The Digerati Life

The harsh reality and aftermath of foreclosure: personal stories of financial loss from Foreclosure Alley.“You know you’re in trouble when the lawn is brown and the pool is green.”

Something making the rounds of the web is a haunting, somewhat gloomy video on foreclosures — the scenes of which show some surprising, unexpected details. We hear about the foreclosure statistics and the stories in the news, mostly on a detached level. But as I find out more about the personal stories of people whose lives have been greatly upturned by the real estate bust and what seems very much like an economic recession borne of the financial crisis we’ve been hit with, I can’t help but feel sadness and dismay for the things that have transpired.

Despite all the talk that we should just let the market do what it will do, it doesn’t change the fact that financial loss has wrecked people’s lives significantly. The news is littered with many such stories, including this one about a family with a toddler who is forced to live in a tent, and a desperate 90 year old woman who shot herself while in the process of being evicted from her foreclosed home.

For many, a home to live in has become harder to find, as people with damaged credit are finding it harder to find a place to rent. Landlords are becoming much stricter about whom they sign up as tenants, no doubt, due to difficulties with previous renters.

Remember the infamous poster boy for foreclosure and real estate decline: Casey Serin? From his example, we see that when things go wrong financially, it can escalate quickly and significantly. Once you make a few financial mistakes, it can be one short step from missed payments to homelessness: your credit gets damaged, your debt load spirals and before long, you’re evicted.

The Story Of Foreclosure Alley: Main Points

What struck me most about this video about foreclosed homes in Southern California (in a suburban development of large, spacious homes now dubbed as “Foreclosure Alley”) were these facts:

1. One in two homes sold last month was a home that was previously repossessed. 700 families lose their homes to foreclosure everyday.

2. The typical foreclosed home is a newer house in a newer neighborhood that was purchased over the last 5 years.

3. Many families that abandon their homes no longer care about what they leave behind. You’ll find so much stuff in these homes when the cleaning crew comes by. All the items they come across — even brand new large, flat-screen television sets, appliances, computers, printers and other electronic gadgets will be thrown out to a landfill! Ironically, the cleaners claim that it takes too much time and money to donate these items to charity. Some surprising materials that people leave behind: photo albums, pink slips for vehicles, birth certificates and other important documents, and in one case, even an urn carrying remains of a loved one. These latter items are eventually returned to their owners.

4. People leave behind many valuable material possessions during a foreclosure because they may no longer be able to pay for them (as they try to walk away from debt and financial obligations) or because they are at a low emotional point and just want to “get things over with”. It’s a point of despair and abandonment when they leave their foreclosed home still stuffed to the brim with their former lives.

5. The business of “trashing” is done by a cleaning company that specializes in cleaning out foreclosed homes. Such companies are doing very well at this time, with business currently booming.

6. Part of fixing up a foreclosed home (other than cleaning it out) is to spray paint a dead lawn to get it ready for resale. It’s done for instant curb appeal.

7. How far have prices gone down? Original prices for these foreclosed homes just a few short years ago: $399,000. Today, they’re worth $180,000.

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When making the foray into real estate, have you thought about whether you’d buy a new house or an older home? Does it matter? Here are some pros and cons.

Thanks to the present housing slump, potential home buyers are finding some great bargains, if they have the patience and the savvy to haggle the final price. Many houses in the market have been erected during the last 5 years and should be pretty much trouble free.

But, as they say in the construction business, they don’t make them the way they used to. Experts also say that a house increases in value over the first 20 years, and then the only valuable property is the land. Land almost never decreases in value, unless there is a toxic landfill underneath. So the important question for potential buyers is: is it better to buy an old house or one recently made?

Why You Should Buy An Older Home

Size is not important, but it sure helps. One of the big pluses in buying an old house is the property size. They used to build houses on larger lots. If you have a large family, the opportunity to live on a larger piece of property seems like a wonderful option. In general, the square footage for the average single family home has increased over time, while land size appears to have shrunk. A home built in the 50’s and 60’s has a typical living space of around 900 to 1,600 square feet but it wasn’t uncommon for land parcels then to be larger than what it is today, especially in the suburbs.

