Real Estate Auctions

[SHELLY]

What makes me so sad is I talked my husband into this. As hard as I work, he works even harder. I love south walton and based this venture more on love than finanical advise. We are not able to travel there due to illness and work as much as we would like.
I am serious about any creative thoughts anyone would be so kind to share about what folks are doing who have a home they need to sell with an interest only loan(Please do not kick me --down already--got it dumb dumb dumb). It has not sold at $100K loss and it is not overpriced. We will work two jobs before we give it away. if we had flipped it immediately , we would have made a profit. But no we had to wait a year!!!

Here are some things I have considered:
Sell our primary home and live in a tent.

Move the house from South Walton to our hometown and sell our primary . I guess the bank would not like that since we have a 300% mortgage now.

Or if everyone on the board and all the realtors, investors would go buy one piece of property in the area to reduce the inventory the market would improve.
As you can see my best thinking got me here.

AP,

Sorry to hear about your story--novices usually do break the #1 rule of money and investing, which is: "Think with your head, not your heart. " Believe it or not--some folks who walk on the shady side of investing/speculation actually rely on that "novice thought process" to make lots and lots of money.

Guilt over the situation is not going to solve the problem--its water under the bridge (you're certainly deserving of a very short Pity Party, but try to dispense with it as quickly as possible so you can start concentrating on finding a solution).

From what I've read, you really need to do some reading (about real estate and mortgages) and seek some solid professional financial advice quickly. Hopefully you can find a good finanical advisor, RE attorney, or CPA (maybe check with some doctors you trust) -- and make sure they don't steer you toward some snake oil salesman who is trying to sell annuities or whole life insurance (don't get me started on those folks! :roll: ).

Most folks are getting out from under IO loans by refinancing to a fixed, but it sounds as if this may not be an option for you. I applaud your courage in speaking up about your situation--the first step to tackling a problem is to admit you're aware of it in the first place, so you see, you ARE on your way to solving it. I sincerely wish you luck as you go forward.

 

[SHELLY]

Shelly's insights may have helped many people in terms of realestate investing by giving a different view point. Who knows what the market is going to do, if I knew, I would be a billionaire. He/She does have a right to boast since she predicted this way back when and he/she took the beating on the forum from the naysayers.

It was more a matter of "connecting the dots" than "predicting." I follow the economy and also know just a bit about the markets--so when the real estate market fundamentals started getting WAY out of whack, it was more like watching a seismograph that showed ever-increasing activity and knowing that something unpleasant was about to happen sooner rather than later.

Most telling was when folks were lining up at O'dark-thirty for a "chance" to "win a chance" to get into a lottery, to get to buy a reservation, to buy a condo that hadn't been built yet It reminded me of the time I went to a McDonalds several years ago with a line down the block at 5am--found out these people got up at 3am, grabbed their kids and stood in line for hours to buy Beanie Baby Meals!...AND they threw away the food (can't really fault them for that). Believe it or not...both types of ?investors? experienced the same mental thought process, just at opposite ends of the economic spectrum--fascinating stuff!

 

[Diane4145]

Please if you are going to be mean spirited or insulting --DON"T!

:clap_1: :clap_1: :clap_1:

 

[Mango]

Andi Pandi,
like Shelly says, have your quick Pity Party and speak to several different mortgage professionals and a CPA. It's possible if you have any equity in your primary residence, to cash out on your primary (to a FIXED rate please)
and reduce the principle on the interest only ARM so that your payments are significantly lower, since when you apply principle to the Adjustable loan, when the loan recasts itself, your payment will be based on the lower principal remaining balance. This may be a viable option since now your loan to the value on the SoWal property is higher than a Bank will allow once appraised. There are also interest only fixed rate loans available if you think you will have problems swinging the fully amortized payment.
There are also 40 year loans available now. Just make sure you speak to someone knowledgeable who will act as a trusted adviser, not someone just trying to put you in any loan, hence speak to several different people until you find someone you are comfortable with.

Maybe with some of these options, if they are viable for your situation, you can hang on to the SoWal property longer and wait out the market longer.

Good luck.

 

[SHELLY]

Andi Pandi,
like Shelly says, have your quick Pity Party and speak to several different mortgage professionals and a CPA. It's possible if you have any equity in your primary residence, to cash out on your primary (to a FIXED rate please)
and reduce the principle on the interest only ARM so that your payments are significantly lower, since when you apply principle to the Adjustable loan, when the loan recasts itself, your payment will be based on the lower principal remaining balance. This may be a viable option since now your loan to the value on the SoWal property is higher than a Bank will allow once appraised. There are also interest only fixed rate loans available if you think you will have problems swinging the fully amortized payment.
There are also 40 year loans available now. Just make sure you speak to someone knowledgeable who will act as a trusted adviser, not someone just trying to put you in any loan, hence speak to several different people until you find someone you are comfortable with.

