Will honest people start doing dirty/crooked things to bail out of their houses

[23109VC]

Here is a question I have wondered about.

Suppose a homeowner buys a house during the peak of the real estate cycle for $500,000. They do 100% financing – so there is no equity.

Say the house now is only worth $250,000. So now this person has a house that they could buy for half what they owe.

Suppose this person has the $$ now, due to increased earnings, whatever – to BUY another house. the same type of house for $250k. with a corresponding mortage that is a lot lower.

once they get the NEW house purchased, at the new bottom of the barrel price – they just stop paying on the old house and walk away. and let the bank foreclose on it. the bank is left holding the $250,000 loss.

Can the bank sue the person for the loss or are they basically free and clear of tha thuge loss?

the reason I ask is that I honestly wonder what is going to happen when even the “honest” people who have money, and CAN make their payments see their “house/investment” suddenly worth half what they paid…their monthly payment seems now “HUGE” compared to what a new person buys for, and they get pissed…and would rather find some scam way to get out of paying….by buying anothe rhouse at the newer/cheaper prices and then just dumping the old one.

i mean in a perfect world you jsut sit tight, ride it out, and wait for prices to come back. but peple are not honest, and they are crooked. and it would not suprise me to find people who ordinarily would be honest, doing things that are crooked and/or fraudulent…

[JWM in SD]

Cash and time vs. Debt and Stucco Box.

Who wins and who loses???

Take a wild guess……….

[patientlywaiting]

” Can the bank sue the person for the loss or are they basically free and clear of tha thuge loss? ”

No, the bank can’t sue if the mortgage was as non-recourse purchase loan. But they can sue if the house was refinanced. That prevents owners from refinancing and walking away with equity money leaving the bank to hold the bag.

I don’t remember the exact code section but it’s a left-over from the depression era.

What does it have to do with honesty? A contract is a contract. What does it say? The bank will treat you per the letter of the contract. You might as well do the same to them.

What you say is a good idea but most buyers have refinanced a few times, so they are out of luck.

[patientlywaiting]

” Can the bank sue the person for the loss or are they basically free and clear of tha thuge loss? ”

No, the bank can’t sue if the mortgage was as non-recourse purchase loan. But they can sue if the house was refinanced. That prevents owners from refinancing and walking away with equity money leaving the bank to hold the bag.

I don’t remember the exact code section but it’s a left-over from the depression era.

What does it have to do with honesty? A contract is a contract. What does it say? The bank will treat you per the letter of the contract. You might as well do the same to them.

What you say is a good idea but most buyers have refinanced a few times, so they are out of luck.

[JWM in SD]

Cash and time vs. Debt and Stucco Box.

Who wins and who loses???

Take a wild guess……….

[HLS]

In CA, in general, when you get foreclosed on, IF you still have your original “purchase money loan” it is NON recourse debt, which means the debt is secured by the property and nothing more.
You will not get a 1099-C nor a deficiency judgment, nor owe any income tax for debt relief.

Your credit score will suffer. It will rise over time and it will stay on your credit report for 7 years.

IF your loan is a REFI loan, you will have issues to deal with. That is RECOURSE debt. See IRS guidelines for details.

[golfproz]

That was common practice in the last crash, at least in the IE. I had at least a half dozen people on my street do that in the early 90’s. When the builders started selling new homes at 40%-50% off they all bought new bigger homes that cost way less than the ones they were living in. Then they just let the old ones go back to the bank. There credit was toast for a few years, but really, how much does that matter if you have a home and a few credit cards already. You’re gonna get hit with higher rates if you buy a car but other than that there are few problems.

It’s would not surprise me to see it happen again.

[golfproz]

That was common practice in the last crash, at least in the IE. I had at least a half dozen people on my street do that in the early 90’s. When the builders started selling new homes at 40%-50% off they all bought new bigger homes that cost way less than the ones they were living in. Then they just let the old ones go back to the bank. There credit was toast for a few years, but really, how much does that matter if you have a home and a few credit cards already. You’re gonna get hit with higher rates if you buy a car but other than that there are few problems.

It’s would not surprise me to see it happen again.

[kewp]

HLS hit the nail on the head; this is precisely why the crash is going to snowball. It would be financial suicide *not* to toss your keys for these people.

Heck, an even better course of action is to just stop paying your mortgage and wait for the bank to evict you. Threaten that you will declare bankruptcy and sue the bank for predatory lending if they don’t pay you to move out.

The banks are on the ropes and are going to have so many repos that I would not be surprised if you could live rent/mortgage free for a year or more until they kick you out.

[HLS]

When this mess is over in a few years, I bet that the tax code involving non-recourse debt gets changed for the next time around….
Along with a few other things.

[HLS]

When this mess is over in a few years, I bet that the tax code involving non-recourse debt gets changed for the next time around….
Along with a few other things.

[bsrsharma]

Reminds me of the saying: “If you borrow a Million $, the bank owns you; If you borrow a Billion $, you own the Bank”. Collectively, the borrowers own the banks now and can do pretty much what they want.

[seattle-relo]

Are you wondering what happens to the new house? If the people did have non-recourse loans, can the bank from the repo try to sue them anyway for fraud and try to take the new house? I beat if people can get away with it, they would do it. If they can get into a new home with a lower payment, I think they’d do it.

[oxfordrick]

And your credit will be reinstated…..

just in time to catch the next wave!

[patientlywaiting]

Fraud is an interesting aspect of this whole drama.

A lot of borrowers obtained loans through fraud (overstating income, primary residence instead of investment purchase, etc..) If the banks do some research and can uncover fraud then all bets are off. I would think that the non-recourse aspects of the mortgages are voidable because of fraud (which is also a criminal offense punishable by jail time, if the DA decides to prosecute).

Personally, I think we (as a society) should put more resources to prosecuting the white collar criminals. It doesn’t seem fair that the uneducated criminals get stiff sentences while the smart people who cook up complex scheme go unscathed.

[patientlywaiting]

Fraud is an interesting aspect of this whole drama.

A lot of borrowers obtained loans through fraud (overstating income, primary residence instead of investment purchase, etc..) If the banks do some research and can uncover fraud then all bets are off. I would think that the non-recourse aspects of the mortgages are voidable because of fraud (which is also a criminal offense punishable by jail time, if the DA decides to prosecute).

Personally, I think we (as a society) should put more resources to prosecuting the white collar criminals. It doesn’t seem fair that the uneducated criminals get stiff sentences while the smart people who cook up complex scheme go unscathed.

[oxfordrick]

And your credit will be reinstated…..

just in time to catch the next wave!

[seattle-relo]

Are you wondering what happens to the new house? If the people did have non-recourse loans, can the bank from the repo try to sue them anyway for fraud and try to take the new house? I beat if people can get away with it, they would do it. If they can get into a new home with a lower payment, I think they’d do it.

[bsrsharma]

Reminds me of the saying: “If you borrow a Million $, the bank owns you; If you borrow a Billion $, you own the Bank”. Collectively, the borrowers own the banks now and can do pretty much what they want.

[kewp]

HLS hit the nail on the head; this is precisely why the crash is going to snowball. It would be financial suicide *not* to toss your keys for these people.

Heck, an even better course of action is to just stop paying your mortgage and wait for the bank to evict you. Threaten that you will declare bankruptcy and sue the bank for predatory lending if they don’t pay you to move out.

The banks are on the ropes and are going to have so many repos that I would not be surprised if you could live rent/mortgage free for a year or more until they kick you out.

[blew_it]

HLS (or anyone else), are you sure that’s correct that you don’t take a debt relief hit from walking on a first mortgage? That is contrary to what I’ve been reading regarding the “double whammy” of foreclosure with the tax hit piled on.

[HLS]

First mortgage isn’t the issue..
The issue is Recourse Debt or NON-Recourse debt.

Purchase Money loans are usually NON recourse debt.
(Refi Loans are RECOURSE debt)

Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral.That is, the lender cannot pursue you personally in case of default.

Forgiveness of a non-recourse loan resulting from a foreclosure does NOT result in cancellation of debt income.

Taxable cancellation of debt income.(Note: As stated above, cancellation of debt income is not taxable in the case of non-recourse loans.)

http://www.irs.gov/newsroom/article/0,,id=174034,00.html

CONSULT A CPA for your personal situation.