These days, larger plots of land would be considered prime real estate and will cost you a fortune. Not to mention the type of wood and materials used in the past, redwood instead of pine, and the size, 2 x 6 instead of 2 x 4. It’s true that some old homes still cost a fortune in some areas, so you’ll have to be patient and search for the great opportunity.

They can’t see us and other goodies. Aside from the size, old homes give you some privacy from the neighbors. The new subdivisions tend to build a new house right next to a nosy neighbor who could crawl through your bedroom window from his own. Think about the area where older homes were built; their zoning preserves the neighborhood and may afford you more agreeable neighbors, with protection from noisy businesses setting up shop in your vicinity. Trees may also be an advantage; they’ve had time to grow and form a beautiful canopy on the streets where you might jog every day. Finally, there is the distance. Older homes may be closer to the city and give you less commute time. Wow, that’s worth a lot. Think of the gas and the frustration you save.

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These property flippers have turned their unusual investment property into a green home that’s now on the market.

Out with the old, in with the new. About a year and a half ago, I wrote about an unusual property for sale, which was this firehouse in the wooded suburbs of the Bay Area that went on the market for $825,000. The firehouse sat on a suburban street but didn’t look to have much room for more than a couple of firetrucks. It was therefore no surprise when the fire department decided to move their firehouse to an adjacent street on a much wider property, with the space to house more trucks.

Well, I’d like to give an update on that old firehouse. But just to remind you, here’s what it looked like some time ago, sporting the following features:

FIREHOUSE FOR SALE!

Class: Single Family Residential
Type: Detached Single Family
List Price: $825,000
Lot Size: 13,131.00 SF
Age: 50
Bedrooms: 2
Baths: 1 Full, 1 Half, No Tub
Stories: 1

Remarks:
A rare opportunity to buy a firehouse. Fantastic location on large lot in desirable XYZ County. Remodel, rebuild or build new. So many possibilities. Add a second story and take advantage of the views.

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Would you pay for prime real estate? What do you think of these cramped quarters and small spaces with a price tag of $1,000 per square foot?

Even with the real estate market slowdown, real estate prices don’t appear to have budged much in San Francisco. Although I have relatives in this city who claim that properties over there aren’t selling well at all, it sure doesn’t seem to be the case, when you see some of the insane prices being quoted for the tiniest of homes: $279,000 to $330,000 each for some condominium units, with homeowners’ association dues hovering at $270 per month.

The real estate market is supposed to suck right now; still, it hasn’t stopped some Bay Area developers from turning around and selling the smallest properties for as much as they can still get for it.

But I forget that some of these latest quotes I’m seeing are for brand new condos in an urban area, where space is scarce. Still, I’ve never figured out what’s so attractive about living in the city (spoken like a true country gal), even if you happen to work in the heart of it.

What Housing Market Crisis? Prime Real Estate In San Francisco

Just to give you some idea what $279,000 to $330,000 is going to buy you in San Francisco today, take a look at these snapshots of the aforementioned condo units sized up to be around 250 to 350 square feet. They are located at the Cubix Yerba Buena building in the SoMa area in SF.

Architect George Hauser is the first to say the studios are too small for many people, families in particular. He and local planning groups, however, believe the so-called micro units represent one means of providing more first-time home-buying opportunities in a city where most prices outstrip most incomes.

“It’s not the last place a person might own, but a great place to spend three to five years as a young single … to build equity and move up,” said Hauser, principal of Hauser Architects in San Francisco. “You’re in a small space with great amenities and the resources of the city.”

For more on what the public thinks about this development, check out the comments provided in the original story.

Feeling like a sardine yet? Take note that I’ve got nothing against small houses — something which I’ve written about in the past. There are indeed, many benefits to owning small homes; I’m just not that crazy about those of the small and expensive variety.

Of course, many people argue that the prices for these city condo units are just right. Since they are seemingly cheap, what with the median price of Silicon Valley homes at $749,000, we’re told that these units are a great way to get in on the ground floor of Bay Area real estate. The argument for buying into such a market is that you’ll be able to build up equity which can help you upsize into larger, pricier homes down the road.

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When considering how much house you can afford, you’ll need to look beyond mortgage payments for the true cost of home ownership.

