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Old 10-03-2011, 06:16 PM   #41
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I have one case in point of people being responsible and being screwed by the market. Friend's kid and hubby, both college grads who both worked full time while in college and after. They graduated before the peak of the housing bubble. Saved for a couple of years to get a down payment, and then bought a modest house <125k with 20% down.

A couple of years pass and the market goes to ****. They are transferred for work and must sell. One year, while paying for two residences, and 100 showings later they sell their first house after borrowing an additional 25k from their parental units to bring to the closing. They lost 50k in less than 5 years.

These kids are screwed. They did nothing wrong. They went to college, studied and worked hard, worked hard after graduation and are still burdened by debt created by the stupid housing market. What do you have to say to them besides, sucks to be you.
I am sorry for them--DD and her husband have seen their home go down by at least $150K since they bought in 2006. I don't know whose "fault" it is that your friend's kid and my kid has to make good on their loan. No one gave the bank any extra money when they made a boatload of money selling a house before the bubble burst, though, did they?
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Old 10-03-2011, 06:40 PM   #42
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I bought at the peak, but proactively paid my mortgage down as quickly as possible. As a result, I've never been in a position to walk away and stick the bank with the lost value of the house.

Watching the people that were able to walk away (after essentially failing at a leveraged investment), I always felt like I got screwed for doing the right thing. It makes me feel better to see the banks going after the defaulting parties to collect their losses. I had to pay, so should they.
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Old 10-03-2011, 06:46 PM   #43
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When a bank sells a home in foreclosure, many times they don't accept the highest offer but instead favor all cash offers. As if it's not messy enough.
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Old 10-03-2011, 06:49 PM   #44
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I bought my current house from the bank. The owner sold it to the bank for $1.00. After reading the article, I see the wisdom in this strategy vs foreclosure.
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Old 10-03-2011, 07:10 PM   #45
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I am sorry for them--DD and her husband have seen their home go down by at least $150K since they bought in 2006. I don't know whose "fault" it is that your friend's kid and my kid has to make good on their loan. No one gave the bank any extra money when they made a boatload of money selling a house before the bubble burst, though, did they?
I'm not saying it's the banks fault. It just annoys me when everyone assumes that it's the kid's fault for trying to make a bundle off the market, which was not the case. These kids did the responsible thing. They went to college, worked hard and bought a small home. Then the market tanked. They didn't default, they didn't walk away, they and their parents, who are retirement age, did the right thing and paid off the debt. ChrisC's response just made me .

They were just trying to live the american dream of owning a home. For what it's worth, my kids, both PhD's, have no plans of home ownership in the near future. Both think it's a suckers game.
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Old 10-03-2011, 07:34 PM   #46
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I bought my current house from the bank. The owner sold it to the bank for $1.00. After reading the article, I see the wisdom in this strategy vs foreclosure.
What incentive is there for the bank to agree to that?
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Old 10-03-2011, 07:51 PM   #47
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I'm not saying it's the banks fault. It just annoys me when everyone assumes that it's the kid's fault for trying to make a bundle off the market, which was not the case. These kids did the responsible thing. They went to college, worked hard and bought a small home. Then the market tanked. They didn't default, they didn't walk away, they and their parents, who are retirement age, did the right thing and paid off the debt. ChrisC's response just made me .

They were just trying to live the american dream of owning a home. For what it's worth, my kids, both PhD's, have no plans of home ownership in the near future. Both think it's a suckers game.
So, they lost money -- that's the bottom line. They're not on the street, are they? If my three kids lost a lot of money at this stage of their young lives I wouldn't be sad for them either. In fact, my oldest daughter has lost a lot of money in buying a condo a few years ago -- she's into big time negative cash flow in renting out her condo after she was relocated with her husband. If she sold her condo now, it would be a short sale and she'd be on the hook for the deficiency. I wouldn't be saddened if she had to exhaust her savings to pay for this debt. I feel sorry for people who are unemployed, living from paycheck to paycheck, who have lost their homes, or are struggling big-time financially --events you didn't say occurred with these kids in your original post. The fact that these "kids" did the responsible thing in paying their debt is laudable and it is the right thing to do, but why should I feel sad about someone doing the right thing?

