developers debt to HOA

TerryT7 (Texas)
Posts: 10

Posted:

I am interested in buying a home in which the developer has a loan to the HOA in the amount of $932,000 over a 3 year period. The HOA is over spending what is taken in monthly by approximately $25,000 per month which is covered by the developer. The developer is carrying this as a loan from the developer to the HOA. complete build out may not be for 3 or more years at which time I am estimating that the loan to the developer could be as much as $2,000,000. If there is a recession and sales drop who knows when complete build out occurs. Can I expect that the developer will have expectations of being paid back. Should I look for another place to build a home?

BillH10 (Texas)
Posts: 1,217

Posted:

Terry, like many (most) developers, this one has set the monthly assessment too low in order to entice buyers.

I don't know if the developer can encumber the HOA for repayment, those are questions you should ask the sales agent or, better yet, hire an attorney to examine the association documents and render an opinion before you sign anything.

Sooner or later however, probably immediately after turnover, the owners in the Association can expect a significant increase in their monthly assessments as there will be no 'sugar daddy developer' in the background to cover the monthly shortfalls. $25K is a lot of income underrun relative to expenses, do you have any insight into what is taking place. How large is this association now, and at buildout?

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Just walk on by and meet me at the corner.........

PestY
Posts: 128

Posted:

Quote:

Posted By TerryT7 on 08/25/2019 2:01 PM
I am interested in buying a home in which the developer has a loan to the HOA in the amount of $932,000 over a 3 year period. The HOA is over spending what is taken in monthly by approximately $25,000 per month which is covered by the developer. The developer is carrying this as a loan from the developer to the HOA. complete build out may not be for 3 or more years at which time I am estimating that the loan to the developer could be as much as $2,000,000. If there is a recession and sales drop who knows when complete build out occurs. Can I expect that the developer will have expectations of being paid back. Should I look for another place to build a home?

RUN

RUN FAST

RUN FAR

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Why even go there? Find a stable community and count your blessings. I commend you on reviewing their finances before buying. I did not do a good job of this when I bought and I could shoot myself for this.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I am not sure how you got this information. Also don't know what isn't making you run about a mile away from this. Where do you think the money will come from in 3 years? Dues and/or special assessments await. Do you really want in on that?

Former HOA President

TerryT7 (Texas)
Posts: 10

Posted:

i asked for the financials and they were given to me.
should this data not be available to all people whom are wanting to build a home and join the HOA?
Building a home with a builder is one thing, but I know when you join a HOA, I know that I am entering into a agreement with the Developer and other HOA members. My first thought is that the current rate of shortfalls being covered by the developer are unsustainable. The Developer is calling the subsidies a loan on the books and I suspect would want to be paid back. The developer keeps digging a financial hole for the HOA which I think will cause issues on the build out of the community ever getting completed.

TerryT7 (Texas)
Posts: 10

Posted:

i asked for the financials and they were given to me.
should this data not be available to all people whom are wanting to build a home and join the HOA?
Building a home with a builder is one thing, but I know when you join a HOA, I know that I am entering into a agreement with the Developer and other HOA members. My first thought is that the current rate of shortfalls being covered by the developer are unsustainable. The Developer is calling the subsidies a loan on the books and I suspect would want to be paid back. The developer keeps digging a financial hole for the HOA which I think will cause issues on the build out of the community ever getting completed.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Might not be bad.....

Depends how it was set up......

Many developers will use the land/lots as collateral so if there are 200 acres and 200 lots, the land value would more than cover a 2 million loan. As the developer sells one house, he pays off more of the loan.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By TerryT7 on 08/25/2019 6:20 PM

i asked for the financials and they were given to me.
should this data not be available to all people whom are wanting to build a home and join the HOA?

The data is available to members of the Association (i.e. after your purchase).
Many HOA's or sellers will provide this info if they buyer asks (most don't bother to ask).
A few States make it a requirement as part of the closing procedure (but many don't bother to read).

Quote:

Posted By TerryT7 on 08/25/2019 6:20 PM

Building a home with a builder is one thing, but I know when you join a HOA, I know that I am entering into a agreement with the Developer and other HOA members. My first thought is that the current rate of shortfalls being covered by the developer are unsustainable. The Developer is calling the subsidies a loan on the books and I suspect would want to be paid back. The developer keeps digging a financial hole for the HOA which I think will cause issues on the build out of the community ever getting completed.

Your thoughts are, in my opinion, accurate.

