Just when you thought that foreclosures happened only to the poor and middle class, the rich are getting sucked into the foreclosure wave, too! According to a Reuters News online article posted on the National Association of Realtors’s website, foreclosure is plaguing home owners in some of the wealthiest counties in the nation!
”Homes sold on the auction block this month for as much as $852,000, more than four times the median home price in the United States, and auction officials believe that even higher-priced foreclosures are lining up in the pipeline. ” What definitely has contributed to this phenomenon are the easy lending practices that were being touted by lenders in the past few years and the exceedingly low “teaser” interest rates on many adjustable rate mortgages. With very little down payments required, even the affluent couldn’t resist.
"Because of the financing that was possible, so many people bought the bigger house, the million-dollar house with the bowling alley or the tennis court outside, " says Deborah Guzek, who works for a nonprofit credit counseling service in Farmington Hills, Mich. ” As interest rates adjusted, the previously attractive monthly payment jumped dramatically and the house was no longer affordable.
“Furthermore, data shows that about 40 percent of pricey homes that were bought last year were second homes or investment properties. Josh Rosener, managing director at investment research firm Graham Fisher & Co. , says these homes are even more likely than others to go into foreclosure. ” With investment property that was obtained with 100 percent financing or other types of creative loans, the dropping value of the house in some markets automatically placed the homeowner under the loan. Consequently, most owners would rather cut their losses and walk away from the deal. Homeowners are more likely to do what they can to save the home they reside in but are less reluctant to hang on to second or investment homes.
It’s no surprise then that for those wealthy investors that have plenty of cash, there is likely to be many a prime property available for dramatically, low discounts.
Nef Cortez has been a licensed real estate broker and has held various positions in the real estate and mortgage industry for over 25 years. If you would like to read more of Nef's pithy and timely advice (with the latest info on local foreclosures), visit his website at Diamond Bar Houses or read his blog at Southern California Real Estate Blog