Sunday, November 23, 2008

Washing away ownership in Washington

Many times, and for many people, owning a home may not be the best choice. While the American Dream views home ownership as essential this is not necessarily the best choice for many people. During the Great Housing Bubble people jumped into home ownership without looking afraid they would be priced out if they did not act fast.

Thinking that home values only go up, people often bought more house than the could afford. But at the time these decisions seemed like sure bets to many people. Now they are paying the price - foreclosure, damaged credit, high ARM and Option-ARM payments with little ability to refinance. Some of these decisions were made by need, but many times they were made by greed. While we may not know what helped fuel the ownership decisions in today's featured example, we do know the former owner paid a heavy price. Let's take a look -

Here is the property -

Here is the property info -

Property Features

  • Status: Active
  • County: Morris
  • Year Built: 1965
  • 3 total bedroom(s)
  • 2 total bath(s)
  • 2 total full bath(s)
  • 6 total rooms
  • Style: Ranch
  • Master bedroom
  • Living room
  • Kitchen
  • Basement
  • Bathroom(s) on main floor
  • Bedroom(s) on main floor
  • Master bedroom is 16x11
  • Living room is 23x15
  • Dining room is 15x11
  • Kitchen is 20x11
  • Basement is Partially Finished
  • 2 car garage
  • Attached parking
  • Heating features: 1 Unit, Baseboard - Hotwater,Oil
  • Exterior construction: Stone, Wood
  • Roofing: Asphalt Shingle
  • Approximately 2.46 acre(s)

Here are the financials -
  • The property was purchased in September 2004 for $407,900.
  • One the same day the property was a purchased an ARM for $326,320 with Meritage Mortgage.
  • The property was refinanced with cash-out in December 2004 using an ARM for $391,000 with Long Beach Mortgage Co.
  • The property was refinanced with cash-out again in November 2005 for $499,500 again with an ARM this time with Countrywide Mortgage.
  • An additional Lis Pendens was filed in December 2007 by Bank of New York for the Countrywide Mortgage.

  • The home is currently for sale with a realtor for $344,900.
When the property was purchased the owner put 20% down. The $81,580 was a huge down payment during the bubble years. However, just three months later the $64,680 was extracted from the property. That gave the owner just over 4% equity from the original purchase price.

Just 11 months later another $108,500 was extracted. The homeowner had withdrawn $91,600 more than the original purchase price. That would signify an increase of value of almost 20% during the one year of ownership. Perhaps the money was re-invested in the property thereby justifying the significant increase in value. The $91,600 comes to an second income of just over $24,000 per year for the time of ownership.

The loss on the mortgage will cost the lender $175,294 just for the mortgage. And that is if the property sells for the full asking price and the realtor receives the standard fees. Add all the other foreclosure expenses and the property will cost well over $200,000.

On a side note - one can learn a lot about a family by looking at the mortgage and deed filings. This property appears to have been purchased after a marriage broke-up. The other spouse acquired the "marriage" house. Unfortunately both spouses appear to have lost their domiciles within 4 months of each other due to foreclosure. Hopefully the future turns out better than the recent past for the former couple. And hopefully if there are children they are not experiencing too much pain during the past few years.

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