Renting From the Bank in Jefferson

One thing interesting that happened during the bubble was that the terms buying and owning became very fluid. One could put no money of their own into something yet still be considered the owner. In these cases it was really the banks and lenders that "owned" the property the "owner" was the one with the name on the title. Many of the cases the "owners" are just returning title of the property through foreclosure.

Some of the buyers are trying to do the right thing and sell the property, but when the property nets less than the current liens who makes up the difference. Will these turn into short sales? Are the "owners" bringing check to closing? How will this price gap be closed? Since we are not the ones involved we may never know who pays what. But from the available data we do know that someone will be losing money on these deals. Which brings us to today's featured example of renting from the bank in Jefferson -

Here is the Property -

The Front of the House.

The Kitchen and Dining Area.

The Living Room.

Here is the property info -

Single Family Property Status: Active County: Morris Year Built: 1965 1 total bedroom(s) 1 total bath(s) 1 total full bath(s) 5 total rooms Style: Ranch Living room Family room

Kitchen Basement Laundry room Bathroom(s) on main floor Bedroom(s) on main floor Master bedroom is Includes: Walk-In Closet Basement is Finished, Full Hardwood floors Fireplace(s) Fireplace features: Family Room, Wood Stove-Freestanding Heating features: Baseboard - Electric,Electric Water Heater,Electric

Cooling features: 1 Unit, Ceiling Fan, Window A/C(s) Exterior construction: Vinyl Siding Roofing: Asphalt Shingle Pets allowed Approximate lot is 44X83 Lot features: Open Lot Approximately 0.08 acre(s) Lot size is less than 1/2 acre Utilities present: Cable TV,Private Sewer, Septic,Shared Well,Electric Service High School: Jefferson

Here are the financials -

• The property was purchased for $180,000 in November 2004.

• The original mortgage on the purchase date was for $180,000 with Flagstar Bank.

• In June 2006 the property was refinanced with an ARM for $169,600 with First National Bank of Arizona.

• A second mortgage was opened the same day in June 2006 for $21,200 also with First National Bank of Arizona.

• The property is currently for sale and listed with a realtor at $189,900.

• Property taxes for 2009 are $3536.86.
  

From the public records we can see that the property was purchased with nothing down - 100% financing. Another thing we can tell is that since the property was purchased through one loan PMI or property mortgage insurance would have been required. During the bubble PMI was often avoided through a piggyback loan. Perhaps that was why the owners refinanced with cash out - taking $10,200 out of a property that they never put any money into. Not a bad deal - making over $10 grand to live in a property for less than 2 years. Imagine a property paying the owner to live there - boy the bubble was great! Asymmetrical compensation of another sort we guess.

Now, just 2-1/2 years after the extraction the the property is for sale. The sale price for $300 less than the mortgages are for. But if the property sells for full asking price and the realtor makes their standard commission, someone will lose $11,694 on the sale. Will that loss come from the owner or the lender?

And what how much will it cost the potential owners to live in this property? Assuming a significant down payment of 20% down which is $37,980 and one received a 30 year fixed qualifying for today's Bankrate.com low of 4.75 rate the potential owners payment of mortgage and taxes would be approximately $1087.23. Also needing to be factored in for a full monthly carrying costs would be insurance and utilities. And believe or not this price is in the ballpark of local Garden Apartment rates, so other than a significant down payment perhaps the monthly carrying costs are not so expensive.