I see what you are saying, but let's not forget regional differences.
We just sold in Hoboken, NJ in 30 days with two offers for about 4% off list. Our buyers sold their condo in a week with multiple offers over asking with a low agent pay out and in a walk up for $650,000. They had a mortgage well over 1 million on our house (very jumbo! And their buyer had a jumbo loan on their condo.

We have moved to a rural area of New Jersey and yet the house that we walked away from because we couldn't reach agreement on price now has two other offers on it.

Also what about the "bottom has been reached" info on the news. I take it you disagree with that?

My (very local) take on it all is that homes that are well located and show well in this area are selling. Even in the more rural areas we have moved to.

Also, people on this board post every day about the offers they have received. The offers may be lower than they would like, but they are receiving offers.

I really don't think it's all doom and gloom. But maybe I am the eternal optimist!

Yes, I disagree that we've seen the bottom.

/t

as a long time housing bear, i believe that the bottom is MUCH closer then most people would think..That said, there will be a LONG period of time with near zero appreciation.This will then get people to realize it is a HOME, not an investment, and sanity will return to the housing market

"The rent is half of what her mortgage payment went up to."

Good. Sounds like she can start paying the bank on a deficiency sale so the rest of us do not have to.

Just keep in mind that none of the impact on the financial markets has been from the foreclosures yet.
So far it has been from the investors that purchase the mortgages after the fact.
They have refused to provide the working cash the mortgage lenders need based on questions about the securities that will be issued.
The note holders will start screaming in another few months when the foreclosures become a drain on their profits.

Brickeye,
No, they won't get anything out of her. She actually had put down 30% cash when she bought the house so there was enough equity to cover the principal, accrued interest, penalties and lawyer fees. She just didn't bother trying to sell it because she would've only made a couple of thousand at the most and didn't feel like having the hassle.

I also lived in NH in the late 80's. Bought a house in '87 for 115K. Houses on our street went up to 145K in late '88. Recession hit in 89, house prices bottomed out in 91-92. Low sale price for identical house in neighborhood was 82K at that time. House prices sat and slowly crept up, and in '99 we sold for 118K.

The banks tricia is talking about are names like Numerica and BankEast.

I do think this time is a little different, as the rest of the economy is still adding jobs (knock on wood). The recession last time spread across the entire economy. I'm hopeful prices settle down a little more and than sit stagnant for 2-3 years.

"No, they won't get anything out of her. She actually had put down 30% cash when she bought the house so there was enough equity to cover the principal, accrued interest, penalties and lawyer fees. She just didn't bother trying to sell it because she would've only made a couple of thousand at the most and didn't feel like having the hassle."

She will get a seriously damaged credit rating, even without a deficiency judgment.
Hope she enjoys renting for a good while.

Brickeye,
Yes, she knows her credit is shot. I've warned her that when the market recovers, the nice people renting her that palace with all the brand new appliances will put it back up for sale.

The reason they're in such straits is that her husband was paralyzed in an accident and the medical bills, plus loss of his income, overwhelmed them. They had been in the middle of refinancing when he had his accident and then she found no one would touch their loan so she was trapped with the adjustable. She has kicked herself many, many, many a time for not getting a fixed rate loan to begin with.

The reason they're in such straits is that her husband was paralyzed in an accident and the medical bills, plus loss of his income, overwhelmed them. They had been in the middle of refinancing when he had his accident and then she found no one would touch their loan so she was trapped with the adjustable. She has kicked herself many, many, many a time for not getting a fixed rate loan to begin with.

Give her a hug from me the next time you see her. I know all too well how it is to be injured and have to wait years before you get compensation. Unfortunately this happens pretty often, I can't tell you the number of posts I've seen at other places where others have also lost their house due to medical.

Don't want to throw this OT, but if your friend needs ideas on trying to get disability, I've been through the system and might be able to offer suggestions.

Sorry for OT - but thanks Roselvr - when the coworker was still trying to save her house she got in touch with our state Attorney General, who hooked her up with a disability advocate. She had no idea the programs that are out there, and things are looking up.

