House-flippers in financial hell: "Many areas are becoming ghost towns as families foreclose"

[El Pinko]

http://www.dailynews.com/news/ci_8906031


Many areas are becoming ghost towns as families foreclose

By Gregory J. Wilcox, Staff Writer
Article Last Updated: 04/13/2008 03:16:58 AM PDT

David Day's house-flipping strategy flopped and now he's fighting for his financial life. Like so many others, he'll likely lose.

Day and his family are on foreclosure's doorstep, struggling to make mortgage payments totaling $6,240 a month.

"I haven't slept in five months. I wake up every morning in a cold sweat. I'm getting ready to go into bankruptcy," he said. "There is no money for food, basically."

Day, a record producer who lives in Granada Hills, is upset that his lenders won't modify the mortgages on either his residence or investment property. So far, all the assistance plans exclude speculators.




I have mixed feelings about this. When the bubble was going strong, I looked on flippers with a certain amount of disdain - carpetbaggers who had the nerve to come into a neighborhood with no intention of staying, adding a few tacky "upgrades" to a rundown house then selling it for a quick $70K profit and then moving on to the next property.

But at the same time, it's been years, maybe decades, since the economy has created enough decent-paying jobs for all the people, so it's only natural that people would take a chance on this kind of gamble.

:shrug:

[Systematic Chaos]

1. You couldn't have said it better.

I had a co-worker who was nearing retirement age at my last casino job. He spoke a lot about buying an investment property back in 2004 - 2006. I did everything I could to talk him out of it because, like many of us here, I paid attention and knew this whole real estate thing was a time bomb waiting to go off. I don't think he ever bought any property, thank goodness.

[Skittles]

2. house-flippers can fuck themselves n/t

[petronius]

4. They did - along with a bunch of other people as they helped drive

the housing market to ridiculous levels.

[Skittles]

10. you know it

those bastards helped make housing unaffordable and drive people to desperate measures

[BigDaddy44]

33. "bastards"?

They're stupid, not evil. They bought something, and tried to sell it for more than they purchased it for. You've never done that? Never bought a stock? A mutual fund? Never sold a house at a profit?

I have little sympathy for them....they made a bad business decision. But they're not evil.

[El Pinko]

37. The cumulative effect of all the housing speculators was to make housing utterly unaffordable

in many areas of the country but all the privileged few.

I suppose it's too much to expect people to see the immorality of participating in a speculative frenzy about a BASIC HUMAN NEED like housing, so I won't call them "evil".

But I personally don't think housing speculators were of the highest moral caliber by any stretch.

Stocks, etc. ae supposed to be investments. Homes were not thought of as investments at all until recent years.

And that mindset has turned out to be toxic to millions.

A house is supposed to be something you buy to live in IF you can afford it. If you're really well off, you can buy some apartments and rent them out.


It's not supposed to be something you can buy and resell in 2 years for twice what you paid for no other reason than mass insanity.

[DBoon]

8. Unfortunately, you may live next door to several

when their properties go into foreclosure, and they become abandoned rat traps, you are stuck living next to them

It doesn't matter if you are a responsible homeowner who never took on more than you could safely afford - enough speculators gone bankrupt will destroy you too.

[Skittles]

9. I live in an apartment

and no matter what the fallout, house flippers can still fuck themselves

[pnwmom]

21. Guess what. Speculators invest in apartments, too. Hopefully, not yours.

Renters are losing their homes and apartments all over the country, because real estate investors' mortgages are going into foreclosure. The effects are going to be felt more and more widely, unfortunately.

[Skittles]

24. like I said

WHATEVER the fallout, house-flippers can FUCK THEMSELVES

[pnwmom]

30. I think you're blaming the wrong people.

The people who go on infomercials to sell their plans on making millions from real estate do deserve a chunk of the blame.