[HLS]

First mortgage isn’t the issue..
The issue is Recourse Debt or NON-Recourse debt.

Purchase Money loans are usually NON recourse debt.
(Refi Loans are RECOURSE debt)

Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral.That is, the lender cannot pursue you personally in case of default.

Forgiveness of a non-recourse loan resulting from a foreclosure does NOT result in cancellation of debt income.

Taxable cancellation of debt income.(Note: As stated above, cancellation of debt income is not taxable in the case of non-recourse loans.)

http://www.irs.gov/newsroom/article/0,,id=174034,00.html

CONSULT A CPA for your personal situation.

[blew_it]

HLS (or anyone else), are you sure that’s correct that you don’t take a debt relief hit from walking on a first mortgage? That is contrary to what I’ve been reading regarding the “double whammy” of foreclosure with the tax hit piled on.

[HLS]

In CA, in general, when you get foreclosed on, IF you still have your original “purchase money loan” it is NON recourse debt, which means the debt is secured by the property and nothing more.
You will not get a 1099-C nor a deficiency judgment, nor owe any income tax for debt relief.

Your credit score will suffer. It will rise over time and it will stay on your credit report for 7 years.

IF your loan is a REFI loan, you will have issues to deal with. That is RECOURSE debt. See IRS guidelines for details.

[gn]

I think that the “stigma” associated with foreclosure will greatly decrease in the next few years. That’s because foreclosures will become so common.

Most people will simply think:

I was a victim of greedy mortgage brokers/the artificial high prices of the real estate bubble. Look around, there are thousand of other victims. I’m not the only one. So, it’s OK to walk & let the lender foreclose.

[gn]

I think that the “stigma” associated with foreclosure will greatly decrease in the next few years. That’s because foreclosures will become so common.

Most people will simply think:

I was a victim of greedy mortgage brokers/the artificial high prices of the real estate bubble. Look around, there are thousand of other victims. I’m not the only one. So, it’s OK to walk & let the lender foreclose.

[djrobsd]

There’s only one hole in your plan. How are they going to get a mortgage on the second property when they still have the mortgage on the first one? The bank is going to see the other mortgage, and decline the loan, unless they have enough debt to income ratio to support paying BOTH mortgages, or they have 20% to put down on the second property and declare it as an investment property. It seems to me though that the bank would look long and hard at your first property before loaning you money on another one…. At least I would!

[seattle-relo]

I am sure that there are some people who do have enough savings for 20% down and could declare the second property as a rental, then move in the “rental” and let the old house foreclose. I think my husband worked with someone who did that back in the 90’s. I think they did because they had to relocate to Chicago for work and couldn’t sell their CA property.

[seattle-relo]

I am sure that there are some people who do have enough savings for 20% down and could declare the second property as a rental, then move in the “rental” and let the old house foreclose. I think my husband worked with someone who did that back in the 90’s. I think they did because they had to relocate to Chicago for work and couldn’t sell their CA property.

[seattle-relo]

I am sure that there are some people who do have enough savings for 20% down and could declare the second property as a rental, then move in the “rental” and let the old house foreclose. I think my husband worked with someone who did that back in the 90’s. I think they did because they had to relocate to Chicago for work and couldn’t sell their CA property.

[seattle-relo]

I am sure that there are some people who do have enough savings for 20% down and could declare the second property as a rental, then move in the “rental” and let the old house foreclose. I think my husband worked with someone who did that back in the 90’s. I think they did because they had to relocate to Chicago for work and couldn’t sell their CA property.

[patientlywaiting]

Very easy to get another purchase mortgage. Just tell the lender you are in the process of selling the old house so it won’t be a liability anymore.

That’s how people normally obtain loans when they move up. The lender then ignore the current mortgage in the underwriting process.

[Ex-SD]

It’s not that easy anymore. Getting a loan for another home while you still own the present one will be difficult. The bank will still count the obligation for the first home towards your total debt.

[patientlywaiting]

ex-sd, that’s news to me.

If you’re right, that will kill the move-up market as well. Are move-up families going to have to sell, rent then buy?

[Ex-SD]

I’m not talking about a vacation home. I’m talking about a primary residence. If someone is planning on throwing the keys back to the lender and attempts to buy another home in the same general market, the lender isn’t going to believe that it’s a vacation home. They would buy off on the idea of it being a rental but then they’re going to want to see a substantial down payment and a full-doc loan now that liar loans are out the window.

Any mortgage pros want to get in on this and correct me if I’m wrong?

[patientlywaiting]

ex-sd, I’m no expect on this matter so I don’t pretend to know more than you. Just thinking about the possibilities here.

I was talking about a family who wants to move up to a better house in the same general area. They can buy a new house with a contingency that they sell the old one first, or they can buy the new house then sell the old one later. It would work the same for a family that is downsizing.

How can the lender divine what the “real” intention of the buyer is assuming that he is otherwise a rock solid borrower.

[patientlywaiting]

ex-sd, I’m no expect on this matter so I don’t pretend to know more than you. Just thinking about the possibilities here.

I was talking about a family who wants to move up to a better house in the same general area. They can buy a new house with a contingency that they sell the old one first, or they can buy the new house then sell the old one later. It would work the same for a family that is downsizing.

How can the lender divine what the “real” intention of the buyer is assuming that he is otherwise a rock solid borrower.

[23109VC]

in my original assumption, I”m assuming the person who pulls this off has a solid job, currently has strong FICO scores, and has not refi’d the existing house….

So…they have a large income, they can go full doc – and prove income.

so you wind up “lying” and claiming your existing home is rented out, you generate a rental contract with someone you know, or a straw, who signs up for the rental, at a high monthly rate – so that the bank thinks the existing home is rented – and then qualify for the new house.

i have a buddy who was buying home #2, and had house #1. he lived in #1 and did bogus docs showing house #1 was rented out. it was all fake. he then qualified for house #2, bought it, moved in. THEN he put #1 up for rent and just burned up savings until it really rented. he had to carry it a couple of months, but he pulled it off…but he did LIE on his app by claiming it was rented….he had a rental contract executed, by a real person buyt all involved knew it would be torn up the moment his loan closed on #2.

i don’t see why people won’t pull this in the upcoming crash.

heck, if my house is suddenly worth a fraction of what I paid for it…and I could buy the SAME type house, or hell, a BETTER one for LESS money, you think i’d sit in myhouse and essentially waste money… i think you will see peple lining up to dump their house and let the bank have it.

assuming they have the income/docs/etc to qualify for house #2.

or people will draw up fake escrow papers and claim their house is already sold and in escrow. what would stop me from having a purchase agreement with say…my SISTER…who signs up to BUY my house…it goes into escrow…I quality for house #2 b/c bank thinks house #1 is selling…and then approve you for new house…then after the fact #1 “falls out”…or would they demand it actually close before they funded #2?

if people did this in the 90s, they will do it again and there will be a way. maybe some people won’t have the $$ or the ability to do it, but if there are some people who CAN do it, and it makes financial sense to do it, whether it is the “moral” or “right” thing will be out the window. money is money and people will sell their soul for it.

[gn]

23109VC,

Are you thinking of a possible exit strategy from your current house in case the market in Temecula collapse ?

[23109VC]

those who asked if I was that guy who posted all the questions about buying a house for 350k.. yeah that’s me.

yeah, I’m thinknig ahead about exit strategies IF the $hit hits the fan.

i’m STILL above water. NO house in my area has sold for what I paid. YET. 🙂 I’m one of those complacent people who will NOT sell or move if things just got slightly underwater.

but if it actually fell to 100k less than *I* paid…then I’d start thinking exit strategy.

We have no buyer’s remorse yet. We like our house, like our area, and after considering rents and what we pay to own – we think we are at worse breaking even right now. we could rent for less net dollars – but after factoring in taxes, etc… our mortgage (including HOAs taxes, and factoring the tax savings vs renting) is about what we would pay to rent possibly a smidgen higher to buy…but we didn’t have to incur moving costs/stress…which to us was worth something.

all in all we are still happy. when my house is worth 250k i won’t be happy and will be looking to bail. 🙂 we’ll see if it happens.

i’ll continue to check in from time to time and report what I see. so far I’m still happy with my decision.

[Eugene]

Two points.