Whatever. Now you and Harley can put me on ignore.
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Old 10-03-2011, 08:34 PM   #48
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The fact that these "kids" did the responsible thing in paying their debt is laudable and it is the right thing to do, but why should I feel sad about someone doing the right thing?
Sympathy doesn't have to be a line in the sand nor does it have to be all-or-none.
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Old 10-03-2011, 09:22 PM   #49
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I'm not saying it's the banks fault. It just annoys me when everyone assumes that it's the kid's fault for trying to make a bundle off the market, which was not the case. These kids did the responsible thing. They went to college, worked hard and bought a small home. Then the market tanked. They didn't default, they didn't walk away, they and their parents, who are retirement age, did the right thing and paid off the debt. ChrisC's response just made me .

They were just trying to live the american dream of owning a home. For what it's worth, my kids, both PhD's, have no plans of home ownership in the near future. Both think it's a suckers game.
But you are implying that if someone puts 20% down on a house, there should be some 'guarantee' that the resale value will not drop below that.

There is no guarantee. It's not about it being someones 'fault', or feeling sorry for anyone, it's life.

If I never invested another penny in the market after the first time I lost $50K, I'd probably still be working. Now that would be sad.

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Old 10-03-2011, 09:29 PM   #50
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What incentive is there for the bank to agree to that?
They got the property and could sell it to cover most of what was owed. Plus the bank thought they could get more for it than they actually got. Perhaps in this case, the bank was misled. Still, 80-90% recovery of the loan is doing pretty good in this environment.
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Old 10-03-2011, 09:49 PM   #51
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I'm not saying it's the banks fault. It just annoys me when everyone assumes that it's the kid's fault for trying to make a bundle off the market, which was not the case. These kids did the responsible thing. They went to college, worked hard and bought a small home. Then the market tanked. They didn't default, they didn't walk away, they and their parents, who are retirement age, did the right thing and paid off the debt. ChrisC's response just made me .

They were just trying to live the american dream of owning a home. For what it's worth, my kids, both PhD's, have no plans of home ownership in the near future. Both think it's a suckers game.
I most definitely have a lot of sympathy for people in that subset of underwaterness, sinjin.
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Old 10-03-2011, 09:57 PM   #52
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Originally Posted by Free To Canoe

They got the property and could sell it to cover most of what was owed. Plus the bank thought they could get more for it than they actually got. Perhaps in this case, the bank was misled. Still, 80-90% recovery of the loan is doing pretty good in this environment.
If that's the case (the bank is recovering the majority of the loan, such at they'd be willing to "buy" it from the borrower for a dollar), then likely the amount they were short when selling it may not be worth going after the borrower later for anyways. I'd suspect the vast majority of people having to short sell or foreclose (that the banks would go after later, as in this article) are not in a position where the bank would accept paying $1 to own the property.

Then again, I may be wrong, as I've heard stories of the banks paying a homeowner to move out.
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Old 10-03-2011, 10:07 PM   #53
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What incentive is there for the bank to agree to that?
Not having to go through the expense, prolonged delay, and likely property deterioration resulting from a foreclosure?
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Old 10-04-2011, 02:13 AM   #54
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Not having to go through the expense, prolonged delay, and likely property deterioration resulting from a foreclosure?
Well yeah, sure, there's that.

In the case of "strategic defaults" though, where the borrower can pay, but chooses to walk away, and where going after them for the balance would be most successful, I'd imagine a bank wouldn't want to accept a sale of the place to them for $1. Then again, maybe they would.

