100 percent financing can bite overeager buyers

[UpInArms]

http://www.heraldnet.com/stories/05/09/25/100bus_kelly001.cfm

excerpt:

When a buyer purchases an investment property with very little or no money down, there's no margin for error when the renter bolts in the middle of the night because of job loss or a death in the family. The renter was basically paying the owner's mortgage, taxes and insurance with the monthly rent check. When no new renter surfaces and the place goes vacant for a few months, the owner quickly tires of coming out of pocket with the mortgage for the investment home and simply walks away from the deal.

Lenders are floating a carrot, and there's nobody to save overeager consumers from following it. An example is a recent advertisement in California that says "Buy the home you want ... not the home you can afford!" American consumers are spending while also having one of the lowest savings rates in the world.

While we also lead most of the world in percentage of homeownership, appreciation is no longer floating all boats in all regions of the country. Some areas of Colorado, Georgia, Indiana, Michigan, Ohio and Texas have been absolutely flat, and homes in those places haven't even rendered enough appreciation to pay the closing costs for a seller who bought in 2003.

The bottom line is that foreclosures are up in areas that once were strong, and lenders are getting more real estate-owned, or REO, property back on their books.

...more...

[Deja Q]

1. Maybe that's not a bad thing.

Some "communities" I know ofhad land terraformed from swamps.

Those yuppie fools right now might cry when job loss or price hikes hit, but some bigger fool down the line will have to pay once the swampland starts to revert...

And you know what? :rofl: It's just business.

[OldLeftieLawyer]

3. They're not yuppies

And they're not the people living a "lifestyle," so to speak. They're just working people who wanted to own a home and didn't understand what a mess they were getting themselves into.

They just wanted a piece of the American dream, and they're hardworking, industrious, good people who didn't have a clue as to how financing works. A huge percentage of them are immigrants, some of whom were the first homeowners in their families.

Yuppies already made their money and have moved on. They're the ones who'll buy up the foreclosed properties when the middle-class people who got sucked into this "no money down" financing scam - all perfectly legal - goes sour on them.

[OldLeftieLawyer]

2. Just you wait ...........

October 17, when the new bankruptcy law kicks in. Watch and see how many foreclosures take place within a couple of months as people who've been using plastic to finance their 100% mortgages realize they can make either their credit card (new) minimum payments (double what they are now) or their mortgage payment.

The bubble's already burst. People just like keeping their heads in the sand.

[girl gone mad]

4. Yes, it does appear to have burst.

The foreclosure market should get interesting. In a declining market, fewer people will be looking to buy investment properties that they can "flip". The banks won't be willing to let the properties go below a certain value. Something will have to give.

[ayeshahaqqiqa]

5. It's happening already

I live in Arkansas, where I work for a termite company. In my state, you have to have a termite inspection/treatment for a house sale (except in rare instances where people pay cash and don't insist upon it). What I've noticed in the last year is the rise in the number of repos. What is also interesting is who is buying the reops. A little over half are being bought by people in town who buy up properties and then rent them out. About a fourth are going to out of state buyers who are attracted to Arkansas for the relative low prices of property and the low property taxes. The other fourth are native Arkansans. We've noticed a lot of volitility in the market-houses being bought and sold within a year or two.