1. Banks will be reluctant to lend money to people who are upside down on their mortgages. The “I’m trying to sell” trick isn’t going to work when your house is worth 250k and you owe 500k in the first mortgage.

2. If I’m not mistaken, zero down loans are usually constructed out of a 20% down first mortgage and a second mortgage/HELOC to cover the down payment. It’s done this way because 20% down waives the PMI requirement, interest on the second mortgage is tax deductible, and PMI is not.

In this situation, first mortgage is non-recourse, but second mortgage isn’t. Who lent you 100k to cover your down payment will try to sue you and collect his money.

[seattle-relo]

I believe if the second was to purchase the home, it is also considered a nonrecourse loan.

[seattle-relo]

I believe if the second was to purchase the home, it is also considered a nonrecourse loan.

[DaCounselor]

“2. If I’m not mistaken, zero down loans are usually constructed out of a 20% down first mortgage and a second mortgage/HELOC to cover the down payment. It’s done this way because 20% down waives the PMI requirement, interest on the second mortgage is tax deductible, and PMI is not.

In this situation, first mortgage is non-recourse, but second mortgage isn’t. Who lent you 100k to cover your down payment will try to sue you and collect his money.”
________________________________

You are mistaken as to the characterization of the 20% second mortgage as a recourse loan. It is not. It is purchase money and by CA law it is non-recourse. The lender has no recourse if you default other than seizure of the collateral. Doesn’t matter if the 2nd is called a HELOC or a Whozeewhatsit. It’s non-recourse.

[DaCounselor]

“2. If I’m not mistaken, zero down loans are usually constructed out of a 20% down first mortgage and a second mortgage/HELOC to cover the down payment. It’s done this way because 20% down waives the PMI requirement, interest on the second mortgage is tax deductible, and PMI is not.

In this situation, first mortgage is non-recourse, but second mortgage isn’t. Who lent you 100k to cover your down payment will try to sue you and collect his money.”
________________________________

You are mistaken as to the characterization of the 20% second mortgage as a recourse loan. It is not. It is purchase money and by CA law it is non-recourse. The lender has no recourse if you default other than seizure of the collateral. Doesn’t matter if the 2nd is called a HELOC or a Whozeewhatsit. It’s non-recourse.

[Eugene]

Two points.

1. Banks will be reluctant to lend money to people who are upside down on their mortgages. The “I’m trying to sell” trick isn’t going to work when your house is worth 250k and you owe 500k in the first mortgage.

2. If I’m not mistaken, zero down loans are usually constructed out of a 20% down first mortgage and a second mortgage/HELOC to cover the down payment. It’s done this way because 20% down waives the PMI requirement, interest on the second mortgage is tax deductible, and PMI is not.

In this situation, first mortgage is non-recourse, but second mortgage isn’t. Who lent you 100k to cover your down payment will try to sue you and collect his money.

[SD Realtor]

23VC why would you bail? You purchased the home after going through the angst of many a post and I am sure many a calculation on your part. You knew going in that the market was indeed going to depreciate but I thought that your purchase was a long term decision… that you would be in the home come hell or high water for many years.

Honestly I am puzzled and became puzzled when you wrote that you are thinking about exit strategies if the sht hits the fan. If? If? You know it is not if but when.

Repeat this phrase 1000 times. A house is not an investment. You bought this home on the premise that it was NOT in investment but because you wanted to buy a home and live in a home. It seems that some of the parameters that you listed in order to justify your original purchase are not true anymore. However if you think that prices will not drop more, and not drop by alot more… and you are going to let that eat at you… then by all means you should sell now instead of wait for later.

SD Realtor

[Anonymous]

Thank you SD Realtor!!
Can you imagine if we walked away from everything in our lives that go down in value? I wonder if the original poster ever purchased a new car on payments…a car loses 30% of its value when you drive it off the lot yet most of us continue to pay on it for years. Your house is your home. Common sense says you shouldn’t buy a house if your intension is to sell in a year or two. There are millions of people who purchased homes at the last peak of the market and saw prices drop dramatically–lots bailed and wish they hadn’t; others stuck it out and are happy today that they did. Stop reading the newspapers and just enjoy your home. If you purchased with a P&I loan, you will be very very happy in the long run.

[HLS]

“If you purchased with a P&I loan, you will be very very happy in the long run”

And what makes you so sure that people will be VERY VERY happy in the long run ?? Are you a RE agent ?????

AND even if you are right, those who purchased with an interest only loan will be happy too. The thinking that P&I is CRUCIAL to someones success in real etstate is SOOOOooooo 40 years ago….

Thre is NO comparison to “the last peak”
Homes were much more affordable then, in relation to income.

You suggest they stop reading the newspaper and then what ?
Just listen to you ???

You just don’t understand that for MANY people it is a stretch to just pay full interest payments, forget about any principal. The extra couple of hundred dollars is just beyond affordability of many.

The carrying costs today to “hang on” and spend $40K+ a year waiting for the market to “recover” is irresponsible advice. People need to UNDERSTAND what they are up against and make choices that they can live with. The house may NEVER go back to the levels of 2005.

It’s attitudes like yours about housing and the stock market that have average people drinking Kool-Aid by the gallons. Pathetic advice.

SO,because so many people are delusional about the “value” of their house, they will remain in debt for twice what the house could be repurchased for in the not so distant future.
Govt gets exactly what they want. Keep people in debt way beyond what they can afford.

Keep the sheep BAA’ing waiting for the miracle cure.

[Anonymous]

HLS, yes I am a Realtor. Are you a renter? You sound like the bitter renters I meet who think homeowners are idiots and get pissed off at your landlord because he has decided to sell and you have to move again.

And because I am a Realtor and a homeowner, as well as investor, I DO understand what a stretch it is to buy. Unfortunately, I wasn’t born rich so I had to scrape and save like other people should to buy a house and give up the idea of a new car and eating out to make a mortage payment. I have helped approximately 60 couples/individuals buy homes during the past 5 years an NONE of them have lost their homes. A few of them have pulled out cash and wish they didn’t. I never recommend flipping. I always ask people whether or not they can afford the home in the long run. You seem to think everyone in the real estate business is unethical. (I guess it’s similar to how I think people who rent for 20+ years aren’t very smart.)Yes, I’m a little old fashioned about the P&I but I want to retire without a mortgage, although I realize a lot of people don’t care.

I challenge you to find any unhappy homeowner who has lived in their home for more than 10 years and never pulled cash.

[JWM in SD]

“I challenge you to find any unhappy homeowner who has lived in their home for more than 10 years and never pulled cash.”

Shari, are freaking kidding me?? How long have you been reading this site? This is not about homeowners who bought 10 years ago with traditional financing and didn’t pull cash out. They are not going to drive the market so they are….IRRELEVANT.

Now go back to selling houses to suckers….

[Anonymous]

I haven’t been on this sight long but I thought it was about the current housing market, past cycles, historic trends, etc. I thought it was about how to look at what is happening today in a broader context.

But now I see the light…it sucks out there; the prices will never stop falling; the end is nowhere in sight; everyone who has lost any equity should bail now before it gets worse; you’ve got to be an idiot to even think about buying, etc.

Better?

[JWM in SD]

No, it doesn’t suck one is smart enough to see through the lies and fraud perpetuated by the NAR and CAR. I have cash and I have time, declining prices are good for me and are bad for flippers and “investors”…welcome to the real world where there are cycles. If what you want is to perpetuate unaffordability, then you are a proponent of the continued economic damage to this country and worthy of my scorn.

[Anonymous]

JWM–I’m in 1000% agreement that there are cycles–I never said there weren’t. I don’t think I have anything to do with economic damage to this country, except on a personal level I don’t own a flat screen TV, I don’t buy new cars, I don’t have credit card debt because I don’t buy that much “stuff” and our economy is dependent on people over extending themselves to buy “stuff” (including houses).

I recently met a young couple who bought their house in 2002 for $289,000. A year ago, they refied into a negative AM loan with $60,000 cash out to remodel the kitchen and buy a new car, plus got a line of credit pay off some credit cards. Now their house on the market as a short sale because they are overwhelmed by the payments. The first two weeks their house was on the market they went on a Hawaiian cruise. Is unaffordable housing their problem?? Is the blood-sucking Realtor who sold them the home to blame?? Is the scum bag mortgage broker who sold them a neg AM at fault?? Is the bank who gave them money to buy a new SUV the problem?? Sure some buyers were dupped into loans that they didn’t understand, so scorn the whole lot of us if you like but we are not the reason our economy nor the housing market is in its current state.