But the ordinary person who has bought a run-down house to fix up and sell doesn't make a lot of money, or even easy money. They are just responding to the fact that a lot of people don't want to buy a run-down house -- they want to buy a house that is in "move-in" condition. But they won't pay above market price, either. So the only way for the fixer-upper to make a profit is to keep costs down, often by doing much of the work themselves.

Once again, the Rethugs have succeeded in turning working people against each other, rather than against the banks and investment corporations that most bear the responsibility here.

[DadOf2LittleAngels]

36. The ordinary person is not a career flipper

and I have no issues with them but the folks who make a career out of smacking paint on an otherwise disaster of a property and trying to sell it for some ungodly amount of money are as bad as the banks..

[Skittles]

42. YOU KNOW IT DADOF2

you are ABSOLUTELY CORRECT - they were a HUGE part of the problem

[Adsos Letter]

16. Ya' know Skittles...

I am always at somewhat of a loss to figure out exactly where you stand on an issue :rofl:

[Skittles]

25. I detest people who exploit

fucking DETEST them :hi:

[flygal]

3. This reply sums up my feelings

This is by far, the biggest ponzi scheme in the history of the US led by the US govt, Alan Greenspan, Ben Bernake, Hank Paulson, and of course Bush and his cronies. Ridiculous loose lending and no regulation what so ever.

As the tide turns, we now see the suckers holding the bag. Good thing the greedy banks who helped this scheme are holding a big chunk of the bag too, except Helicopter Ben will bail them out with our tax money. Congress will bail out the homebuilders. The Joey Donuts and the David Day of the world get left with nothing except to hear rhetoric from Bush saying how the American economy is strong. Aint America great!

[calimary]

5. Oh, but don't call him bitter. Hey' we're all happy-happy-joy-joy here in America!

:eyes:

[Johonny]

34. :)

bitter? Bit him too.

[calimary]

38. :D

[dysfunctional press]

11. it kind of reminds me what happened to midwest farmers in the 70'S

the bankers came in and told the farmers their land was worth bunches of money, and with the government convinced them to borrow against the value of their land to modernize their equipment- then, when the farmers were in hock for the new machinery, the bankers come back and say "oops, we goofed- seems yur land isn't worth as much as we thought- so now your collateral(the farm) isn't worth enough to cover the loans on the new equipment- so you'll have to come up with more collateral, or we'll have to call in those loans(foreclose). and sell everything at auction to cover the debt.

which is how ADM got themselves lots of land and new equipment at bargain basement prices.

the movie "Country" with sam shepard and jessica lange does a pretty decent job of spelling it out.

[murielm99]

22. I remember that well.

Many family farmers around here lost property that had been in their families for years.

The man who lived south of me lost his family to divorce and his farm. He was starting over in another state when he died at age 43. I know the stress of his losses killed him.

I think the housing bust may get more attention than what happened to farm families in the seventies and eighties. We will see Hoovervilles all over the place. Let's call them Bushvilles, or Dubyatons, unless someone can think of something more clever.

[leftofcool]

6. No sympathy for house flippers!

[DBoon]

7. risk taking and optimism is the true American religion

Telling people that they cannot become wealthy by taking risks and plunging ahead is like telling a medieval peasant that there really is no such thing is the virgin birth.

These people aren't just being stupid and greedy - they are being true believers in America and all it stands for.

[Warpy]

12. The people who came in and refurbished good housing stock

even if the repairs were mostly cosmetic, were doing a service. I have no problem with them.

The real house flippers were the ones who'd come in and buy properties and hold them off the market and empty for a few years, doing nothing to them, and sell at a profit.

Here in central N.M., a full third of new constructions was going to flippers who came in and bought it as investment property, not renting it or having it occupied in any way, thinking they were going to make a quick and large profit in a couple of years.

This area was horribly overbuilt with upper end housing over the last 5 years to satisfy speculators, most of whom were from out of state. Now there is a tremendous amount of housing stock that has been dumped onto the market and is going nowhere, the houses having been held just long enough to become slightly unfashionable.

