Author Topic: Seeing lot's of foreclosures with people who are still employed and paid well  (Read 2694 times)

Bearded Man

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I have a neighbor who is in foreclosure, yet he still goes to work every day. Why lose the house? All the money he put down, all the payments he made over the last 10 years, just gone.

I am seeing this with MANY listings I look at. House sold for 310K in 2006, someone put a lot of money down judging by the 223K foreclosure (doubt they would build up even half that much equity in that little time without a large down payment). These people are still employed by all appearances, and paid pretty well from what I can tell. Yet it is so common.

If you put no money down and the value dropped in half, I could see a reason. But when you have nearly 100K in equity, even in this market?

arebelspy

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They haven't been paying for years, most likely.  I know people who are still in homes and haven't been paying for 4+ years.  They very likely don't have equity, and/or are living "free" for as long as they can get away with it.
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Another Reader

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I know of couples where one was on the mortgage and the other wasn't.  They milked the free rent deal as long as it made sense, saved the mortgage payments for a down payment, and then bought a similar house at a much lower price that was affordable on the untainted spouse's income alone.  Don't be surprised if that neighbor buys a house down the block from the old one in his wife's name.

waltworks

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In many cases there are also multiple liens/mortgages on the property and the listing price might not reflect that. Foreclosures can be weird.

Trust me, the people getting foreclosed on do not have equity.

-W

Bearded Man

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Good responses. My neighbors wife doesn't work, so she has no verifiable income, but what you say makes sense.

jmoney

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"Don't ever try to explain why people do stupid things or you will drive yourself crazy."

Even though they bought it for $310 k is it worth $223 k? Ethical and moral issues aside, if the house you bought in Detroit for $310 k was now worth $150 k and you came on financial difficulty does it make business sense to keep paying? Does it really matter you put down 20%? It doesn't matter what they paid in 2006. The market crashed since then and the only relevant value is todays value.

Are they ok health wise?

My guess is these people are overleveraged with cars, credit cards, college tuition, etc. and just got behind and can't catch up.

Even though the husband has a job is he paid on commission in a hard hit industry? Even salary can be hard hit. They handed out 10% pay cuts two years in a row at my salary job in 2009.