Fat_Lazy_Union–HLS just sounds like a lot of the renters I meet. They come into my open houses gloating about how smart they are that they haven’t bought a house. I’m not saying renters are bad people, although almost everyone on this board calls Realtors scum suckers. Just joshing, but I do believe in the long run, homeowners get ahead financially.

[HLS]

Shari…

Don’t start with me….

I was able to peg what you do from several sentences.
I chew propaganda up and spit it out daily.

Your assumptions of me are 180 degrees off.

I bought my first OO property in 1980. I’ve been a landlord since 1982. I rented a room for less than a year in 1982 until I bought my next home, and I won’t bore you with what’s happened since then.

Other than that, I’ve never rented a day in my life, unless you consider paying for cabins on cruise ships renting.

I can assure you that I’m not bitter, you won’t see me at one of “your” open houses, and I’m probably not like anyone that you’ve ever met before. I don’t fit into any box that you’ve ever seen.

I’m sure that you have never told people that buying a house is gambling. Your income depends on repeating the propaganda that spews from what is purported to be professional, ethical organizations. Your income depends on it.

I’d love to hear some of the lines that came out of your mouth (over the last 10 years) that got you by with nothing more than luck, it certainly wasn’t wisdom or experience.

Regardless of what the organizations that you pay dues to tell it’s members, you aren’t psychic and don’t have a crystal ball and have ABSOLUTELY no business giving people investment advice or predicting future gains, UNLESS you personally are a poster child for financial security for much longer than the 9 year bull run of local RE.

You want to go toe to toe, I can assure you that I can hold my own. I’m involved in the mortgage business but my income doesn’t depend on it. I wasn’t doing retail loans at the peak, so don’t even think that I put people into crappy loans or earned huge commissions.

Take a hard look at what you are saying, word by word.
That’s what I do, even when nobody is listening.
It’s called integrity.

I look in the mirror every day and like who I see.
I only hope that you can say the same.

[HLS]

Shari…

Don’t start with me….

I was able to peg what you do from several sentences.
I chew propaganda up and spit it out daily.

Your assumptions of me are 180 degrees off.

I bought my first OO property in 1980. I’ve been a landlord since 1982. I rented a room for less than a year in 1982 until I bought my next home, and I won’t bore you with what’s happened since then.

Other than that, I’ve never rented a day in my life, unless you consider paying for cabins on cruise ships renting.

I can assure you that I’m not bitter, you won’t see me at one of “your” open houses, and I’m probably not like anyone that you’ve ever met before. I don’t fit into any box that you’ve ever seen.

I’m sure that you have never told people that buying a house is gambling. Your income depends on repeating the propaganda that spews from what is purported to be professional, ethical organizations. Your income depends on it.

I’d love to hear some of the lines that came out of your mouth (over the last 10 years) that got you by with nothing more than luck, it certainly wasn’t wisdom or experience.

Regardless of what the organizations that you pay dues to tell it’s members, you aren’t psychic and don’t have a crystal ball and have ABSOLUTELY no business giving people investment advice or predicting future gains, UNLESS you personally are a poster child for financial security for much longer than the 9 year bull run of local RE.

You want to go toe to toe, I can assure you that I can hold my own. I’m involved in the mortgage business but my income doesn’t depend on it. I wasn’t doing retail loans at the peak, so don’t even think that I put people into crappy loans or earned huge commissions.

Take a hard look at what you are saying, word by word.
That’s what I do, even when nobody is listening.
It’s called integrity.

I look in the mirror every day and like who I see.
I only hope that you can say the same.

[JWM in SD]

Shari you can’t for real right? That couple is exactly the reason why the housing market is currently in this state. Why? Because if the easy $ had not run its course they would have expected some other greater fool to buy their house and pay for all that crap. You are proof positive that most realtors are complete idiots who were earning an exorbitant income that would not have been possible in the real world. Let me clue you into something Shari, its a bad idea to piss off Piggingtons. We are the ones that will determine you future income stream if you decide to continue in the RE business.

[Anonymous]

I am 100% real. So sorry my opinions piss you off. It’s very humble for you to think that anything you say will affect my future income.

[luxuryglow]

per Shari

” Realtors…scum suckers.”

[luxuryglow]

per Shari

” Realtors…scum suckers.”

[JWM in SD]

“It’s very humble for you to think that anything you say will affect my future income.”

Its not what I say Shari, its what I do that can & does affect you as a realtor. If it doesn’t affect you and were all just a bunch of JBRs, then what are you doing here? You are looking into the face of your enemy…the enemy of ignorance and avarice. You will lose if you don’t adjust your opinions. I have money and I have time. FBs and GFs have lots of debt and a stucco box.

[JWM in SD]

“It’s very humble for you to think that anything you say will affect my future income.”

Its not what I say Shari, its what I do that can & does affect you as a realtor. If it doesn’t affect you and were all just a bunch of JBRs, then what are you doing here? You are looking into the face of your enemy…the enemy of ignorance and avarice. You will lose if you don’t adjust your opinions. I have money and I have time. FBs and GFs have lots of debt and a stucco box.

[Anonymous]

I am 100% real. So sorry my opinions piss you off. It’s very humble for you to think that anything you say will affect my future income.

[patientlywaiting]

I’ve been around long enough to know that Fat Lazy Union owns a nice house in Carmel Valley. He bought near the top; but he’s open-minded enough to see the real estate market for what it is — overpriced.

Like HLS said, integrity is about seing the truth for what it is regardless of your own interests and where your income comes from. If you make mistakes, you suck it up and move on.

[Coronita]

I've been around long enough to know that Fat Lazy Union owns a nice house in Carmel Valley. He bought near the top; but he's open-minded enough to see the real estate market for what it is — overpriced.

 

patientlywaiting,

You're giving more credit than i deserve. Actually, my house is a POS stucco box… But relative to all other stucco boxes, it's probably about an average POS stucco box. In fact, I can't recall any new developments that aren't stucco boxes.

It was overpriced when i bought it, but at least the interest rate was really low. Right now, I think it's the worst of both worlds. Interests rates are up, particularly jumbos, but home prices haven't come down enough yet. Yes, I'm aware that it's still lower than other points in history. BUT, home prices haven't been this high at any points in history either. 1% difference on a jumbo is significant.

[Coronita]

I've been around long enough to know that Fat Lazy Union owns a nice house in Carmel Valley. He bought near the top; but he's open-minded enough to see the real estate market for what it is — overpriced.

 

patientlywaiting,

You're giving more credit than i deserve. Actually, my house is a POS stucco box… But relative to all other stucco boxes, it's probably about an average POS stucco box. In fact, I can't recall any new developments that aren't stucco boxes.

It was overpriced when i bought it, but at least the interest rate was really low. Right now, I think it's the worst of both worlds. Interests rates are up, particularly jumbos, but home prices haven't come down enough yet. Yes, I'm aware that it's still lower than other points in history. BUT, home prices haven't been this high at any points in history either. 1% difference on a jumbo is significant.

[patientlywaiting]

I’ve been around long enough to know that Fat Lazy Union owns a nice house in Carmel Valley. He bought near the top; but he’s open-minded enough to see the real estate market for what it is — overpriced.

Like HLS said, integrity is about seing the truth for what it is regardless of your own interests and where your income comes from. If you make mistakes, you suck it up and move on.

[JWM in SD]

Shari you can’t for real right? That couple is exactly the reason why the housing market is currently in this state. Why? Because if the easy $ had not run its course they would have expected some other greater fool to buy their house and pay for all that crap. You are proof positive that most realtors are complete idiots who were earning an exorbitant income that would not have been possible in the real world. Let me clue you into something Shari, its a bad idea to piss off Piggingtons. We are the ones that will determine you future income stream if you decide to continue in the RE business.

[Anonymous]

JWM–I’m in 1000% agreement that there are cycles–I never said there weren’t. I don’t think I have anything to do with economic damage to this country, except on a personal level I don’t own a flat screen TV, I don’t buy new cars, I don’t have credit card debt because I don’t buy that much “stuff” and our economy is dependent on people over extending themselves to buy “stuff” (including houses).

