Sunday, September 28, 2008

Losing Money in Dover

Originally when the housing bubble burst it looked like the losses would be either to the buyer or the lender. While it was assumed that the lenders would pass the costs to other customers and onto employees things would be self-contained to only to those who were had any investment in the companies with bad lending practices.

Now it is obvious that the losses are throughout our entire economic system. Everyone is going to pay a share. Some of the players are paying the biggest price but the transfer of losses is now a burden on our entire country. Like it or not is irrelevant, it has happened.

So knowing we are paying for bad decisions, which brings us to today's example where both the lender and the buyer are losing money. Unfortunately the innocent tax-paying bystanders will probably be the one that ends up losing the most. Also these posts are almost now more important than others - we have to document the atrocities of the housing bubble so hopefully the next generations will not make the same mistakes. So lets stroll over to Dover and see today's example.

Here is the property -

Here is the property info -

Property Features

  • Single Family Property
  • Status: Active
  • County: Morris
  • Year Built: 1976
  • 3 total bedroom(s)
  • 1.5 total bath(s)
  • 1 total full bath(s)
  • 1 total half bath(s)
  • 7 total rooms
  • Type: Bi-Level
  • Master bedroom
  • Living room
  • Family room
  • Kitchen
  • Bathroom(s) on main floor
  • Bedroom(s) on main floor
  • Master bedroom is 16x12
  • Living room is 14x13
  • Dining room is 12x8
  • Family room is 21x13
  • Kitchen is 12x9
  • Pool features: In-Ground Pool
  • 2 car garage
  • Parking features: Built-In Garage
  • Heating features: Baseboard - Hotwater,Oil
  • Interior features: Eat-In Kitchen,Ground Level Rooms: Family Room, First Level Rooms: 3 Bedrooms, Bath Main, Dining Room, Kitchen, Living Room, Second Bedroom is: 14x9, Third Bedroom is: 10x10
  • Exterior construction: Wood, Wood Shingle,Slab Foundation
  • Roofing: Asphalt Shingle
  • Approximate lot is 114X184
  • Approximately 0.48 acre(s)

Here are the financials -
  • The property was purchased for $412,500 in August 2006.
  • The original mortgage at time of purchase was for $371,500 using an ARM with Accredited Home Lenders.
  • Foreclosure started by a Lis Pendens filed August 2007.
  • The property is currently an REO for sale using a realtor for $279,900.

The homeowners down payment of $41,000 or just below 10% of the purchase price is lost. Big amount of savings/equity to lose. And since the Lis Pendens was filed within a year of the purchase the homeowner was basically in trouble just after the ink was dry.

The lender will be writing off a minimum of $108,394 for this property. This is the $91,600 for the difference between the original mortgage and the current selling price of $279,900. The lender will also lose $16,974 if the property sells for the full asking price and the realtor which has listed the property receives the standard commission.

The combine losses just between the buyer and lender total $149,394 for an investment that lasted less than 2 years. That is some loss.

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