Maybe with some of these options, if they are viable for your situation, you can hang on to the SoWal property longer and wait out the market longer.

Good luck.

Heed Mangos warning and visit a pro (someone with YOUR interests in mind, and not just dollar signs in their eyes) before trying to engineer any of this stuff on your own.

You mentioned that you were a novice...all the more reason you need to do some THOROUGH reading on mortgages and the RE market. I'm hesitant to give any concrete advice because there may be many moving parts to your present finances we don't know about (outstanding bills, loans, savings, 401Ks, money stuffed in your Serta)....

But I would be very careful when screwing around with your primary home mortgage in order to finance an investment property--otherwise you may be putting TWO properties in jeopardy, one of which will only go back to the bank, but the other can put you on the street.

Just say you took a large chunck of money ($200,000 + broker's commission) out of your primary home and plunked it into your investment property to bring your vacation home mortgage down from $800,000 to $600,000 and your IO payment down as well. Now you've got to pay the IO AND now you've added an equity loan or extended your mortgage (depending on how you do it). Did you mean to say you had a 300% mortgage??

Now let's say next year comes along and RE is still in the ditch and the vacation property appraises at $500,000 and you still don't want to sell, so you continue to carry (with taxes, insurance, etc.) and then one of you lose your job or can't work for some reason. It just gets doesn't get any better from that point on.

Keep the faith and go out there and get some answers.

 

[KBB]

I have sold AND purchased property from auctions. My philosphy is this...if you want to sell your property at an auction, it can be advantageous if you are ready to be done with it and you have enough money in the house that will allow you to still make money if it sells at a price below appraisal.

In my opinion, the best feature of auctioning your house is that the auction company advertises your home all over the country. People in California might think S. Walton properties are cheap compared to theirs. You are not limited JUST to the existing people who visit South Walton. I get flyers from auctions held all over in places I never heard of before and if its something I am interested in, I might go.

I do not think auctions are a good way to sell a home if you are wanting to get over $1 million. This is a huge hurdle for auction companies. I also agree that "absolute auctions" are the best way to go....whether you are selling or buying. "Absolute" means the buyer HAS to sell the property, regardless of price, as long as the auction actually begins. One trick the auction companies do well is to check out the register bidders to find out how much of an opening bid will be made. This information is then given to the seller to make his decision on whether or not to proceed with the auction. The owner can back out upto the point when the auctioneer starts reading all the terms and conditions. Of course, the actual final number is usually much higher than the opening bids, but it is a gamble you take.

The BEST thing about selling a house with an auction company is that you can sell it "AS IS" and that includes any wierd property line disputes, Mold problems, etc. You have to disclose these items, but you don't have to fix them.

Buying a property at an auction can also be a good deal. Even if the owner pulls the property from the auction because he doesn't think he will get what he wants on the price, the auction company usually will contact you (if you were a register bidder) afterwards to see if you would like to make an offer. If an auction company does not get many people to attend the auction, then they are not a good company to use. The good companies know their business and do it well. I can tell you some that are good and at least one that is horrible.

I like to think that auction companies are just a different type of marketing tool for sellers and buyers. You have to know the risks involved but as long as you do, you can benefit in either role you may play. Realtors can still be involved too and get a commission. The seller pays the advertising cost, but this is similar to the costs of paying the real estate commission.

 

[KBB]

Mango:

Glad you provided some helpful information to this distressed owner.

Andipandi, you are not alone...there are many people in the same situation as you.
Anyone could have predicted the overpriced market would have to adjust.......BUT no one knew when it was going to happen. Or did Shelly actually predict that Hurricane Season was the culprit? or did she predict the increase in interest rates? or was it the increase in gas prices? or was it the increase of insurance costs? or was it all of the above...

Point is...none of us have a crystal ball (except SJ)...you didnt make a bad decision, you just got caught with bad timing. Just hang in there a little longer...it will get better (thats my prediction)..."Good things come to those who wait"---unless you are waiting in a MacDonald's line !

 

[Mango]

Heed Mangos warning and visit a pro (someone with YOUR interests in mind, and not just dollar signs in their eyes) before trying to engineer any of this stuff on your own.

