOC so it doesn’t follow you to your grave and become a claim on your estate??

Actually, that was last year that I didn’t think I could qualify. I CAN document my income now. I would only be looking for about a 60% LTV mtg so I wouldn’t really need to apply for a full-doc loan anyway. My perfect payment records on this and other mtgs is testimony to how they will be paid, since the payment on a 3% mtg will no doubt be less than what I am currently paying (partly due to going back to 30 yrs). But why rock the boat?

You never answered the questions if YOU would refi a 4% adj (to another product and pay the costs) OR if you thought rates will rise significantly in the next 3 years.

I’m waiting for an “expert” opinion, here :=]

I have a major problem with rising closing costs of late. I closed this mtg for <$2800 out the door. That paid ALL my purchase closing costs. Most of these lenders today have a lot of garbage charges I wouldn't agree to and recording charges, for instance, have quadrupled since then. I see the assumable mtg as valuable. I see one of my neighbors buying it for their kids and grandkids to live in. The "kid" will end up assuming the small loan and there won't be any origination costs or points. That's how things work around here.

[sdrealtor]

Do you read? I said I consolidated the student loan into the HELOC so my rate is effectively 4% on it. I answered both questions already but here goes again. I said I didnt think rates were going up anytime soon. If I was certain I was moving in 3 to 5 years I would look into a ZERO cost refi into a 5/1 or 3/1 arm which is in the low 2% range and would considering making additional prinicipal payments with the savings. I know very good lenders who can do things without all the junk fees if you need help. IMO banking on selling your house to one of your neighbors isnt a plan its a prayer. Good luck with that one.

BTW, so after 30% down and paying a mortgage for about 10 years you have a 60% LTV. Sounds like zero appreciation. The house next door to mine sold 10 years ago and today would still sell for 40% more than that. Thats how things work around here.

[sdrealtor]

Again the assumable feature is not that valuable. Its only valuable if rates are much higher than what you got which they arent. They are probably lower AND they are fixed. The costs are minimal and could be built into the loan anyway. It would make no sense for someone to assume your loan in this lending environment.

[bearishgurl]

In 2.5 to 3 years, I believe I will be able to make a $75-$80K “profit” upon selling. This presupposes I will finish the rest of my needed repairs and does not include a co-broke fee. That’s not zero appreciation. And I daresay I very likely don’t have the carrying costs that you do, lol!

From your posts, it sounds as if you have already removed a substantial portion of your equity.

You still haven’t told us if all that “40% appreciation on paper” will be YOURS or if you have to split it with a co-owner upon sale!

[bearishgurl]

[quote=sdrealtor]Again the assumable feature is not that valuable. Its only valuable if rates are much higher than what you got which they arent. They are probably lower AND they are fixed. The costs are minimal and could be built into the loan anyway. It would make no sense for someone to assume your loan in this lending environment.[/quote]

It would if it was simple, inexpensive and the buyer didn’t have to jump thru so many hoops to obtain it.

[bearishgurl]

I just googled Carl Richards and it appears that he actually moved to “Park City, UT” last year where he formed a biz called “Prasada Capital Mgmt.”

http://marketplace.publicradio.org/display/web/2011/07/15/mm-why-you-shouldnt-follow-the-stock-market/

Guess he doesn’t have to pay for ski vacations anymore. He’s already there!

He’s still dispensing out financial and investment advice and there is even a speaker on the site to listen to an interview with him, lol!

[AK]

[quote=bearishgurl]I just googled Carl Richards and it appears that he actually moved to “Park City, UT” last year where he formed a biz called “Prasada Capital Mgmt.”

http://marketplace.publicradio.org/display/web/2011/07/15/mm-why-you-shouldnt-follow-the-stock-market/

Guess he doesn’t have to pay for ski vacations anymore. He’s already there!

He’s still dispensing out financial and investment advice and there is even a speaker on the site to listen to an interview with him, lol![/quote]

The “hoocoodanode” factor at work.

If a doctor gives you the conventional ineffective treatment for your ailment and you die, he/she has treated you to the standard of care and is not liable.

If an engineer designs a defective product making the same mistaken assumptions and analyses used by others in the field, he/she has followed industry standard practices and has some protection from liability.

If a financial advisor makes the same mistakes as everyone else … I mean, hoocoodanode?

Come to think of it, I’m not sure he’s the one who made mistakes. I mean, he certainly lived a lot better than I did for quite a few years.

[sdrealtor]

The 40% appreciation was being conservative and is since 2001. I own it since 99 so its more like 60%. Its mine and I have tons of equity. My carrying costs are below 20% of my monthly income and I have the assets to pay it off. If I factor in the income I get on my rental the carrying costs are about the same as yours. I could sell that rental property and pay off the HELOC but it doesnt make sense to do so. Everything I post is the worst case scenario.

Your $75 to 80K profit is a prayer and best case scenario if everything goes right for. When in your life has everything gone right for you? I never make plans on assumptions like that. I should start calling Pollyanna.

What happens if the market gets worse?

What happens if the needed repairs are more costly than you think?

What happens if your mid-century home needs new unexpected repairs?

What happens if you have to pay a brokerage fee?

What happens if your neighbor buys it but expects to have the cost of those brokerage fees deducted from the sales price as nearly all buyer would?

And almost certainly, what happens if the house isnt worth what you think it is now?

[sdrealtor]

[quote=bearishgurl][quote=sdrealtor]Again the assumable feature is not that valuable. Its only valuable if rates are much higher than what you got which they arent. They are probably lower AND they are fixed. The costs are minimal and could be built into the loan anyway. It would make no sense for someone to assume your loan in this lending environment.[/quote]

It would if it was simple, inexpensive and the buyer didn’t have to jump thru so many hoops to obtain it.[/quote]

Dear Pollyanna
There are just as many hoops to assume it, little cost to obtaining a new mortgage, lower monthly payments fixed for the life of the loan and no benefit to them.

Tough Luck

Ebenezer

[NotCranky]

[quote=bearishgurl]Rus, check your pms tonight or tomorrow.[/quote]
Thanks,BG.

[eavesdropper]

[quote=bearishgurl]I just googled Carl Richards and it appears that he actually moved to “Park City, UT” last year where he formed a biz called “Prasada Capital Mgmt.”

http://marketplace.publicradio.org/display/web/2011/07/15/mm-why-you-shouldnt-follow-the-stock-market/

Guess he doesn’t have to pay for ski vacations anymore. He’s already there!

He’s still dispensing out financial and investment advice and there is even a speaker on the site to listen to an interview with him, lol![/quote]

Hell, Ron Lieber at the NYT gives him a regular blog spot every week. Here’s a sample of this guy’s “talent” (careful, he’s a reeealll deep thinker, this one):

Be sure to check out the discriminating readers playing the game of “Stump the Chump” in the Comments section.

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