I recently met a young couple who bought their house in 2002 for $289,000. A year ago, they refied into a negative AM loan with $60,000 cash out to remodel the kitchen and buy a new car, plus got a line of credit pay off some credit cards. Now their house on the market as a short sale because they are overwhelmed by the payments. The first two weeks their house was on the market they went on a Hawaiian cruise. Is unaffordable housing their problem?? Is the blood-sucking Realtor who sold them the home to blame?? Is the scum bag mortgage broker who sold them a neg AM at fault?? Is the bank who gave them money to buy a new SUV the problem?? Sure some buyers were dupped into loans that they didn’t understand, so scorn the whole lot of us if you like but we are not the reason our economy nor the housing market is in its current state.

Fat_Lazy_Union–HLS just sounds like a lot of the renters I meet. They come into my open houses gloating about how smart they are that they haven’t bought a house. I’m not saying renters are bad people, although almost everyone on this board calls Realtors scum suckers. Just joshing, but I do believe in the long run, homeowners get ahead financially.

[JWM in SD]

No, it doesn’t suck one is smart enough to see through the lies and fraud perpetuated by the NAR and CAR. I have cash and I have time, declining prices are good for me and are bad for flippers and “investors”…welcome to the real world where there are cycles. If what you want is to perpetuate unaffordability, then you are a proponent of the continued economic damage to this country and worthy of my scorn.

[Anonymous]

I haven’t been on this sight long but I thought it was about the current housing market, past cycles, historic trends, etc. I thought it was about how to look at what is happening today in a broader context.

But now I see the light…it sucks out there; the prices will never stop falling; the end is nowhere in sight; everyone who has lost any equity should bail now before it gets worse; you’ve got to be an idiot to even think about buying, etc.

Better?

[JWM in SD]

“I challenge you to find any unhappy homeowner who has lived in their home for more than 10 years and never pulled cash.”

Shari, are freaking kidding me?? How long have you been reading this site? This is not about homeowners who bought 10 years ago with traditional financing and didn’t pull cash out. They are not going to drive the market so they are….IRRELEVANT.

Now go back to selling houses to suckers….

[Coronita]

HLS, yes I am a Realtor. Are you a renter? You sound like the bitter renters I meet who think homeowners are idiots and get pissed off at your landlord because he has decided to sell and you have to move again.

 

 

meow-ouch..Catfight…catfight…

I definitely wouldn't be buying right now. 1) mortgage interest rate is well above the low of 5% days that allowed one to buy a high six digit home, 2)home prices have not fallen enough to offset the rise in a mortgage interest rate. Buying now would be worse than buying in 2004 or 2005 imho, because you get a crappy interest rate and haven't seen a correction large enough to offset that additional interest amount.

 

 

Why do some Realtor's always like to throw in…"Renter" card? Wow being a renter is soo bad? The big bad loser renter. There are different reasons to rent and buy at any time. And who really "owns" that home with an outstanding mortgage? Bank? Gessh.. I feel like I just walked into a BMW or Mercedes dealer. IE: arrogant sales pitches stating it's a privilege to drive that POS bangle-butt inspired design BMW or chrysler quality like 1/2 assembled in outside germany mercedes. Worse, I love seeing all the Mercedes and BMW drivers who take out ridiculous 4-5 year leases thinking they "own" a BMW/Mer…That's pretty funny too.

No, I'm not bitter, no I'm not a renter, and no I'm not jealous of people that drive BMW and Mercedes. (Although a bit jealous of those that can afford to drive and maintain things like a 997, M5, R8,).

 

[Coronita]

HLS, yes I am a Realtor. Are you a renter? You sound like the bitter renters I meet who think homeowners are idiots and get pissed off at your landlord because he has decided to sell and you have to move again.

 

 

meow-ouch..Catfight…catfight…

I definitely wouldn't be buying right now. 1) mortgage interest rate is well above the low of 5% days that allowed one to buy a high six digit home, 2)home prices have not fallen enough to offset the rise in a mortgage interest rate. Buying now would be worse than buying in 2004 or 2005 imho, because you get a crappy interest rate and haven't seen a correction large enough to offset that additional interest amount.

 

 

Why do some Realtor's always like to throw in…"Renter" card? Wow being a renter is soo bad? The big bad loser renter. There are different reasons to rent and buy at any time. And who really "owns" that home with an outstanding mortgage? Bank? Gessh.. I feel like I just walked into a BMW or Mercedes dealer. IE: arrogant sales pitches stating it's a privilege to drive that POS bangle-butt inspired design BMW or chrysler quality like 1/2 assembled in outside germany mercedes. Worse, I love seeing all the Mercedes and BMW drivers who take out ridiculous 4-5 year leases thinking they "own" a BMW/Mer…That's pretty funny too.

No, I'm not bitter, no I'm not a renter, and no I'm not jealous of people that drive BMW and Mercedes. (Although a bit jealous of those that can afford to drive and maintain things like a 997, M5, R8,).

 

[Anonymous]

HLS, yes I am a Realtor. Are you a renter? You sound like the bitter renters I meet who think homeowners are idiots and get pissed off at your landlord because he has decided to sell and you have to move again.

And because I am a Realtor and a homeowner, as well as investor, I DO understand what a stretch it is to buy. Unfortunately, I wasn’t born rich so I had to scrape and save like other people should to buy a house and give up the idea of a new car and eating out to make a mortage payment. I have helped approximately 60 couples/individuals buy homes during the past 5 years an NONE of them have lost their homes. A few of them have pulled out cash and wish they didn’t. I never recommend flipping. I always ask people whether or not they can afford the home in the long run. You seem to think everyone in the real estate business is unethical. (I guess it’s similar to how I think people who rent for 20+ years aren’t very smart.)Yes, I’m a little old fashioned about the P&I but I want to retire without a mortgage, although I realize a lot of people don’t care.

I challenge you to find any unhappy homeowner who has lived in their home for more than 10 years and never pulled cash.

[HLS]

“If you purchased with a P&I loan, you will be very very happy in the long run”

And what makes you so sure that people will be VERY VERY happy in the long run ?? Are you a RE agent ?????

AND even if you are right, those who purchased with an interest only loan will be happy too. The thinking that P&I is CRUCIAL to someones success in real etstate is SOOOOooooo 40 years ago….

Thre is NO comparison to “the last peak”
Homes were much more affordable then, in relation to income.

You suggest they stop reading the newspaper and then what ?
Just listen to you ???

You just don’t understand that for MANY people it is a stretch to just pay full interest payments, forget about any principal. The extra couple of hundred dollars is just beyond affordability of many.

The carrying costs today to “hang on” and spend $40K+ a year waiting for the market to “recover” is irresponsible advice. People need to UNDERSTAND what they are up against and make choices that they can live with. The house may NEVER go back to the levels of 2005.

It’s attitudes like yours about housing and the stock market that have average people drinking Kool-Aid by the gallons. Pathetic advice.

SO,because so many people are delusional about the “value” of their house, they will remain in debt for twice what the house could be repurchased for in the not so distant future.
Govt gets exactly what they want. Keep people in debt way beyond what they can afford.

Keep the sheep BAA’ing waiting for the miracle cure.

[Anonymous]

Thank you SD Realtor!!
Can you imagine if we walked away from everything in our lives that go down in value? I wonder if the original poster ever purchased a new car on payments…a car loses 30% of its value when you drive it off the lot yet most of us continue to pay on it for years. Your house is your home. Common sense says you shouldn’t buy a house if your intension is to sell in a year or two. There are millions of people who purchased homes at the last peak of the market and saw prices drop dramatically–lots bailed and wish they hadn’t; others stuck it out and are happy today that they did. Stop reading the newspapers and just enjoy your home. If you purchased with a P&I loan, you will be very very happy in the long run.

[SD Realtor]

23VC why would you bail? You purchased the home after going through the angst of many a post and I am sure many a calculation on your part. You knew going in that the market was indeed going to depreciate but I thought that your purchase was a long term decision… that you would be in the home come hell or high water for many years.

Honestly I am puzzled and became puzzled when you wrote that you are thinking about exit strategies if the sht hits the fan. If? If? You know it is not if but when.

