Sunday, August 3, 2008

Landlord in Dover

During the beginning of the housing bubble a movie came out being a an owner-occupied landlord. It was called Duplex and starred Drew Barrymore and Ben Stiller. The movie was a comedy it still illustrated some of the responsibilities of being a landlord.

The idea of leasing out an apartment in the house to pay for a property one could not otherwise afford did not start from the movie. The timing was perfect. Banks were just starting to finance 100% of the property. No doc (commonly called liar loans) were available so if it sounded like you could buy your dream home chanced are you could. Now the only problem was keeping it.

In the movie the problem was a difficult tenant. In real life the problem was paying the monthly mortgage payment (even with the tenant payments). Today's feature property did not have the movie type ending - the real life ending involved losing the property to foreclosure. Lets take a look.

Here is the property -

Here is the property info -
  • Multi-family Property
  • Status: Active
  • County: Morris
  • 2 total unit(s)
  • Year Built: 1900
  • Complex features: Unfinished Basement,Total Bedrooms: 7,Total Full Bath: 2
  • Two story
  • Parking space(s): 2
  • Heating features: Baseboard - Hotwater,Gas-Natural
  • Exterior features: Off-Street Parking
  • Roofing: Asphalt Shingle
  • Unit 1 has 5 room(s)
  • Unit 1 has 3 bedroom(s)
  • Unit 1 has 1 bath(s)
  • Unit 1 features: Bedrooms, Kitchen, Living Room
  • Unit 2 has 7 room(s)
  • Unit 2 has 4 bedroom(s)
  • Unit 2 has 1 bath(s)
  • Unit 2 features: Bedrooms, Dining Room, Kitchen, Living Room
  • Approximately 0.07 acre(s)
  • Lot size is less than 1/2 acre
  • Utilities present: Public Sewer,Electric Service,Public Water

Here are the financials -
  • The property was purchased for $450,000 in September 2005.
  • The original mortgage was with an ARM for $360,000 through Accredited Home Lenders.
  • A piggy-back mortgage was made the same day for $90,000 also through Accredited Home Lenders.
  • The Lis Pendens was filed in October 2007.
  • The property is currently for sale listed at $284,900 through a realtor.
This was homeowner took part in the common feature of 100% financing (or renting from the bank). Since the Great Housing Bubbles collapse the mindset has morphed to down payment has turned into nothing to lose.

Just two years into landlord ownership and the foreclosure process started. From the paperwork it is hard to tell if the property was to be owner occupied or both units rented. But even if the paperwork did state owner-occupied during the bubble accurate paperowrk was not that important. As for the homeowner - since the purchase was with an ARM the monthly payments were less than the 30-year fixed. So other than the hit to their credit score and possibly vacating the property the losses were minimal - if nothing.

As for the lender - the loss was significant. The total financing losses will be at least $182,194 if the property is sold for the full asking price. With the additional foreclosure costs added on this property could easily cost the lender well over $200,000.

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