If it were me, I would look elsewhere.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

A developer makes their money by selling their properties. Let's say they buy 101 acres. They break it up into 100 lots and 1 for clubhouse/pool/amenities. They charge 100K to purchase the lots. The owners hire a builder which may or may not be related to the Developer. Once built out the Developer turns over the HOA to the owners.

So the developer may offer some incentives of keeping dues low or offering amenities like pool/clubhouse etc. Which come out of their pocket as they are the "HOA". It may be they need to float a loan to cover amenities and lower dues till they are fully built out. Depending on how they are set up, the loan may not be a bad thing.

The real issue comes when they are fully built out and turnover. The Homeowners have to take on the HOA's debts. Which may not be the developer's loan. The owners do have to take care of the amenities. It may be they need to do roads and other common elements as well. So the owners will need a reserve fund and daily operation fund.

If the current dues aren't cutting that future budget, then you and your fellow owners pick up the tag. So you may be happy to build and move into this place. Just be aware that dues will be changing. Can you afford the additional dues that it may require in 3 years? It could be a significant raise. Something to consider before moving in.

Former HOA President

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By MelissaP1 on 08/26/2019 5:00 AM
A developer makes their money by selling their properties. Let's say they buy 101 acres. They break it up into 100 lots and 1 for clubhouse/pool/amenities. They charge 100K to purchase the lots. The owners hire a builder which may or may not be related to the Developer. Once built out the Developer turns over the HOA to the owners.

So the developer may offer some incentives of keeping dues low or offering amenities like pool/clubhouse etc. Which come out of their pocket as they are the "HOA". It may be they need to float a loan to cover amenities and lower dues till they are fully built out. Depending on how they are set up, the loan may not be a bad thing.

The real issue comes when they are fully built out and turnover. The Homeowners have to take on the HOA's debts. Which may not be the developer's loan. The owners do have to take care of the amenities. It may be they need to do roads and other common elements as well. So the owners will need a reserve fund and daily operation fund.

If the current dues aren't cutting that future budget, then you and your fellow owners pick up the tag. So you may be happy to build and move into this place. Just be aware that dues will be changing. Can you afford the additional dues that it may require in 3 years? It could be a significant raise. Something to consider before moving in.

THAT IS the biggest bunch of horses%*&t I have EVER heard in my life.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Sounds normal to me. What part sounds wrong?

RichardP13 (California)
Posts: 3,868

Posted:

I have a conference in a couple of hours at the Reagan Library. I will respond this evening.

BarbaraT1 (Texas)
Posts: 821

Posted:

I encountered this scenario with a few properties I managed. In each of those cases, the developer "forgave" the loan at turnover. Sometimes in exchange for the new homeowner board agreeing to accept the common properties as is and not demanding promised amenities. But, I wouldn't count on this happening in your case and agree with the other posters that you should keep shopping.

JZ2 (Florida)
Posts: 52

Posted:

No one here can really answer that for you.

$2M is a lot of money, and state law may or may not allow the developer to collect that from the homeowner-membership. My first suggestion would be to consult an experienced HOA attorney in your area so you can get an answer to that threshold question.

If the developer loan is indeed collectible from the homeowner-membership under state law, then your next step is determining whether the additional personal liability is "worth it" to you and your family.

For example, if the community will have 5000 homes in it at full build-out, that's not nearly as significant a concern ($400.00 per home) as it would be if only 500 homes were planned ($4,000.00 per home). The richness in the mix of amenities -- and the additional value that amenity mix imparts to your home -- may or may not be "worth it."

Good luck!

TerryT7 (Texas)
Posts: 10

Posted:

There are less than 100 homes built thus far with a developer loan near $900k and monthly short falls in the order of $20-25K a month.
The total build out will be around 300 homes and my projections put the developer loans at $1.5 to $2MM at build out.
That would be about $6500/ house that would have to be paid back provided the developer wanted the repayment. Sounds untenable to me.

BillH10 (Texas)
Posts: 1,217

Posted:

Terry, what in heaven's name is causing a shortfall of $25K per month in an association of 100 homes? What are the monthly expenses?

TerryT7 (Texas)
Posts: 10

Posted:

landscaping and water usage

NpS (Pennsylvania)
Posts: 4,216

Posted:

I bought my house new over 30 years ago. The monthly fees were around $100. I looked at all the things that were promised and I laughed. There was no way that anything near that amount was going to cover this and that and whatever. My conclusion - When the money is needed, I'll have to pay up - but for now, I'd rather have that money in my own pocket than put it in the hands of some BOD who might piss it all away.

