Facing Foreclosure? You aren’t alone!
Just yesterday I got a frantic call from a California investor. Apparently, he had seen the fortunes people made on the west coast and thought he’d like to make the same type of money. The problem was that the California market was slowing and very expensive. Someone he knew told him of the next city that was projected to be the next California – San Antonio, TX. What makes this great deal even better is that pricing in San Antonio were still very low! He could get in and buy several properties for the price of one in California. So instead of making a lot of money on one property he’d make a lot of money on a lot of properties! I must admit this sounds like a GREAT strategy!
Here is where his plan went wrong.
1) He didn’t know his market. If he had worked with a Realtor knowing the market who had his best interest at heart, he would have known that there really is no way San Antonio could be the California. Why? Because San Antonio (as of now) is not land-locked. When a housing boom hits prices in California hit because nobody has anywhere else they can build, but in San Antonio we just go out a few miles. Did prices go up? Yes, but not like the West coast because all that was driving up prices in San Antonio is our normal appreciation plus an increase in land prices as owners see that development is headed their way. They cannot go up too much because land buyers could go to the piece on either side of them, or skip them over all together. So not knowing what drives the San Antonio market, or how prices are determined and set here was a big mistake. If you are not in San Antonio the lesson here is buyer where you know! That guy had as much business buying real estate in San Antonio as I do buy camels to rent out to people in Saudi Arabia!
2) He wasn’t well informed when he did buy. It sounds like the Realtor he was working with gave him poor information, or didn’t have the foresight to tell that as more people were buying up rentals that rental market would get diluted and rental prices would fall. The poor guy on the other end of the phone now has several properties that cannot cover the cost of themselves. Every month he is losing money on these houses even if they are occupied. This isn’t always a bad strategy, but if cash-flow is tight at your house already, it can make for some very stressful times!
3) Market forces were at play that he couldn’t control. Could he have known the sub-prime market would crash? No. Could he have known that he bought right before the market cooled? No. A well known real estate guru said in a seminar that the only way you can tell you have hit the peak in the real estate market is after is has happened when the market is headed down. Our poor guy had no idea. Especially at his job as a computer programer or whatever he does. He is not actively working in real estate. He was totally blindsided.
Kind of sounds like the perfect storm for foreclosure! As of yet he is still up to date on his payments, but he was specifically calling me to ask what would happen to him if he walked on the property. He is not alone. I’m also working with another lady who bought properties at market value a year ago, and now needs to sell. There just isn’t enough room for her to sell the properties without cutting a check at closing. Both of these folks bought their properties as speculator/investors. Are they any less decent of people because they are in trouble with homes that are not their primary residences? I don’t think so. They were people who got into something they didn’t fully understand. In many cases they own their home so they assume they know real estate. Many times that just isn’t the case.
So what should they do? Well, if you are considering walking on a house you need to talk to a real estate attorney about the consequences of doing that. That is tough decision, but if you are just no longer able to make the payments I do suggest you call the bank or mortgage company you have the properties financed with to see if you can work something out. Banks look at reports on individual markets. Those markets get ranked based how susceptible they are to foreclosure. If you are in a market that is likely to be hit with a high number of foreclosures the bank may be willing to work with you. Just remember the old saying, “He with the gold makes the rules!” There are no guarantees with banks. You’ll just have to call them and try to work something out.
The next thing I would do is call a local real estate agent you can trust. How do you determine he/she is trustworthy? Interview them. Even I get people that call me and act as though I’m their only choice in agents just because they happened across my site or saw my picture somewhere. There are over 8,000 agents in San Antonio alone. If you don’t get a really good feeling that the agent is going to look out for you, keep looking! Once you find one you feel is a good fit tell them your situation and see what they think. I’ve said many times that real estate is local. My guy in California has no idea of what is going on in San Antonio – no idea! He is in California hearing how bad things are there. He may have a couple properties in neighborhoods that we can get sold pretty easily. If you are thousands of miles away the market you bought in, then you need someone there to tell you what is really going on. Here is a little tip: If someone sold you those properties without giving you any idea of market conditions or forewarning you about rental incomes, you may want to look for a new Realtor to help you sell them!
People across the United States are facing some tough decisions when it comes to homes they bought in the past couple years. Each case needs to be handled individually. Make sure you work with people who care about you, and most of all TALK TO THE BANK WHO GAVE YOU THE LOAN. Suffering in silence won’t help anyone out of this situation!
If you are in trouble with your home and need to sell it fast, contact me! I’ll do all I can to help you, and if I cannot I’ll tell you why even if it means I don’t get the business.
Chris Cowley
210-389-6006