I think it is going to get really bad when people realize that forclosure may not be a bad idea for many people.

If you bought a $550,000 house w/ no $ down last year and your builder just sold the house next door to you for $450,000 (see recent builder fire sales) then your house just lost $100,000 in equity.

Do you keep paying for your house or do you leave the key on the counter and walk away? Some people might think that having their credit ruined for 7 yrs is worth $100K.

Why do people get so huffy, puffy at others who play by the rules? Foreclosure is part of the rules. The lender and the borrower know this, so why make it a moral issue, if somebody chooses foreclosure??? If you lend at 80/20 100%, be prepared to end up with a house that the borrower walks away from in a downturn. Nobody forced you to lend under those circumstances. Sheesh.

jrldh, no doubt the lender bears some responsibility, but to walk away because your house is worth less,even though it likley isn't for sale, hence only a "perceived" loss? I would then add why shouldn't a bank "call in" your loan when the market is booming, and take 50% of the gains? In your rationale, the bank should take the loss, but not share in the gains? Sheesh

jrldh,

While we don't have Debtor's Prison in this country we do feel, as a society, that we should repay our debts.

Also, your thinking is a tad off...

Playing by the "rules" is paying your mortgage debt on time...hence, the saying, "As long as you pay, you can stay!"

Foreclosure is a PENALTY for NOT playing by the rules.

/triciaa

But it is a penalty that is part of the rules. Isn't it?

"I would then add why shouldn't a bank "call in" your loan when the market is booming, and take 50% of the gains?"

If that were part of the rules and the buyer knows this, then yes. But because it isn't so, no.

Also, I have participated in similar discussions before and they always unfold similarly.

I understand the point that one should stand by one's promises.

But I also think that as long as it is within the contract's terms, which foreclosure is, it is not right to complain about someone using this option. It is part of the lenders _responsibility_ to accept ending up with the collateral, isn't it?

Personally, I think that foreclosure and bankruptcy laws in the USA should be stricter. In my home country, you can't just walk away. The rules, very broadly speaking, are that you actually have to have a very good reason and then you'll have your wages garnished (which I think is better than debtors prison). Therefore you can't just walk away, if your equity vanishes in a downmarket, which is apparently possible in the USA.

But the law is as it is and lenders and voters should lobby to get it changed so that only hardship cases are avoided but convenience walk aways are prevented.

jrdlh,

You are still misunderstanding foreclosure. It's NOT a borrower's right. It's the lender's right. And, NO...it is not their responsibity to end up owning the property.

Are you aware that a lender can decide not to foreclose a mortgage but rather just take you to Court & sue on the Promissory Note?

Foreclosure is a lender's right not an obligation. You have signed a Promissory Note. That Note does not say that the lender's ONLY recourse is to liquidate the property. What is says is that the lender has taken a lien on the property as collateral to protect against default. The mortgage does not preclude the lender from using other avenues to collect on the Note.

Nowhere does it say that the borrower has the right to just walk away from the debt without penalty. What that penalty is depends on the lender & the Court.

Foreclosure is not a "rule". It is one of several remedies available to a lender. It's a very good idea for borrowers to actually read their Promissory Notes & Mortgages/Deeds of Trust.

/tricia

Well, then what is the problem? If the lender can choose to sue on the Promissory Note, then they should do it.

I never stated that it is a right. I just said it is within the rules, ok?

---Also what about the "bottom has been reached" info on the news. I take it you disagree with that?---

Outside of the National Association of Realtors, where did you hear this?

This I gotta see.

Here's one for you: "Dont you dare buy a home now, you will lose money," Cramer

/record inventory of unsold homes, fewer loans, fewer buyers, ARMs resetting

"Some people might think that having their credit ruined for 7 yrs is worth $100K."

Well maybe they should think about the fact that they'll have to pay income tax on the difference between what they borrowed and what the bank is able to sell the house for (from which the selling expenses have to be subtracted, BTW).

In your example, the house was bought last year for 550K with no money down. The buyers will have paid off almost no principal, so they'll still owe almost the whole 550K. The bank forecloses and can't sell it for anything like the 450K selling price for the house next door because who would pay market price for a foreclosed house?