Looking back, I was wrong. I was only thinking about myself. There were those who were pushing themselves financially to meet the $100 monthly obligation. They might not be in a position to meet a greater obligation.

Then the mortgage meltdown happened. I learned a lot about what happens when people have no equity in their homes.

You brought up some risks that are even worse than what I faced. Buying into a 1/3 developed HOA. $2M of pre-turnover debt. Yet, I think you have a common situation to the one I had back then.

Your expectation of what you might need to contribute is probably very different than many of your neighbors. You see the debt as something you might need to pay. Your neighbors might see the debt as something the HOA is responsible for, not them. You can tell them that they are the HOA all you want, but they just won't see it - and will be angry when told that more money is needed.

Sikubali jukumu. Read all posts at your own risk.

SueW6 (Michigan)
Posts: 814

Posted:

Are you confusing “ loan” with “investment” still on the books of this private corporation, which is still in its building phase?

How on earth would 100 homes have deficit spending each month at the level you are talking about?

The developer will re-coop his investment when his product (homes) sell.

TerryT7 (Texas)
Posts: 10

Posted:

landscaping and water, mowing and watering, yes that is correct.

PestY
Posts: 128

Posted:

Terry,

You need the stress of buying into a potential disaster why exactly ?

LetA (Nevada)
Posts: 2,679

Posted:

Quote:

Posted By TerryT7 on 08/26/2019 1:46 PM
landscaping and water usage

$25,000 per month?? What in the name of sweet Sunday Jesus is going on?? How much water is being used? and what are they paying the landscapers?? DAYAMMMMM

TerryT7 (Texas)
Posts: 10

Posted:

$270K/year landscaping
$190,000/ year water usage

LetA (Nevada)
Posts: 2,679

Posted:

I would honestly find a place with a much stable HOA to buy in. Truth be told, the developer is floating loans to himself via the HOA.
Those numbers for landscaping and water. HOLY SHEET how many homes are you talking about/ Either way, someone there needs to look into using grey water instead of potable water for landscaping.

RichardP13 (California)
Posts: 3,868

Posted:

Water in Los Angeles is expensive, about $11.00 per unit (748 gallons). In Texas, it is closer to $16.00 for the same amount.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By TerryT7 on 08/26/2019 5:12 PM
$270K/year landscaping
$190,000/ year water usage

I would be curious if these are detached, single family homes and how many acres. Landscaping is $22.5 per month, while water is $15K. Lots of acreage requires lots of landscaping and lots of water. Deficit comes downs once more homes are sold. I would also guess the HOA might be subsidizing some of the expenses or dues.

SamE2 (New Jersey)
Posts: 310

Posted:

Shouldn't the developer be paying for the 200 lots that they own are in the process of selling?

TerryT7 (Texas)
Posts: 10

Posted:

I did some investigating.
The median cost to maintain a 18 hole golf course is less than $1MM
Colleges landscaping maintenance as low as $450K for 240 acre campus

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By TerryT7 on 08/27/2019 9:03 AM
I did some investigating.
The median cost to maintain a 18 hole golf course is less than $1MM
Colleges landscaping maintenance as low as $450K for 240 acre campus

I am guessing either this community may not be the right fit for you, or HOA's, in general, might not be the right fit.

JZ2 (Florida)
Posts: 52

Posted:

Run!

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Did not mention this is a golf community. Is the HOA a for-profit or a non-profit? Is it worth the ability to have access to a golf club?

Former HOA President

JZ2 (Florida)
Posts: 52

Posted:

NpS

//I bought my house new over 30 years ago. The monthly fees were around $100. I looked at all the things that were promised and I laughed. There was no way that anything near that amount was going to cover this and that and whatever. My conclusion - When the money is needed, I'll have to pay up - but for now, I'd rather have that money in my own pocket than put it in the hands of some BOD who might piss it all away.

Looking back, I was wrong. I was only thinking about myself. There were those who were pushing themselves financially to meet the $100 monthly obligation. They might not be in a position to meet a greater obligation.

Then the mortgage meltdown happened. I learned a lot about what happens when people have no equity in their homes.//

Good point, and one worthy of the attention of any prospective homeowner in an HOA-governed community.

The reality is, whether one realizes it or not (and virtually none do), a homeowner is a "partner" with every other homeowner in your community. And just like a commercial partnership, when your HOA needs additional capital to fund its obligations, you and your "partners" will be expected to ante up (or suffer the consequences).