You mentioned that you were a novice...all the more reason you need to do some THOROUGH reading on mortgages and the RE market. I'm hesitant to give any concrete advice because there may be many moving parts to your present finances we don't know about (outstanding bills, loans, savings, 401Ks, money stuffed in your Serta)....

But I would be very careful when screwing around with your primary home mortgage in order to finance an investment property--otherwise you may be putting TWO properties in jeopardy, one of which will only go back to the bank, but the other can put you on the street.

Just say you took a large chunck of money ($200,000 + broker's commission) out of your primary home and plunked it into your investment property to bring your vacation home mortgage down from $800,000 to $600,000 and your IO payment down as well. Now you've got to pay the IO AND now you've added an equity loan or extended your mortgage (depending on how you do it). Did you mean to say you had a 300% mortgage??

Now let's say next year comes along and RE is still in the ditch and the vacation property appraises at $500,000 and you still don't want to sell, so you continue to carry (with taxes, insurance, etc.) and then one of you lose your job or can't work for some reason. It just gets doesn't get any better from that point on.

Keep the faith and go out there and get some answers.

I am not saying that cashing out on someones primary residence to finance another property is the best solution for everyone. People have to look at all possible scenarios in a case like this. Are you approaching retirement, moving to a fixed income, etc.? That is why speaking to numerous professionals is the wisest course of action. You never know what is going to happen, which is why I tend to err on the side of conservatism. Even though someone may qualify for specific loan, if I dont feel comfortable doing it by looking at spending patterns, and credit, I recommend they dont refinance.

Worst case is you hand the keys to the Bank back on the second home, but at least you have a roof still over your head.

 

[spinDrAtl]

Andi, you need to take a good look at what it is that you are trying/need to accomplish to right your situation. Is it lowering your monthly outflow? Is the situation just too dire such that no type of refinance would solve it and you must get out? Can it be managed by making some adjustments? I agree with others - you need to do a thorough analysis of all your factors and determine the best course of action for you.

Make sure you are not concentrating on just one factor that gets in the way of doing a good analysis. I know of someone who had 200k in CREDIT CARD DEBT (mortgage and car additional). This person had the opportunity to take a fixed rate 2nd mortgage and reduce their monthly outflow by $1300 or more dollars per month by paying off other debt. They decided not to do it because 'the interest rate was too high' - 13% on a fixed rate second to 115% of their home's value. Now mind you, they were paying 22-28% on these credit cards if not more, but because they had seen ads touting 6-7% interest rates, they thought this program was too high. This program is not for everyone of course as you get negative equity in your home and if you had to sell in the near future, you could be in trouble. But if you are about to start fouling up your credit report and you have made the commitment to clean things up and plan to stay put in your home, that can be the way to go.

Another lady who was not in so much trouble, but was tight on meeting monthly obligations went to her local bank for advice. She was probably a couple months away from getting a 30 day late on her mortgage (BAD,BAD,BAD) but not in such a dire situation that it could not be solved. Lo and behold, they advised her to DECLARE BANKRUPTCY. This lady had no more need to declare bankruptcy than Bill Gates. There was another program that worked for her and she has reduced her bills to a manageable level PRIOR to ruining her credit. If she had listened to her local banker and not looked around for more advice, she would have been screwed for years.

So do some homework and talk to some trusted friends and professionals.

My two cents.

 

[andipandi]

Mango, Shelly, Rocco, Spin Dr.,
Blessings and thanks to all of you who donated time and ideas. There are many sharp, savvy folks here. I did not mean to sound destitute or whine I am not alone. Smarter, wealthier people than us seem to be in the same shape over south walton real estate . I bet they may be reading at this very minute. Thank you for using your powers for good and not evil.

Sorry, I was off thread subject. I see the auction route is not a viable option as we have little or no equity. I was making a funny about the 300% mortgage. Got the standard 20% down 2yrs ago. Just did not expect it to depreciate! We have no debt except mortgages and do not spend much money. We are luckier than those people who may forfeit a primary residence or file bankrupcy.

I had planned to speak with an advisor. Yes, more than one advisor is an excellent idea . Do you know the fee for SJ's crystal ball therapy?? My main questions are when do you stop throwing good money after bad ?? How do you stop the hemorrhaging? When will this flipping market turn around????
Thanks again!

Have you heard of trading homes???? If we could trade this home for one in our city , we could sell our primary(which has alot of equity). We have many second home owners in our area. Just curoius how that might work???