Repeat this phrase 1000 times. A house is not an investment. You bought this home on the premise that it was NOT in investment but because you wanted to buy a home and live in a home. It seems that some of the parameters that you listed in order to justify your original purchase are not true anymore. However if you think that prices will not drop more, and not drop by alot more… and you are going to let that eat at you… then by all means you should sell now instead of wait for later.

SD Realtor

[23109VC]

those who asked if I was that guy who posted all the questions about buying a house for 350k.. yeah that’s me.

yeah, I’m thinknig ahead about exit strategies IF the $hit hits the fan.

i’m STILL above water. NO house in my area has sold for what I paid. YET. 🙂 I’m one of those complacent people who will NOT sell or move if things just got slightly underwater.

but if it actually fell to 100k less than *I* paid…then I’d start thinking exit strategy.

We have no buyer’s remorse yet. We like our house, like our area, and after considering rents and what we pay to own – we think we are at worse breaking even right now. we could rent for less net dollars – but after factoring in taxes, etc… our mortgage (including HOAs taxes, and factoring the tax savings vs renting) is about what we would pay to rent possibly a smidgen higher to buy…but we didn’t have to incur moving costs/stress…which to us was worth something.

all in all we are still happy. when my house is worth 250k i won’t be happy and will be looking to bail. 🙂 we’ll see if it happens.

i’ll continue to check in from time to time and report what I see. so far I’m still happy with my decision.

[gn]

23109VC,

Are you thinking of a possible exit strategy from your current house in case the market in Temecula collapse ?

[23109VC]

in my original assumption, I”m assuming the person who pulls this off has a solid job, currently has strong FICO scores, and has not refi’d the existing house….

So…they have a large income, they can go full doc – and prove income.

so you wind up “lying” and claiming your existing home is rented out, you generate a rental contract with someone you know, or a straw, who signs up for the rental, at a high monthly rate – so that the bank thinks the existing home is rented – and then qualify for the new house.

i have a buddy who was buying home #2, and had house #1. he lived in #1 and did bogus docs showing house #1 was rented out. it was all fake. he then qualified for house #2, bought it, moved in. THEN he put #1 up for rent and just burned up savings until it really rented. he had to carry it a couple of months, but he pulled it off…but he did LIE on his app by claiming it was rented….he had a rental contract executed, by a real person buyt all involved knew it would be torn up the moment his loan closed on #2.

i don’t see why people won’t pull this in the upcoming crash.

heck, if my house is suddenly worth a fraction of what I paid for it…and I could buy the SAME type house, or hell, a BETTER one for LESS money, you think i’d sit in myhouse and essentially waste money… i think you will see peple lining up to dump their house and let the bank have it.

assuming they have the income/docs/etc to qualify for house #2.

or people will draw up fake escrow papers and claim their house is already sold and in escrow. what would stop me from having a purchase agreement with say…my SISTER…who signs up to BUY my house…it goes into escrow…I quality for house #2 b/c bank thinks house #1 is selling…and then approve you for new house…then after the fact #1 “falls out”…or would they demand it actually close before they funded #2?

if people did this in the 90s, they will do it again and there will be a way. maybe some people won’t have the $$ or the ability to do it, but if there are some people who CAN do it, and it makes financial sense to do it, whether it is the “moral” or “right” thing will be out the window. money is money and people will sell their soul for it.

[Ex-SD]

I’m not talking about a vacation home. I’m talking about a primary residence. If someone is planning on throwing the keys back to the lender and attempts to buy another home in the same general market, the lender isn’t going to believe that it’s a vacation home. They would buy off on the idea of it being a rental but then they’re going to want to see a substantial down payment and a full-doc loan now that liar loans are out the window.

Any mortgage pros want to get in on this and correct me if I’m wrong?

[patientlywaiting]

ex-sd, that’s news to me.

If you’re right, that will kill the move-up market as well. Are move-up families going to have to sell, rent then buy?

[Ex-SD]

It’s not that easy anymore. Getting a loan for another home while you still own the present one will be difficult. The bank will still count the obligation for the first home towards your total debt.

[patientlywaiting]

Very easy to get another purchase mortgage. Just tell the lender you are in the process of selling the old house so it won’t be a liability anymore.

That’s how people normally obtain loans when they move up. The lender then ignore the current mortgage in the underwriting process.

[djrobsd]

There’s only one hole in your plan. How are they going to get a mortgage on the second property when they still have the mortgage on the first one? The bank is going to see the other mortgage, and decline the loan, unless they have enough debt to income ratio to support paying BOTH mortgages, or they have 20% to put down on the second property and declare it as an investment property. It seems to me though that the bank would look long and hard at your first property before loaning you money on another one…. At least I would!

[DaCounselor]

I don’t think there is anything dirty or crooked about someone allowing their home to go into foreclosure, even if they can afford the payments, because the value has dropped dramatically. It’s probably not a good strategy for someone who re-fied, but for someone with 80/20 non-recourse purchase money it may make sense. The mortgage contract is pretty simple – the buyer agrees to make payments as described, and if they don’t the lender(s) take the collateral. That was the deal. If the poor 2nd gets wiped out, oh well, that’s show business. That’s what you risk when you go 100% ltv as a lender. You don’t want the risk, don’t lend the money.

Forging rental agreements and fake escrows are a whole different story. Such activity is dirty and crooked and fraudulent, and there is probably going to be plenty of it.
But what can you expect when there are potentially hundreds of thousands of dollars at stake? The way I see it, if otherwise straight people were inclined to fib on the stated income deals that got them into trouble in the first place, they will probably be willing to do the same again to get out of the old deal and into a new one.

[seattle-relo]

So would it be considered fraud if the second home was purchased as rental property, then the owners decided to move into it, not rent it, and foreclose on it? Would that be illegal?

[seattle-relo]

Sorry, I meant foreclose on the old place, not the new place.

[seattle-relo]

Sorry, I meant foreclose on the old place, not the new place.

[gn]

seattle-relo,

It won’t be considered fraud or illegal. People’s lives change & their need change. They have the right to move around & switch homes.

One thing to consider: in most cases, the purchase of a rental property requires a 30% down payment & higher-than-normal interest rates (i.e. higher interest rate than the rate for a primary residence).

[kev374]

hasn’t everyone and his dog pretty much refied at least once? If so most have recourse debt.

[Critter]

Hey GN, I was thinking the same thing. VC, weren’t you the one that posted many times over several threads about buying a Temecula house from your landlord for $350K or so? Is this the house you are talking about here?

[peterk2001]

what if you have a HELOC opened but haven’t touched any of the money yet, do you still have a non-recourse loan in place that you can walk away from, or does it complicate the process????

[Bugs]

Inasmuch as many of these borrowers have already committed loan fraud at least once, I’m pretty sure their inhibitions against doing it bigger/better by buying down won’t be very hard to overcome.

[Bugs]

Inasmuch as many of these borrowers have already committed loan fraud at least once, I’m pretty sure their inhibitions against doing it bigger/better by buying down won’t be very hard to overcome.

[NotCranky]

“what if you have a HELOC opened but haven’t touched any of the money yet, do you still have a non-recourse loan in place that you can walk away from, or does it complicate the process????”

The HELOC is a completely separate legal instrument from the purchase money deed(s). No problems if it wasn’t used.

[NotCranky]

“what if you have a HELOC opened but haven’t touched any of the money yet, do you still have a non-recourse loan in place that you can walk away from, or does it complicate the process????”

The HELOC is a completely separate legal instrument from the purchase money deed(s). No problems if it wasn’t used.

[peterk2001]

what if you have a HELOC opened but haven’t touched any of the money yet, do you still have a non-recourse loan in place that you can walk away from, or does it complicate the process????

[Critter]

Hey GN, I was thinking the same thing. VC, weren’t you the one that posted many times over several threads about buying a Temecula house from your landlord for $350K or so? Is this the house you are talking about here?

[kev374]

hasn’t everyone and his dog pretty much refied at least once? If so most have recourse debt.

[HLS]

Purchase of rental property can be done with 10% down, or less, depending on your credit score. To get a great loan, 25%+ is better, and rates AREN’T that much higher than normal, IF you qualify.
I posted an example of current rates on page 2 of “JOE 401K” thread.

No lender will accept a verbal “we are selling our other house” and not factor in the debt.