When there is a large "developer loan obligation" hovering over everyone's heads that eventually needs to be paid, some will be able to afford to pay their "partner" capital call, and other partners will default. And guess what? Those defaults will somehow need to be covered by the non-defaulting "partners" (at least, until they are collected from the defaulting "partners" -- if and when that occurs).

Developers love to showcase the shiny amenities... but not so much their books. It is one's duty as a prospective homeowner to know precisely what he or she is buying into...

TerryT7 (Texas)
Posts: 10

Posted:

It is not a golf community,
I was just making comparisons for the cost of maintaining a golf course.
I guessing I could maintain a 9 hole course for the price of lawn and watering in this HOA run by the developer.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By JZ2 on 08/27/2019 4:41 PM

//NpS. There were those who were pushing themselves financially to meet the $100 monthly obligation. They might not be in a position to meet a greater obligation. Then the mortgage meltdown happened. I learned a lot about what happens when people have no equity in their homes.//

Good point, and one worthy of the attention of any prospective homeowner in an HOA-governed community.

The reality is, whether one realizes it or not (and virtually none do), a homeowner is a "partner" with every other homeowner in your community. And just like a commercial partnership, when your HOA needs additional capital to fund its obligations, you and your "partners" will be expected to ante up (or suffer the consequences).

When there is a large "developer loan obligation" hovering over everyone's heads that eventually needs to be paid, some will be able to afford to pay their "partner" capital call, and other partners will default. And guess what? Those defaults will somehow need to be covered by the non-defaulting "partners" (at least, until they are collected from the defaulting "partners" -- if and when that occurs).

Ever since the mortgage meltdown, I've kept a spreadsheet that I don't share with anyone else. On the spreadsheet I track the date of sale, the purchase price, and the mortgage amount on every house. All public data.

I'm amazed that, even after all the problems from the meltdown, mortgages for 95+% of the purchase price are still being issued. The spreadsheet gives me a handle on how vulnerable my community is to even a minor meltdown. J is correct when he says that the non-defaulters will have to carry the defaulters.

Terry. If you're still interested in the property after all the comments against it in this thread, you might want to spend a few hours and build a spreadsheet for that community. It might tell you a lot about what risks you're buying into.

Sikubali jukumu. Read all posts at your own risk.

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By NpS on 08/27/2019 7:25 PM

Posted By JZ2 on 08/27/2019 4:41 PM

//NpS. There were those who were pushing themselves financially to meet the $100 monthly obligation. They might not be in a position to meet a greater obligation. Then the mortgage meltdown happened. I learned a lot about what happens when people have no equity in their homes.//

Good point, and one worthy of the attention of any prospective homeowner in an HOA-governed community.

The reality is, whether one realizes it or not (and virtually none do), a homeowner is a "partner" with every other homeowner in your community. And just like a commercial partnership, when your HOA needs additional capital to fund its obligations, you and your "partners" will be expected to ante up (or suffer the consequences).

When there is a large "developer loan obligation" hovering over everyone's heads that eventually needs to be paid, some will be able to afford to pay their "partner" capital call, and other partners will default. And guess what? Those defaults will somehow need to be covered by the non-defaulting "partners" (at least, until they are collected from the defaulting "partners" -- if and when that occurs).

Ever since the mortgage meltdown, I've kept a spreadsheet that I don't share with anyone else. On the spreadsheet I track the date of sale, the purchase price, and the mortgage amount on every house. All public data.

I'm amazed that, even after all the problems from the meltdown, mortgages for 95+% of the purchase price are still being issued. The spreadsheet gives me a handle on how vulnerable my community is to even a minor meltdown. J is correct when he says that the non-defaulters will have to carry the defaulters.

Terry. If you're still interested in the property after all the comments against it in this thread, you might want to spend a few hours and build a spreadsheet for that community. It might tell you a lot about what risks you're buying into.

I was an executive with Countrywide Financial from 2003-2008. The LTV or the CLTV had NOTHING to do with the mortgage meltdown. Sorry, the spreadsheet exercise was a waste of your time.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Explained by someone who worked at Countrywide.... The one company most known for selling those loans that contributed to the bubble bursting...

Former HOA President

JohnT38 (South Carolina)
Posts: 1,631

Posted:

I can tell where this thread is going. Please hold off on further discussion until I grab some popcorn...

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By JohnT38 on 08/28/2019 7:34 AM
I can tell where this thread is going. Please hold off on further discussion until I grab some popcorn...

Have you gotten your popcorn?