Some families participating in the Extreme Makeover Home Edition show haven’t had the happy ending they were hoping for, after they were bequeathed the homes of their dreams. That’s because those beautiful, big houses come with a catch — you’ll need to pay up to keep such a home in good condition and to avoid having it end up like this:

Now if there are people who are unable to hold on to their homes despite the fact they’ve gotten them for free, what can we expect from the rest of us who actually have to fork out the money to own a home?

Well, it’s tough. A house will take a chunk out of your budget. And a big house will rack up even bigger expenses.

Many hopeful home buyers assume that a sufficient down payment is all they require to qualify as homeowners. But that’s a fallacy even I wound up believing so many years ago, as one young, fresh-faced would-be-homeowner. Only with time did I realize how costly it really was to maintain a house, with the cost of property ownership being proportionate to the size of the house one chooses to live in.

Home affordability should refer to more than just your ability to pay for a mortgage. But a lot of home affordability calculators, like this one from CNN Money, seem to miss out on some details. I’m not sure they’re adequately considering the many more things you’ll need to budget for as a homeowner, once you’re “stuck” with your dream home and mortgage.

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Big houses are really nice, if only they weren’t so costly.

It won’t be long before the iffy real estate market will be fertile ground for bargain hunters, if it’s not the case already. But recently, there’s been quite some buzz about the latest high-profile foreclosures to hit the news: those homes that were given away for free through the Extreme Makeover Home Edition show.

The Extreme Makeover program makes for great reality tv by providing “free” custom-built homes to families that have been hard on their luck in order to give these families a fresh start. But unfortunately, for a couple of these home recipients, their change of fortune doesn’t stick and they promptly lose their homes to the banks. Some details of these cases, along with my thoughts:

How Big Houses Can End Up In Foreclosure

#1 The Harpers’ Story

In particular, this magnificent Extreme Makeover home owned by the Harper family is one such casualty of foreclosure borne of poor financial decisions.

From thestar.com:

In Clayton County, Georgia, more than 1,800 people showed up to help ABC’s Extreme Makeover team demolish a family’s decrepit home and replace it with a sparkling, four-bedroom mini-mansion in 2005. The finished product was a four-bedroom house with decorative rock walls and a three-car garage that towered over ranch and split-level homes in their Clayton County neighbourhood. The home’s door opened into a lobby that featured four fireplaces, a solarium, a music room and a plush new office.

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Fire safety tips you shouldn’t be without!

Photo by DaveToo

I mentioned earlier how California’s wildfires have sprung up so much earlier in the season; even the Prosper blog has made mention of this phenomenon. Where I live, we have an imposing “Fire Danger” meter posted at a street corner and right now, it’s registering the highest warning possible “Extreme Fire Danger”. Not that this is a surprise (we see this every year, here in the suburbs of Silicon Valley, California), but I haven’t really noticed this indicator at this level so early in the summer.

Normally, it measures “Mild” or “Moderate” for risk. Oddly, even when the weather is fairly cool, foggy or even on the chilly side, I don’t see changes to that meter reading. We’ve got so much dry foliage around here that it probably makes no difference what the weather does anymore. That thing makes me nervous every time I pass it as it reminds me of the fact that I live in a tinderbox. So why do we live here? Because we take our chances anyway, with a decent school district and a nice way of life in general as I’m sure many folks say about where they reside, regardless of whatever risks their locations pose.

Not quite sure what to do about all the abandoned relics around the neighborhood or the home construction and development that’s been unceremoniously interrupted (halted?) by the limping property market. How many ghost houses can you count around your block? I worry that these homes can potentially be fire hazards. But I console myself by the fact that I’m still seeing “For Sale” signs popping up here and there, and rejoice when something gets sold….

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The real estate market hasn’t been kind to expensive homes for sale but there’s one mansion that deserves a second look. It’s not just any ordinary 6,500 square foot mansion with 5 bedrooms, 8 fireplaces and an elevator.

It’s a family’s dream home that they’re turning into dreams come true for others in a different part of the world. Ghana, to be exact.

The family who owns this historic 1912 house is from Atlanta, Georgia, and they’re doing a noble and truly novel act. This house is listed for sale for almost $1.8 million and the owners (the Salwens include two kids and their parents) have pledged half the proceeds to an international cause for the opportunity to make a difference.

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