Maybe the bank sells for 80% of market price. That's 360K. And the expenses are 20K (just guessing here). That means the foreclosed owners will have almost 210K in attributed income. That makes for more than 50K income tax owed, assuming a 25% bracket, and even more for higher brackets. And Uncle isn't going to be patient about getting every bit of it.

Add to that the additional income taxes they'll have to pay because they no longer can deduct property taxes and mortgage interest.

Bush has announced he wants the IRS Code changed (at least temporarily) but for now here's what happens...

When a lender forecloses on a home, the IRS treats it as a sale. If the borrower is not personally liable for the debt, such as would be the case for a nonrecourse loan, then the selling price is equal to the price of the cancelled debt. If the borrower is liable for the debt, then the sale price is equal to the canceled debt up to the fair market value (FMV) of the home. If the canceled debt is greater than the FMV, then the difference between the debt and the FMV is treated as ordinary income, for which the lender is required to send a Form 1099-C, Cancellation of Debt (COD), listing the amount of ordinary income. Any unpaid liabilities on the property, such as property taxes, will reduce the FMV of the home and increase the COD. However, if the liabilities are paid by the borrower, then this will increase the FMV and decrease the COD. The lender will also send a Form 1099-A, Acquisition or Abandonment of Secured Property, that will allow the borrower to determine the capital gain or loss from the foreclosure. Taxes must be paid on the capital gain in addition to any ordinary income from the canceled debt that exceeds the FMV of the home in a recourse loan. For a nonrecourse loan, any income is treated as a capital gain equal to the canceled debt minus the adjusted basis of the propertythere is no COD income. However, a capital loss from a foreclosure cannot be deducted.

With the recent decline of home prices, many homes are worth less than the amount of money owed on the property, especially for borrowers who took advantage of lax lending standards, and bought with no money down or used inflated home appraisals. Consequently, many homeowners whose homes were foreclosed by the lender may owe a significant amount of taxes.The IRS treats all forgiven debt as ordinary income, even though in the case of foreclosure, the homeowner doesnt get to keep the home.

If the taxes are not paid for the year the debt was canceled, then the IRS adds penalties and interest to the total tax bill, which can often be tens of thousands of dollars.

However, the tax is not owed:

...if the debt is discharged in bankruptcy;
...the debtor is insolvent, with debts greater than assets;
...the fair market value of the home is greater than the canceled debt;
...or the loan was from a friend or relative and the canceled debt is treated as a gift. Any debt canceled by a commercial lender is not considered a gift by the IRS.
...Because the lender has some discretion in valuing a home, it can sometimes be successfully argued that the fair market value of the home was greater than the debt, in which case, no tax on COD is due.

Are we having fun yet? Or, are we just confused? :)

I should move this over to my "definitions" thread.

/tricia

"---Also what about the "bottom has been reached" info on the news. I take it you disagree with that?---
Outside of the National Association of Realtors, where did you hear this?

This I gotta see.

Here's one for you: "Dont you dare buy a home now, you will lose money," Cramer

/record inventory of unsold homes, fewer loans, fewer buyers, ARMs resetting "

schabadoo; Someone on the board said that they had seen it on the news. Nothing to do with National Board of Realtors.
I also gave some real examples of sales which have just taken place within the last couple of weeks. The examples were ignored - it seems that some people here prefer to look at the negatives.

I just moved to a different area. In both of these locations (New Jersey) a home that is reasonably priced and shows well, will sell.Of course now we can get into what 'reasonably priced' means. Basically it means something that it priced according to just sold comps as opposed to currently available comps.

I am the first to agree that homes that are in need of major updating only attract a very specific audience (although a total fixer in my old market just went over asking in a bidding war to over a million). Also homes which are in less desirable locations are having a very hard time.

I still see homes which are very mediocre priced at outlandish prices. Even some which are vacant. At the height of the market I wouldn't have bougt some of these places for the prices they are asking now. Probably the sellers either paid too much when they bought , or are just plain greedy.