JohnT38 (South Carolina)
Posts: 1,631

Posted:

I sure have. Let the fun begin!

PestY
Posts: 128

Posted:

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By MelissaP1 on 08/28/2019 4:50 AM
Explained by someone who worked at Countrywide.... The one company most known for selling those loans that contributed to the bubble bursting...

In another post, I called you ignorant. That is as true a statement as one can make. You live in your little world and have no clue what goes on elsewhere, until someone tells you.

What caused the meltdown, a lot of things. Subprime loans were well performing loans, but SISA loans were sh*t. That was in all types of loans, Subprime, Alt-A and Prime. Credit rating agencies (Standard and Poor, Moody's, Fitch's) did not do their jobs. MBS's were not rated correctly, worse, the people who bought these pools never did their due diligence, kinda like homeowners buying homes and moving into HOA's.

Bill Clinton said all Americans should have the ability to purchase a home. Home ownership is NOT for everyone. After a number of recessions, municipalities started shifting the infrastructure of homes onto homeowners through HOA's. Now 53% of Americans live in some form of HOA, which might have a set of rules, but who watches over homeowners, no one.

In 2007, we had millions upon millions of loans put into MBS's that no one knew what was in them, rated by agencies that didn't give a rat's ass, insured by only ONE company, AIG. Everyone was looking for a good time and world all woke up on the same day.

Will this happen again, probably. When, sooner than we think. Yesterday, Trump started the process to return Fannie Mae and Freddie Mac back to the private sector. This is how the ball got rolling in the first place. And Trump is the last person to weigh in on this. His Trump Mortgage failed when others were making boat load of money. Countrywide even denied him a line of credit.

In April 2008, I moved into a new home. 10 days later I was laid off at Countrywide. Never missed a mortgage payment or HOA dues. In one year, the house lost 40% equity. I had a VA loan on the house. If I would have put 20% down, it would have wiped out in a heart beat. I have bought three homes in my lifetime, and not once did I put any money down. Same holds true for a car.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By RichardP13 on 08/27/2019 11:02 PM

Posted By NpS on 08/27/2019 7:25 PM

Posted By JZ2 on 08/27/2019 4:41 PM

//NpS. There were those who were pushing themselves financially to meet the $100 monthly obligation. They might not be in a position to meet a greater obligation. Then the mortgage meltdown happened. I learned a lot about what happens when people have no equity in their homes.//

Good point, and one worthy of the attention of any prospective homeowner in an HOA-governed community.

The reality is, whether one realizes it or not (and virtually none do), a homeowner is a "partner" with every other homeowner in your community. And just like a commercial partnership, when your HOA needs additional capital to fund its obligations, you and your "partners" will be expected to ante up (or suffer the consequences).

When there is a large "developer loan obligation" hovering over everyone's heads that eventually needs to be paid, some will be able to afford to pay their "partner" capital call, and other partners will default. And guess what? Those defaults will somehow need to be covered by the non-defaulting "partners" (at least, until they are collected from the defaulting "partners" -- if and when that occurs).

Ever since the mortgage meltdown, I've kept a spreadsheet that I don't share with anyone else. On the spreadsheet I track the date of sale, the purchase price, and the mortgage amount on every house. All public data.

I'm amazed that, even after all the problems from the meltdown, mortgages for 95+% of the purchase price are still being issued. The spreadsheet gives me a handle on how vulnerable my community is to even a minor meltdown. J is correct when he says that the non-defaulters will have to carry the defaulters.

Terry. If you're still interested in the property after all the comments against it in this thread, you might want to spend a few hours and build a spreadsheet for that community. It might tell you a lot about what risks you're buying into.

I was an executive with Countrywide Financial from 2003-2008. The LTV or the CLTV had NOTHING to do with the mortgage meltdown. Sorry, the spreadsheet exercise was a waste of your time.

Richard
My post was not about the cause of the meltdown.
Nor was my post about the people who lost their homes.
Nor was my post about the mortgage "professionals" who "helped" people get those loans.

No Richard, my post followed JZ's post which talked about the burden on the non-defaulters when homeowners are in default - not to the mortgage company - to the HOA. Something that the mortgage industry and everyone in it didn't give a crap about.

As to my spreadsheet, I have a reasonably good sense of who is going to be under pressure if the market slides.

It may be that when they go for a home improvement loan, they find that the best valuation they can get is less than what they paid. They're not going to default. But neither are they going to fix their homes as much as they could. Which is what I care about.