The problem is, that wouldn't hurt the borrower's credit rating at all (aside from the potential late payments during negotiating this, as a tactic by the buyer), unless they specifically couched it as a short sale to themselves, but as a seller, why accept that? And foreclosure hurting one's credit rating one of the major pieces of leverage the bank has - if they started accepting the house as a sale for $1, and people knew it and knew going that route wouldn't hurt their credit rating nearly as much, if at all, many more people would strategically default, I'd bet.
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Old 10-04-2011, 11:34 AM   #55
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Not having to go through the expense, prolonged delay, and likely property deterioration resulting from a foreclosure?
Or having the owner tear everything out of the house, kitchen cabinets, counter top, doors etc. etc.... including the flooring... like the guy did across the street from my sister....
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Old 10-04-2011, 11:36 AM   #56
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Or having the owner tear everything out of the house, kitchen cabinets, counter top, doors etc. etc.... including the flooring... like the guy did across the street from my sister....
Yep, that was the "property deterioration" I was referring to.
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Old 10-04-2011, 12:59 PM   #57
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I have one case in point of people being responsible and being screwed by the market. Friend's kid and hubby, both college grads who both worked full time while in college and after. They graduated before the peak of the housing bubble. Saved for a couple of years to get a down payment, and then bought a modest house <125k with 20% down.

A couple of years pass and the market goes to ****. They are transferred for work and must sell. One year, while paying for two residences, and 100 showings later they sell their first house after borrowing an additional 25k from their parental units to bring to the closing. They lost 50k in less than 5 years.

These kids are screwed. They did nothing wrong. They went to college, studied and worked hard, worked hard after graduation and are still burdened by debt created by the stupid housing market. What do you have to say to them besides, sucks to be you.
They shouldn't have moved. Makes no financial sence to me. $50k takes $100k in income to save? How long will it take them to earn that? The move was bd judgement on their part.
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Old 10-04-2011, 10:08 PM   #58
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I have one case in point of people being responsible and being screwed by the market. Friend's kid and hubby, both college grads who both worked full time while in college and after. They graduated before the peak of the housing bubble. Saved for a couple of years to get a down payment, and then bought a modest house <125k with 20% down.

A couple of years pass and the market goes to ****. They are transferred for work and must sell. One year, while paying for two residences, and 100 showings later they sell their first house after borrowing an additional 25k from their parental units to bring to the closing. They lost 50k in less than 5 years.

These kids are screwed. They did nothing wrong. They went to college, studied and worked hard, worked hard after graduation and are still burdened by debt created by the stupid housing market. What do you have to say to them besides, sucks to be you.
It is hard for young people. You have to be able to judge the real estate markets, the job and it's duration and where the next job will come from locally. Then decide if you want to rent or buy. One needs to be circumspect about all of these things in a good economic climate. In this climate?
I guess I wouldn't say "it sucks to be you". My brother and sister in-laws went under water on their home in Houston. Had to chip in on their mortgage for what the rental (later - out of state rental) didn't cover. Others in the same situation "walked" on their homes. They worked for 10 years to get out from under it. They were young and unlucky.
A few years later the saved enough for a downpayment on a house. Sold the house at the top of the CA real estate bubble and came back east to retire. The went to cash just before the stock market really tanked.
The were older and circumspect.
No parental unit bailouts here. I would like to think that their bad luck earlier taught them habits that in later years served them well but I will let you be the judge.
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Old 10-04-2011, 10:09 PM   #59
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They shouldn't have moved. Makes no financial sence to me. $50k takes $100k in income to save? How long will it take them to earn that? The move was bd judgement on their part.
Did you miss the line that said "They are transferred for work and must sell"?

It's not always one's first choice. Many military people are stuck in this situation - underwater on a home, but forced to move/transfer.

You could argue they shouldn't have bought in the first place, but arguing the move itself is a bad idea, when they are (essentially) forced to move is silly.
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Old 10-05-2011, 07:10 AM   #60
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Sympathy doesn't have to be a line in the sand nor does it have to be all-or-none.
Nor does it have to be cast to a sea of people who take on the mantle of being victims for rather unfortunate events in which they should be fully aware of the risks of the "investment" they made. The original post that prompted my comments appeared to suggest to me that this young couple were the "victims" of the market downturn (as the OP stated, they were "screwed"). I don't consider that to be the case at all. Maybe, as others suggest, I'm out of touch with reality or my heart just isn't big enough. Yet, I wouldn't say "sucks to you" but I also wouldn't say this is unfair either. It just happens every once in a while in life that you lose money for financial decisions!
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