Not all of the New Jersey market is going gangbusters or even moving at all. We have a regular poster for sale in NJ & they're having trouble even getting lookers.

Also, from a lender's standpoint, New Jersey is one of the worst states to foreclose. It's a bear.

Depending on the court schedule, it usually takes approximately 250 days or more to complete an uncontested foreclosure. This process may be delayed if the borrower contests the action, seeks delays and adjournments of hearings, or files forbankruptcy. New Jersey has one of the longest waiting times for foreclosures. A defendant has 35 days in which to file an answer to a foreclosure complaint. Once a default is entered the lender must wait another 45 days before entering final judgment and a writ of execution is issued and delivered to the Sheriff to foreclosure. The defaulting borrower must be given at least 10 days notice before the foreclosure sale can take place.

So, I can't help but wonder how long it will be before we know what New Jersey's foreclosure rate will utltimately be?

/tricia

as a recent relo from NJ, i can say that the market is still strong from where we came from..Houses are selling, prices have fallen very little, though they clearly aren't rising...The proximity to NYC, with very good public transportation to NYC ,keeps the market healthy...FWIW, the area is Northwest Bergen County, in particular Ridgewood,Ho=Ho-Kus,Wyckoff,Franklin Lakes, Saddle River, Upper Saddle River

Lenders used to have a great tool to keep people from walking away from their house if the value dropped. It was called a DOWNPAYMENT!!

Downpayments got very unpopular when lenders realized they could sell more mortgages if they weren't required.

If you were going to lend money out of your pocket, would you lend someone money who couldn't even come up 20% of the purchase price?

One of the biggest contributors to this whole mess is the fact that everyone is disconnected. The bank doesn't sell you the loan and keep it on their books anymore. A broker sells you the loan which is repackaged and sold to Wall Street. Investors ignored the risks, Brokers pushed their products aggressively, buyers ignored risks ... there is plenty of blame to go around. The funny thing is that as long as realestate went up 20%/yr everything worked.

Just curious if anyone "personally" mad out like a bandit on buying a foreclosure?

If one appeared in my neighborhood for dirt cheap, I'd buy. But I suspect the investers have the inside track.

-jasper

Subprime Tidal Wave

Not all of the New Jersey market is going gangbusters or even moving at all. We have a regular poster for sale in NJ & they're having trouble even getting lookers.

Imagine that's me. I know mistakes were made - big ones, like my house being listed as 70 years old. Our kitchen counters came yesterday, they will be installed this weekend. I have the agents assistant coming next week to get new photos. I have a plan of action on my end once new photos are taken, I'm paying some of my own advertising.

If for some reason getting new photos up along with correct information we will drop down to "the magic number". If someone doesn't scoop the house up I will be surprised.

I guess we'll see if we're supposed to stay here until our house is ready or if we're supposed to rent. So far everything that's happened has happened for a reason, I'm not worried yet.

s a recent relo from NJ, i can say that the market is still strong from where we came from..Houses are selling, prices have fallen very little, though they clearly aren't rising...The proximity to NYC, with very good public transportation to NYC ,keeps the market healthy...FWIW, the area is Northwest Bergen County, in particular Ridgewood,Ho=Ho-Kus,Wyckoff,Franklin Lakes, Saddle River, Upper Saddle River

Depends on the price also. There's someone on citydata that can't get her house sold, she's in Fair Lawn. I've seen photos of the house, it's beautifully done on the inside but I don't know many people that can afford the high price tag.

Where I am in Burlington County is one of the better less expensive towns to move to. You can get a decent house for the low $200's; taxes are cheap. If I had my choice again of staying in Union / Somerset counties or coming to Browns Mills, I'd do it again. I love it down here, reminds me of some of the towns off of Rt 78.

"Just curious if anyone "personally" mad out like a bandit on buying a foreclosure?"

Not personally, but someone I know closed on a foreclosure property this week. It was a custom home that had cost approx. $750,000 to build a couple of years ago. The couple who had built it then got divorced and ended up walking away for some reason, despite having around $200,000 in equity. The bank had had it on the market for almost a year at $690,000. The buyer was able to find out how much was actually owed to the bank, which was $535,000, and made an offer for that amount which was accepted.

