My Personal Adventures into “Foreclosures”

 

From 1991 - 1996, when the United States was in a recession, unemployment was at its all time high, and the real estate market was depressed, I had the unfortunate position of being a Realtor.  

 

My income dipped from 6 figures to the low $30K. I was personally affected by the lack of Buyers due to the inability of people to buy homes because they either lost their jobs, or were in fear of losing their jobs, and the Sellers not wanting to sell because the price of homes had fallen to 40% of what they had experienced, or they no longer had any equity in their homes.

 

In my professional front, I had people calling me in a frenzy because they were about to lose their homes, asking my advice.

I was able to sell many of their homes, with the involvement of their mortgage company accepting “Short Sales”.  Those mortgage companies not willing to cooperate generally forced particular individuals into losing their homes, or more generally referred to as “Foreclosure”.   It was a lose-lose situation regardless.

 

If you were fortunate enough to have your lender work with a Short Sale, the seller would have no profit to show, possibly paying off their 1^st mortgage and a part of a secondary mortgage, or only a part of any mortgage. Their credit would not remain in tact, showing late payments and account closed, however, they would not be Foreclosed upon and have that stated on their credit report for 7 years.

 

In a Foreclosure, the unpaid amount of the mortgage which was unsatisfied by the resale of the property was considered ‘Debt Relief’ and therefore a Taxable Event.  Double whammy – lose your home and then pay taxes to the government.  What a rude awakening!

 

It was a horrible time for many. . . and I was also one of the unfortunates. 

 

 

 

 

 

 

 

I could no longer make my full mortgage payments, I depleted

my 401K. . .I contacted my Lender requesting that they reduce my payments so that I could pay a portion, at least, suggesting that they tack on the unpaid portion to my principal (after all, I had been making them payments on time for 16 years and had a large equity built up) and when times got better I would go back to my original payments.  They refused!

 

We received our Notice of Default in the mail and finally the Notice of Sale was posted on our front door for all neighbors to see – as well as in the Newspaper.  How Very Humiliating.

 

In an attempt to work things out amicably, I had sent numerous letters to various executives of that particular bank and made many phone calls, but with no avail.

 

We didn’t want to be escorted out of our house, so we had garage sales to sell off almost everything we owned, in order to leave with some money. . .I had the house cleaned, because I couldn’t imagine leaving an unkempt house to the next owner, and we left.

 

We left behind 16 years of memories, dreams of our children getting married in the yard, thousands of dollars of improvements made to this property, and our experience of embarrassment.

 

The crushing blow came when we were taxed for the money that was in our 401K and we had to pay ‘Debt Relief Tax’ on the unpaid balance.  Rendering us totally and completely broke.  It took us about 10 years to recover from that foreclosure.

 

I wish that our friends or family would have given us good advice, but when you are in straights, no one wants to give advice.  Had anyone advised us to rent out our house to a College or University – it might have paid the mortgage.  Or if we had just rented out two of the four bedrooms to students – it might have helped with the payments.  Or had we rented out our front acre as an equestrian center – we could have had some income.  Hindsight is always 20/20.

 

So, please let me suggest to those losing their homes – immediately contact your lender.  In current times they WILL work with you.  Consider renting out your house and you can temporarily move to more affordable housing.  Never let your financial difficulties affect your marriage and family. . . remember “A House is not a Home when your Family isn’t there!”

Move on with your life – everything is temporary – tomorrow is another day and will improve.

 

I did!  I continued in real estate a total of 15 more years. 

Real Estate has a way of always turning around.  Invest in properties as soon as you can – it will provide you with retirement funds, education funds, and funds for traveling.

 

Work with a lender you can trust and who will be there for you when you need them.