Dealing with the foreclosure crisis

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By Taylor Miller
Williamston Post staff writ

Many Americans have been hit directly by the foreclosure crisis. With 30 percent of the real estate market distressed, the foreclosure process has become a daily reality for bankers and real estate agents.

“There are 75 homes currently on the market in Williamston. Fourteen sales are pending, and 64 homes have sold year-to-date. Of the 64 homes, 21 are foreclosures,” said real estate agent Shelby Miller.

Shelby said foreclosures hurt not only the people who are losing their homes, but everyone involved in the process.

Banker Kelly Miller said that foreclosures are also a huge part of the banking business today. Banks are constantly dealing with newly foreclosed properties. “It’s really complicated, but there is a whole legal process that takes place in terms of a foreclosure,” Kelly said.

When the bank is notified a home is being foreclosed, it gives the individual six months to make up payments on the house. The bank will take the home if the terms are not met.

“The bank gives them a chance to get out of the situation that they’re in and at the end of that period the bank then has to take possession of the home and decide what to do with it. It is usually passed on to Realtor professionals,” said Kelly.

According to Kelly, the bank is forced to step into the former owner’s shoes and takes over those responsibilities. The banks are then faced with the option to sell or rent the home, which is where the Realtors come in.

Miller says foreclosures are a huge part of her business because they are such a big part of the market. To be a Realtor in this market, you have to be savvy on foreclosures because there is no way to avoid them.

Bankers and Realtors have put it into perspective that the bank is very eager to sell and get the foreclosed property off its inventory, so it is going to be more motivated to sell than a regular buyer.

For example, if homeowners who spent $500,000 for a home find that it is now worth only $100,000, they may not want to keep paying the mortgage. Some may choose to strip the home and walk away. In this situation, the bank is left with the shell of the house and is forced to sell it for whatever the home brings.

According to Shelby, the problem for the bank occurs when that home that sold for $500,000 sells for $30,000, resulting in a $470,000 loss which will likely never be paid back.

“A lot of times when you hear the word ‘foreclosure’ you think of people who are not wealthy and in reality that is not the case. Most of the people who are foreclosing their homes and causing trouble in the banks are people who can afford it, like doctors and lawyers,” said Shelby.

The people who can afford to walk away from their homes are taking advantage of the foreclosure crisis. They walk away from their home with the burden that they will have bad credit, but Shelby explains that it doesn’t matter to them because you can also get something called an equity loan.

“An equity loan is when you take a second loan out. Everything you paid into your first loan, you can then take out in form of an equity loan and deposit that on a new home,” said Realtor Marie Miller.

Bankers argue that such loopholes allow individuals to cheat the banks out of two homes.

The CoreLogic research group has data that shows that more than one in seven homeowners with mortgages of more than $1 million have missed at least three payments in a row. Their data shows that only about one in 12 homeowners who owe less than a million dollars are ‘seriously delinquent.’

If you are trying to sell your home in an honest way and not walk away like many are doing, it is still a difficult process that leaves you with less than what you started with. Honest people who do not want to move would prefer to have the bank renegotiate the loan to a lower amount. If the banks agree, the homeowner faces having a bad credit score for the next seven years, which means the individuals are likely to be unable to get future loans or credit cards.

“Sure, the banks should have never made all of these loans, but there is no way they could see the economic crash coming,” said Kelly.

Unfortunately, every foreclosure on your street also threatens your ability to sell your home. “If you are selling your home for $500,000 and your neighbor’s house is foreclosed, your house is no longer worth $500,000,” said Marie.

In 2001, Ryan Miller purchased his home for $340,000. When he tried to sell his home in 2010, he ran into trouble.

“I went through Realtor after Realtor trying to sell my home for the value I bought it at, or at least close enough to its starting value,” said Ryan.

After a year of searching for a qualified buyer, Ryan had to settle for the highest price offered: $200,000.

Ryan Miller suffered a $140,000 loss in the situation, but he could afford the loss. Although Miller sold his home and suffered the loss on his own, he could have easily walked away from the home using the loophole of the equity loan.

In response to Ryan’s decision, Realtor Miller said, “At that point I’d say it’s almost a test of morals. You have to consciously make a decision: Do I walk away from the home and have the bank suffer the loss or do I suffer the loss on my own?”

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