Don't want to sound snobbish, but Fair Lawn can't measure up to those towns i mentioned..Not even close...

Whoa Try_99...thanks for the link. That article made my inner housing bear sit up and roar. It does an excellent job of pointing out a problem that is national in scope.

Tricia:

I was wondering when someone would get to the part about the IRS. The mindset is going to be somewhat like it was/is with debt forgiveness. It was a great thing but people weren't told or didn't understand or didn't realize that they would have to pay taxes on whatever part of the debt was "forgiven." A shock to lots of people and only recently have I read a couple of stories about people who have lost a home in foreclosure and they were surprised to have gotten a notice that they had to pay the IRS too.

MP

I have purchased REO after the foreclosure auction many times over the past 20 years.
I look for the properties that are in good locations but need substantial work, not just 'flipper' paint job and updating.
New wiring and plumbing are par for the course.
My RE agent is always on the lookout for these.
I have crews that can perform most of the work, and do plenty myself.
If I guess wrong and the costs are higher than anticipated I do even more work myself, or have to hold and rent till values catch up.
I avoid the actual auctions (though I have purchased a few places this way) because they tend to be not worth the hassle.
Very few lenders will refuse to write a decent mortgage when you plop 50% down.

Well, personally I've never discussed the IRS consequences of foreclosures with borrowers. It's really not a lender issue other than the bank is required to send the appropriate 1099 forms. I prepared the calculations for the bank on each foreclosure sale & shipped them off to finance (aka accounting) where the actual 1099s were prepared.

So, I don't think very many people realize that the IRS is even involved. You're right...there's going to be a lot of surprises, I'm afraid.

/tricia

"Just curious if anyone "personally" mad out like a bandit on buying a foreclosure?"

I don't know about making out like a bandit, but the guy that used to live across the street from me flipped for a living. It was a full time job him, but he set his own hours. He did of lung cancer, and his wife moved out. Ironically, she "fixed up" the place and tried to sell it as a flip (when they bought it was a dump, they made it ok but nothing special to live in, and AFTER moving out she upgraded certain things to above the neighborhood standard while leaving other things below the neighborhood average) and it wound up selling for only about 70% of her original asking price. To a guy who for all appearences is planning on being a landlord. Sigh.

Come to think of it they may have made a modest profit on it. Very modest.

Chrisdoc, my lender is still connected, from what I can tell. They let me buy with only 5 percent down, but I had been banking with them for 20 years and had a FICO of 800. And the savings I wanted to keep liquid instead of using it all for a downpayment was in their bank. And they don't sell their loans. When interest rates dropped, they called me to offer a no-fee refi to a lower rate and 15 years instead of 30.

I realize they are the exception, and that I'm paying a little more to have my loan with them. But this stability and relationship is worth it to me. And apparently to them.

Don't want to sound snobbish, but Fair Lawn can't measure up to those towns i mentioned..Not even close..

Interesting. What do you think about the price? Are they asking better town pricing?

Roselvr, they are asking BIG time $$$ for a decent town...The home looks like it has been remodeled, but the pictures look lousy..There are currently 161 listings in Fair Lawn with 96 of those listed priced 500k or less,130 of the 161 are priced 599k or less,...The town itself was a modest town that over the last 10+ years has seen little 2-3 br homes be "blown" out to 4-5 br homes, on small lots..The school district is only ok, and for that price you could live in a better town with a better school district with perhaps more property, but likley less "upgrades"...

Thanks, since I know nothing about the town, your insight is helpful. We'd given her feedback on the photos, she ended up taking some new ones that are better then what was there. Pretty sure I mentioned to her about the quality, some are stretched.

Roselvr also mention to her that 15 is a ridiculous number of photos, she's on a corner lot, and as qdogni said her price is sky-high. We looked in No. NJ two years ago at the height of the market and her house would have had a us driving by then (we looked from 500-750K). Have her agent rerun the comps.

I have a feeling she is trying to get every penny they put into the place out plus a profit and it is no longer 2005.