Many people have situations where their current loan is only under one spouse. There are many ways to purchase another, including using the other spouse or a friend or relative.
There are homes that people have been living in and paying the mortgage on and they have a pile of equity, but the deed or loan isn’t in their names, it’s a relative.
IF they want to sell, it creates problems regarding taxes etc.

If you live in Temecula, a 2nd home couldn’t be Murrieta. It usually has to be a resort/vacation destination. Idylwild, Big Bear, Palm Springs, etc. but NOT Hemet.

People are just complacent. Even if you guaranteed them that their house was going to drop $100K or $200K or that they could buy the house next door for $50k or $100k less than they owe right now, most people wouldn’t move.

Most people don’t make business decisions nor grasp the severity. It’s just easier to bury their head in the sand and wait for the storm to blow through. Even moving next door requires effort, OR they just don’t want to bother.

I know plenty of people that have plenty of equity that accept that their house is going to drop at least 25%-30% from the peak, but they aren’t going to make any changes. It’s their home, and still worth a lot more than they paid or ever dreamed it would be worth.

[ibjames]

I think this thread should be deleted

[(former)FormerSanDiegan]

Will honest people start doing dirty/crooked things to bail out of their houses

Simple logical answer: NO.
Reason: Once the people do a dirty/crooked thing, they are no longer honest.

(You can thank my Logic 101 Professor for the answer above)

[(former)FormerSanDiegan]

Will honest people start doing dirty/crooked things to bail out of their houses

Simple logical answer: NO.
Reason: Once the people do a dirty/crooked thing, they are no longer honest.

(You can thank my Logic 101 Professor for the answer above)

[ibjames]

I think this thread should be deleted

[HLS]

Purchase of rental property can be done with 10% down, or less, depending on your credit score. To get a great loan, 25%+ is better, and rates AREN’T that much higher than normal, IF you qualify.
I posted an example of current rates on page 2 of “JOE 401K” thread.

No lender will accept a verbal “we are selling our other house” and not factor in the debt.

Many people have situations where their current loan is only under one spouse. There are many ways to purchase another, including using the other spouse or a friend or relative.
There are homes that people have been living in and paying the mortgage on and they have a pile of equity, but the deed or loan isn’t in their names, it’s a relative.
IF they want to sell, it creates problems regarding taxes etc.

If you live in Temecula, a 2nd home couldn’t be Murrieta. It usually has to be a resort/vacation destination. Idylwild, Big Bear, Palm Springs, etc. but NOT Hemet.

People are just complacent. Even if you guaranteed them that their house was going to drop $100K or $200K or that they could buy the house next door for $50k or $100k less than they owe right now, most people wouldn’t move.

Most people don’t make business decisions nor grasp the severity. It’s just easier to bury their head in the sand and wait for the storm to blow through. Even moving next door requires effort, OR they just don’t want to bother.

I know plenty of people that have plenty of equity that accept that their house is going to drop at least 25%-30% from the peak, but they aren’t going to make any changes. It’s their home, and still worth a lot more than they paid or ever dreamed it would be worth.

[gn]

seattle-relo,

It won’t be considered fraud or illegal. People’s lives change & their need change. They have the right to move around & switch homes.

One thing to consider: in most cases, the purchase of a rental property requires a 30% down payment & higher-than-normal interest rates (i.e. higher interest rate than the rate for a primary residence).

[seattle-relo]

So would it be considered fraud if the second home was purchased as rental property, then the owners decided to move into it, not rent it, and foreclose on it? Would that be illegal?

[no_such_reality]

but for someone with 80/20 non-recourse purchase money it may make sense.

I’ve heard that if you’ve tapped an HELOC the non-recourse protections of your original purchase are voided.

Anybody know for sure?

For a second thought, yep, many are going to game the system, many will try. I wonder how many will discover their loan broker pulled shenanigans of their own now making them look like fraudsters complimented by the gray nature of their screw the banks move to a new home.

[no_such_reality]

but for someone with 80/20 non-recourse purchase money it may make sense.

I’ve heard that if you’ve tapped an HELOC the non-recourse protections of your original purchase are voided.

Anybody know for sure?

For a second thought, yep, many are going to game the system, many will try. I wonder how many will discover their loan broker pulled shenanigans of their own now making them look like fraudsters complimented by the gray nature of their screw the banks move to a new home.

[DaCounselor]

I don’t think there is anything dirty or crooked about someone allowing their home to go into foreclosure, even if they can afford the payments, because the value has dropped dramatically. It’s probably not a good strategy for someone who re-fied, but for someone with 80/20 non-recourse purchase money it may make sense. The mortgage contract is pretty simple – the buyer agrees to make payments as described, and if they don’t the lender(s) take the collateral. That was the deal. If the poor 2nd gets wiped out, oh well, that’s show business. That’s what you risk when you go 100% ltv as a lender. You don’t want the risk, don’t lend the money.

Forging rental agreements and fake escrows are a whole different story. Such activity is dirty and crooked and fraudulent, and there is probably going to be plenty of it.
But what can you expect when there are potentially hundreds of thousands of dollars at stake? The way I see it, if otherwise straight people were inclined to fib on the stated income deals that got them into trouble in the first place, they will probably be willing to do the same again to get out of the old deal and into a new one.

[Coronita]

If my home goes down by 50% to $450k in CV.

I wouldn't buy another one and llet my current home be foreclosed.

 

1) I would definitely buy another home at 50% off, probably pay cash.

2) I would keep my current house too.

For me, screwing up one's credit on something $500k or less isn't worth the time or inconvenience frankly. If it's $5million on the other hand, well that would be a different story wouldn't it?

So i guess the question is might be how much is your credit really worth?

Also, as much as I want to believe in a 50% correction, I have to put this in perspective. Running my immediate neighborhood, a 50% correction would take us roughly back to 1998 house prices. Most of the homes that on my streets and immediate cross streets are original home owners who purchased in 1998. I would think that no matter what happens, most of these folks aren't going to move because their mortgage is so low and prop tax is so low. These are the stay put people….

The ones that probably would consider selling are the greater fool like myself who bought from the few sellers in this neighborhood. People like me make up about 15-20% of these on our streets, because I looked at the sales history, there hasn't been that much turnover. Out of the new purchasers, I would say at least half of them are asian….So, I would have to put on my "ethinicity" hat here, and say at least for the purchasers around me, most of them will be hanging on to dear life because they would probably fit the stereotype asian that refuses to let go. So I'm not really sure if the 50% discount will be possible in certain areas.

[patientlywaiting]

fat_lazy, I hate to break it to you but your street is not the sine qua non of life in San Diego.

People may not sell on your block but there will be plenty of deals out there that will make your purchase seem like an albatross.

It would be like paying today’s prices for a 10 year old Mercedes. Give it 15 more year and the purchase won’t look so bad.

[Coronita]

fat_lazy, I hate to break it to you but your street is not the sine qua non of life in San Diego.

People may not sell on your block but there will be plenty of deals out there that will make your purchase seem like an albatross.

It would be like paying today's prices for a 10 year old Mercedes. Give it 15 more year and the purchase won't look so bad.

 

I don't claim it to be. I was just pointing out most newer home owners that entered at a higher price will be more susseptiable to leaving and calling quits. If you have some family that's been living in the same house since 98, well then a 50% drop means nothing for a primary home imho. They're not going to sell to be foreclosed because they could buy something else equivalent. Doesn't make sense. There are exceptions to the rules, as a few families will go through unusual hardships, a few will be mismanaged and are living refinance to refinance.  there will be deals a plenty all over the place. But the idea of buying another and letting the current one foreclose would to me only work if it's a new home buyer who paid something like $900k for something that's worth $550k now. Then you have to wonder if they really would qualify with a second home.

 

Anyway, if it happens, and we see 50% corrections, I'd be happy. More homes for me 🙂 

 

[Coronita]

fat_lazy, I hate to break it to you but your street is not the sine qua non of life in San Diego.

People may not sell on your block but there will be plenty of deals out there that will make your purchase seem like an albatross.

It would be like paying today's prices for a 10 year old Mercedes. Give it 15 more year and the purchase won't look so bad.

