A Charleston foreclosure
I think there are two kinds of foreclosures; there are foreclosures that we should feel sorry for because the family has lost their home because of a job loss, illness, death, divorce or possibly taking out a loan they probably shouldn't have and then there are preventable foreclosures caused by either greed, stupidity or worse.
Let's talk a little about the latter.
I just noticed a listing recently in a suburban Charleston neighborhood that seemed to be priced below market so I clicked through to see whether it was a short sale or a foreclosure and sure enough, it was a lender owned home. My natural curiosity led me to the history and tax records (I'll change the numbers up a little to anonymize).
The home was purchased in 2005, lived in for the "mandatory" two years so that the profits on the sale of the home would be exempt from tax and then listed for sale in 2007. Well, not really listed for sale because the asking price was an amazing 90% higher than the seller paid two short years previously. Over the course of the next year and a half, it was gently reduced to only 40% more than the price paid. We all know that Charleston real estate did not appreciate by 90% or even 40% in two years so the list price was probably based on what the home ower needed to sell for rather than what the home was really worth.
And what kind of mortgage did the home ower have.
Well, not only was there a first and second mortgage for 100% financing but the tax records even seemed to indicate that a HELOC (home equity line of credit) was also tapped. Back in the "good old days" (sarcasm intended) when lending was a little too relaxed, banks thought nothing of financing over and above the value of a property. Sometimes, this was the result.
This story was presented just in case you wondered how we might have gotten into a little financial hot water.