It may be that we are going to see more delinquencies, and maybe we need to be less aggressive in our spending til people can get caught up.

My conversation is about people being strapped. Yours is about a bad memory. But I think your view, by limiting yourself to what was going on inside the problem, totally misses what happened to the rest of us who didn't get bailed out and had to carry the burden of the financial hardship to our communities.

Sikubali jukumu. Read all posts at your own risk.

RichardP13 (California)
Posts: 3,868

Posted:

First, the same people that couldn't make payments before are the same ones that won't the next time.

Mortgage companies didn't inflate home prices, realtors did.

How was it the responsibility of the mortgage company to look after the HOA's? They didn't set them up in the first place, maybe you should vent your anger against those people. There was talk of impound HOA dues, BUT who do you send it to, how much, what happens when it changes, any special assessments. Whole different can of worms, but not viable.

If you are going to do home improvement projects at the house and going to use the home as credit, you better have equity. That is the way it works. Our country doesn't save, that has been our mentality. Look at other countries. China sends people over with suitcases of cash that that have saved up.

Even though I lost my job, I was one of those that helped bail others out.

People should have known the risks of homeownership and the loans they were signing up for. The internet was up and running back then. They were more concerned about where they were going on vacation, having a new man cave and having to Escalates in their driveway. I don't feel sorry one bit.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By RichardP13 on 08/28/2019 1:45 PM
First, the same people that couldn't make payments before are the same ones that won't the next time.

Mortgage companies didn't inflate home prices, realtors did.

How was it the responsibility of the mortgage company to look after the HOA's? They didn't set them up in the first place, maybe you should vent your anger against those people. There was talk of impound HOA dues, BUT who do you send it to, how much, what happens when it changes, any special assessments. Whole different can of worms, but not viable.

If you are going to do home improvement projects at the house and going to use the home as credit, you better have equity. That is the way it works. Our country doesn't save, that has been our mentality. Look at other countries. China sends people over with suitcases of cash that that have saved up.

Even though I lost my job, I was one of those that helped bail others out.

People should have known the risks of homeownership and the loans they were signing up for. The internet was up and running back then. They were more concerned about where they were going on vacation, having a new man cave and having to Escalates in their driveway. I don't feel sorry one bit.

A lot I agree with especially: the same people that couldn't make payments before are the same ones that won't the next time.

LetA (Nevada)
Posts: 2,679

Posted:

Richard, there were a good number of people, majority in Nevada that treated their home like an ATM machine. They went from having a home worth $150,000.00 one day and then next day it was worth $400,000.00.
Those people refi'ed, cashed out and went on a spending spree. Granted the banks played a role in this mess.

RichardP13 (California)
Posts: 3,868

Posted:

Home is based on value.

Value is what someone is willing to pay for a home.

Equity is value less what is owed.

Triva question. Homeowners in Minnesota, from 2003-2008 (and maybe even today) had the best credit scores, BUT the worst PRIME lending rate. Why?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

No wonder you were let go... 1st off Realtors do NOT set house prices!!! Realtors are basically "Used car salespeople" of houses. It's like going to a car lot and having the sales person set the price of a car. Doesn't make any sense. A realtor put the price a little high for bargaining terms. Rarely anyone purchases a home at asking price unless that is what the local reality is like. (Think New York City, L.A. etc...).

The home has to be assessed and value set by 3rd party. Who they are paid to go through and evaluate what the house is worth. That ASSESSMENT is then sent to the bank. The bank then approves the loan amount based on that assessment. They aren't going to loan a million dollars to a house worth 500K.

To blame the customers for the collapse is a classic mortgage industry move. "Well if these broke un-credited people wouldn't keep coming to our door asking for a home loan, then we wouldn't have this issue". It's more like "Well you can't afford a home? Let's find a "program" that will allow you to do this". Let's get you into an "ARM". The rates are low now but MAY raise in the future... Then they sell the loan off to another company and that rate increases...

So no I do not blame realtors for the bubble popping. I don't think "Home Value" is what someone will pay for a house. It's based on REAL #'s, condition, and location. My house listed at 75K. The buyer willing to pay the 75K. However, once it was assessed it was only worth 74.5K. So I had to cut my price $500 and pay them the difference. So explain that if your theory holds water....

Former HOA President

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Melissa, I just have to ask. Did you even read what Richard wrote or is there another problem? He said, "Value is what someone is willing to pay for a home."
How can you possibly twist this into him saying, "...Realtors do NOT set house prices!!!"?