 

I don't claim it to be. I was just pointing out most newer home owners that entered at a higher price will be more susseptiable to leaving and calling quits. If you have some family that's been living in the same house since 98, well then a 50% drop means nothing for a primary home imho. They're not going to sell to be foreclosed because they could buy something else equivalent. Doesn't make sense. There are exceptions to the rules, as a few families will go through unusual hardships, a few will be mismanaged and are living refinance to refinance.  there will be deals a plenty all over the place. But the idea of buying another and letting the current one foreclose would to me only work if it's a new home buyer who paid something like $900k for something that's worth $550k now. Then you have to wonder if they really would qualify with a second home.

 

Anyway, if it happens, and we see 50% corrections, I'd be happy. More homes for me 🙂 

 

[patientlywaiting]

fat_lazy, I hate to break it to you but your street is not the sine qua non of life in San Diego.

People may not sell on your block but there will be plenty of deals out there that will make your purchase seem like an albatross.

It would be like paying today’s prices for a 10 year old Mercedes. Give it 15 more year and the purchase won’t look so bad.

[Coronita]

If my home goes down by 50% to $450k in CV.

I wouldn't buy another one and llet my current home be foreclosed.

 

1) I would definitely buy another home at 50% off, probably pay cash.

2) I would keep my current house too.

For me, screwing up one's credit on something $500k or less isn't worth the time or inconvenience frankly. If it's $5million on the other hand, well that would be a different story wouldn't it?

So i guess the question is might be how much is your credit really worth?

Also, as much as I want to believe in a 50% correction, I have to put this in perspective. Running my immediate neighborhood, a 50% correction would take us roughly back to 1998 house prices. Most of the homes that on my streets and immediate cross streets are original home owners who purchased in 1998. I would think that no matter what happens, most of these folks aren't going to move because their mortgage is so low and prop tax is so low. These are the stay put people….

The ones that probably would consider selling are the greater fool like myself who bought from the few sellers in this neighborhood. People like me make up about 15-20% of these on our streets, because I looked at the sales history, there hasn't been that much turnover. Out of the new purchasers, I would say at least half of them are asian….So, I would have to put on my "ethinicity" hat here, and say at least for the purchasers around me, most of them will be hanging on to dear life because they would probably fit the stereotype asian that refuses to let go. So I'm not really sure if the 50% discount will be possible in certain areas.

[23109VC]

wow, this thread took a turn down the nasty street.

when we bought the house – we did plan to be there for the long run, that is still the plan.

after seeing my *neighbor* preparing for foreclosure, and another house down the street already bank owned, it made me wonder what he/they might wind up doing.

that got me thinking, *what it* I had to unload mine, what would I do.

if my house goes negative by $50k i’m not gonna have a hissy fit and try to run. I guess, if suddenly I could buy a house that was 10 times better, for half what I paid for this one, I would think of a way to trade up. that’s human nature.

I just think long term, and usually think of many alternative contingencies and plan for them all. i think about retirement plans and options too, BUT I don’t plan on retiring for about 25 years. It’s a long way off, but i think about it. just b/c i’m wondering about exit strategies, doens’t mean i plan to do it.

better safe than sorry.
if you fail to plan you plan to fail
etc etc

[JWM in SD]

Sorry 23109VC, but it is sometimes necessary to take that route with some of the posters that mysteriously show up here spouting nonsense like Shari the Realtor. In your situation, if you are really thinking long term and can afford the payments, then you are correct that 50K decline is not enough to take chances with bailing on the house. I wouldn’t if I were you. However, I also wouldn’t have bought when you did either and I could have if I had wanted to.

You asked a provocative question and ignited an interesting thread.

[JWM in SD]

Sorry 23109VC, but it is sometimes necessary to take that route with some of the posters that mysteriously show up here spouting nonsense like Shari the Realtor. In your situation, if you are really thinking long term and can afford the payments, then you are correct that 50K decline is not enough to take chances with bailing on the house. I wouldn’t if I were you. However, I also wouldn’t have bought when you did either and I could have if I had wanted to.

You asked a provocative question and ignited an interesting thread.

[SD Realtor]

23109VC my point in this response was simply that I was really puzzled about your post because of the back and forth you had when you were considering the purchase of the home. In fact many posters warned you of the exact events that you are seeing in the neighborhood right now. My advice to you was simply to follow your own line of reasoning that you used when you first decided to move forward with the purchase. If for some reason, that line of thought is not applicable anymore then so be it. However, I firmly do believe that you will see more decline and it will most likely be severe. So make your decision based on that, you know what I mean? I kind of figured back when you made the decision to buy this home, that you performed a worst case scenario of continued decline and if that continued decline does happen, that you could live with it and be okay with it.

Really though, I still do believe a home is a home and not an investment. I am not saying anyone should buy now or sell now. I am saying you buy a home to live in a home. If you are going to buy now, do so knowing the market conditions, eyes wide open, knowing that there is a high probability of saving money if you wait, and only you can answer if a renting lifestyle is acceptable. I rent and I hate it and it causes alot of strife but I get by. Same story for sellers. If you are going to sell now do the same, know what you may have to do to get the home to sell.

SD Realtor

[SD Realtor]

23109VC my point in this response was simply that I was really puzzled about your post because of the back and forth you had when you were considering the purchase of the home. In fact many posters warned you of the exact events that you are seeing in the neighborhood right now. My advice to you was simply to follow your own line of reasoning that you used when you first decided to move forward with the purchase. If for some reason, that line of thought is not applicable anymore then so be it. However, I firmly do believe that you will see more decline and it will most likely be severe. So make your decision based on that, you know what I mean? I kind of figured back when you made the decision to buy this home, that you performed a worst case scenario of continued decline and if that continued decline does happen, that you could live with it and be okay with it.

Really though, I still do believe a home is a home and not an investment. I am not saying anyone should buy now or sell now. I am saying you buy a home to live in a home. If you are going to buy now, do so knowing the market conditions, eyes wide open, knowing that there is a high probability of saving money if you wait, and only you can answer if a renting lifestyle is acceptable. I rent and I hate it and it causes alot of strife but I get by. Same story for sellers. If you are going to sell now do the same, know what you may have to do to get the home to sell.

SD Realtor

[23109VC]

wow, this thread took a turn down the nasty street.

when we bought the house – we did plan to be there for the long run, that is still the plan.

after seeing my *neighbor* preparing for foreclosure, and another house down the street already bank owned, it made me wonder what he/they might wind up doing.

that got me thinking, *what it* I had to unload mine, what would I do.

if my house goes negative by $50k i’m not gonna have a hissy fit and try to run. I guess, if suddenly I could buy a house that was 10 times better, for half what I paid for this one, I would think of a way to trade up. that’s human nature.

I just think long term, and usually think of many alternative contingencies and plan for them all. i think about retirement plans and options too, BUT I don’t plan on retiring for about 25 years. It’s a long way off, but i think about it. just b/c i’m wondering about exit strategies, doens’t mean i plan to do it.

better safe than sorry.
if you fail to plan you plan to fail
etc etc

[zzz]

23109VC – it sounds like you’re asking for advice because 1, you’re trying to understand your options, but 2 as you aptly titled your post about people doing dirty /crooked things, at the end of the day, can you live with knowing you did something wrong? I’m surprised no one else has pointed out that you’re stealing if you dump your house while buying simultaneously into another – assuming you can still afford to make the payments on the one you’re in. Its not about whether you have a recourse loan or not, do you want to join all the people out there who cheat, lie, and steal? Banks unfortunately don’t just write off losses – they also look to recoup those losses by passing on costs to consumers. What choices others make to wipe away their debts, gets paid for by those of us who own up to our debts. Do you think its fair to pay for the mistakes of others? If you start slipping and making justifcations, where do you stop?

[zzz]

23109VC – it sounds like you’re asking for advice because 1, you’re trying to understand your options, but 2 as you aptly titled your post about people doing dirty /crooked things, at the end of the day, can you live with knowing you did something wrong? I’m surprised no one else has pointed out that you’re stealing if you dump your house while buying simultaneously into another – assuming you can still afford to make the payments on the one you’re in. Its not about whether you have a recourse loan or not, do you want to join all the people out there who cheat, lie, and steal? Banks unfortunately don’t just write off losses – they also look to recoup those losses by passing on costs to consumers. What choices others make to wipe away their debts, gets paid for by those of us who own up to our debts. Do you think its fair to pay for the mistakes of others? If you start slipping and making justifcations, where do you stop?

[Author]

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