#655 in a series of true experiences in real estate
A friend of a friend called a few weeks ago. He said he guessed he was going to have to sell. He said that he’d made some bad decisions, bad choices, and now it looked like it was either foreclosure or bankruptcy.
I had met this man a number of years ago, an artist, quiet and pleasant and I was sorry to hear of his troubles. He told me that when his mother died she had left him a small amount of money, not enough he thought to buy anything with, but when he talked to a lender, surprise, they wanted to loan him a lot of money.
And so he bought a condo where he is still living but being an artist, he explained, he did not make steady money, and barring a miracle, such as a big job very quickly, he would lose his home.
Worse, he lamented, no condo had sold in his area for over a year. Did he mean any condo in his own group? No, not a single condo had sold in his entire ZIP code, his agent had told him, for over a year.
He’d made his purchase 5 years ago for, I believe the number was, $300,000. About a year later it was worth $100,000 more, and he got a bigger loan. That’s when he should have sold, he told me. But he didn’t, and now it wasn’t worth that anymore.
We talked for awhile and it didn’t seem like I could offer him an answer to his problems. I wasn’t familiar with condos in his area and I am not familiar with bankruptcy rules. I said I was very sorry he was going through this and wished him well.
A few days later I was talking to our mutual friend about the situation. Where would he go? He didn’t have any money. He had told our friend that he thought he should put in some bamboo floors and sell the condo.
What? I thought his agent, the agent who had sold him the condo in the first place, had said he didn’t think he could sell it. “Oh, but not for enough,” was the answer, He’ll lose $100,000. I told him, he should just paint the place, forget the floors, and sell it.”
“You know,” she went on, “he’s spent all the money he could borrow. There’s nothing left and I can’t imagine where he will go. He doesn’t make much money anyway. He told me that the lender didn’t even ask how much money he makes before giving him the loan.”
“Do you know how much the monthly fees are for his condo? $385. Can you believe it? I told him that he should get another agent, not the one who sold it to him; that agent only wanted to make his commission, he wasn’t considering what was good for our friend.”
“He called the other day and said that he was going to go live in France. He was excited. He could just go live in France and leave the loans all behind. But” (and she did seem very distressed at the thought) “he’ll lose $100,000.”
I didn’t know where to begin and I wasn’t sure I wanted to. I did say that I was pretty sure he didn’t get a loan without having to state his income. And that it seemed that he had been living on money he’d pulled out of his property. He’d probably gotten an equity line and used it all and now he owed more money than the condo could sell for.
So it wasn’t that he was losing money. In fact, he had borrowed it and had spent it. Wasn’t that the case? She said she didn’t know, she just knew that the friend was not good with money and that the agent and the lender were somehow at fault. In her view, the agent had let him buy the condo and the bank had made it possible.
I didn’t want to get into a discussion about personal responsibility. I just told her I thought she was right about bamboo floors. If his situation was as dire as we both thought it was, and if it was the case that his agent did think there was a chance of selling the condo, why was he dallying about? If there ever was a time to make a good decision and quickly, it appeared that it was now.
“I told him exactly that,” she agreed.
I do not know the end of this story. This is the first time I’ve talked to anyone who has been so close to foreclosure or a short sale, and I guess, given the last few years, that’s pretty amazing. So many people seem still unable to pay their home loans. I see properties listed on MLS everyday that have been taken back by lenders when the owners could no longer pay. What a shame; how terrible for the people involved, including the man I talked to.
But the good news is that our market is definitely getting better. Which won’t help the man with the condo – he couldn’t afford to pay for his place even at the beginning. But if you are worried about values, hang on if you possibly can.