I bumped her post (the 1st one in the NJ forum) back up. If she comes back I'll give her more feedback. She wants to switch agents, from what I saw of her agent I didn't think that was the problem. I think I also suggested rerunning comps.

To bring this back on topic:

Depending on the court schedule, it usually takes approximately 250 days or more to complete an uncontested foreclosure. This process may be delayed if the borrower contests the action, seeks delays and adjournments of hearings, or files forbankruptcy. New Jersey has one of the longest waiting times for foreclosures. A defendant has 35 days in which to file an answer to a foreclosure complaint. Once a default is entered the lender must wait another 45 days before entering final judgment and a writ of execution is issued and delivered to the Sheriff to foreclosure. The defaulting borrower must be given at least 10 days notice before the foreclosure sale can take place.

So, I can't help but wonder how long it will be before we know what New Jersey's foreclosure rate will utltimately be?

My old neighbor dropped by 2 weeks ago. We were talking about the foreclosures, I told him he was lucky to get sold when he did. The new buyer tells one story, my old neighbor tells another... One thing that was positive for him was that he sold unlike others here that will end up in foreclosure.

The house up the street from me that was supposed to go for sheriffs sale a few weeks ago is still not sold. They are still living in it, I have no clue what happened. If they had a 6 month listing, the contract should be up soon.

One good thing is that I haven't seen many abandoned houses.

Re the housing market in New Jersey:

The Realty Times Market Watch rates Bergen County as a 2 (out of a total of 5) meaning a somewhat buyer's market, and a 1.7 for average prices, meaning prices are falling. The only town in gdog's list that reports a stable market, neither buyer's nor seller's and stable prices, is Franklin Lakes. Th report for all the other towns is a market tilted toward buyers and falling prices. I have friends who would like to buy in Bergen County, which is why I'm keeping watch.

For Burlington (I think they mean the city, not the county), the local realtors give it a 1 for a stone buyer's market, and also a 1.7 for price.

The market is slightly better in Fairfield, which gets a 2 for buyer's market and a 2 for price (somewhat falling).

Here's the link if you're interested:

No doubt prices are falling , my home i sold in the area i mentioned would likely go for 10% less then when i sold it in summer of 2005, and i sold at the absolute top, but had to buy also, so que sera sera..But that area is, imho, one of the best palces to live..Lived in 2 of the towns i mentioned, with great school districts, good transportaion to NYC, proximity to NYC,the only downside is if you had to buy a 1st home there,it would be a small home or fixer upper for 500k, on a small lot..

"the only downside is if you had to buy a 1st home there,it would be a small home or fixer upper for 500k, on a small lot"

So in order to purchase a 1st home in that part of NJ you would need to have about $60K in the bank and a family income of about $200K/yr. And that salary and down payment will get you "a small home or fixer upper for 500k, on a small lot".

Does anyone else see anything wrong with this situation?

/tricia (waving hand in the air at Chris)

Chris, it's why a lot of younger people from North Jersey went South. I've seen about 10 people I graduated with in Burlington County, which is over an hour from home.

"Depending on the court schedule, it usually takes approximately 250 days or more to complete an uncontested foreclosure."

Sounds like a mortgage foreclosure as opposed to a deed of trust.
Deeds of trust are used in many places to avoid these delays.

A mortgage typically requires court action to foreclose.
A deed of trust can be foreclosed without seeking court permission. The terms are listed in the deed of trust and all the trustee must do is comply with them (it is a contract).
Even a bankruptcy typically produces only a brief delay unless the borrower affirms the debt.

You need to check every state - where I am from -Alabama - foreclosure law states that where a power to sell lands is given to the grantee in any mortgage, or other conveyance intended to secure the payment of money, the power is part of the security, and may be executed by any person. This eliminates the need for a court action. The mortgage company, or bank or whoever holds the mortgage must follow the notice and foreclosure procedures of Alabama.

Having recently moved to Maine - here the process is commenced with a civil action, just like any other collection action - and then gets a jugment of foreclosure and commences with the procedure for a sale.

The second way seems to take much longer.

MP

Absolutely fascinating and educational thread.

Thank you.