We never did see any sort of a bubble, just a very slow and modest rise in a few older areas of the city. The investment not only never realized a paper profit in the short term, it will end up costing investors and people who bought in those areas to live in them alike.

[corporatemedia]

13. The only good flippper is ....

[Jeff_The_Man]

14. Flipper!!

Haha!!!

[taught_me_patience]

15. These assholes

drove up the price of housing in Los Angeles to rediculous levels. Meanwhile I have to rent while I wait for housing prices to come down. I have no sympathy for these assholes. In fact, I have a lot of scheudenfraud now that they are falling on their face. FUCK EM ALL...

[renate]

17. maybe I don't get something about house flippers

My understanding is that they'd buy a house in bad shape, fix it up with their own money (i.e. they had their own skin in the game), deal with the stress of remodeling, and then sell the house for what people were willing to pay for it.

If I'm naive or uninformed about the details, I'll retract what I'm about to say--I wouldn't blame house flippers, I'd still blame the banks that gave absurd loans to people who couldn't afford them in the long term but who believed that the banks wouldn't lend them the money if they truly were a bad risk. "Approved" for a loan used to mean that the bank's number crunchers thought everything would be fine. People didn't know that the definition had changed so they took the loans they were "eligible" for to buy homes they thought would be investments. Sounds to me like they were doing what they had been brought up to think of as the American Way.

In other words, I blame the banks, 100%.

[zeos3]

18. There's lots of blame to go around

I know quite a few people who were in the housing industry and didn't think there was anything wrong. The mortgage brokers wanted to pad their loans to make bigger commisions. The appraisers wanted to give the highest value to property so they could get more appraisals coming their way. The speculators and flippers in it to make easy money. People buying homes they couldn't afford because they'd make money on the purchase.
The banks should have known better...maybe they do know better since they're the ones being bailed out.

[pnwmom]

20. The people I've known who invested in fixer-uppers weren't trying to

make "easy money." They were just trying to make SOME money -- which is why most of us work, right?

There is actually a lot of work involved in improving run-down homes, IF you want to make a profit.

[zeos3]

29. I'm not arguing

I know some people worked very hard and wanted to make some money, I don't dispute that. I'm just saying that in the periphery of my extended friends and acquaintances there are people who were in it for the easy money (selling at profit before building/rehabbing, building to bare minimum code, kickbacks to buyers and mortgagers). There are even a couple, who I'm told, had to leave the country because of their shady dealings.

I guess my point is there were some people willingly abusing the system while others were trying to make a living. I know appraisers and mortgage people who just thought that's how the real estate business goes, unaware of the consequences.

[pnwmom]

31. Welcome to DU, zeos3!

It is scary to think that appraisers and mortgage people could have been that ignorant. Were they new to the business?

[zeos3]

43. Yes they were new

There was a flood of people into all aspects of that industry. The mortgage people I knew seemed to be less in the know. They would tell me "I do mortgages now" so I don't even know what to call them. Most have moved on to other jobs now.

The appraisers I know seemed to know that they were squeezing everything they could out of the appraisal but I'm not sure if they were aware of the consequences or just thought that's how their business is

[Turbineguy]

23. Good point

There were a lot of people involved and what's more as long as the house you owned kept "going up in value" people were overlooking the real problems of an economy based on unsustainable borrowing.

BTW.... Welcome to DU!

[pnwmom]

19. I agree with you. I don't see why trying to invest sweat and equity

in real estate, fixing up homes and hoping to make a profit, is any worse than most ways people try to make money. And I would think it would benefit neighbors if someone brings run-down homes up to standard. The problem is that too many of the speculators got in over their heads, thinking that they'd be able to get out before their payments went up. And they were encouraged to do this by the banks who were practically throwing money at them.

[western mass]

26. The problem is they're SPECULATORS

...and speculation drives up housing prices for people who just want an affordable place to live. That's why they're despised.

[onethatcares]

27. exackery. they took a gamble and they ..........lost

the house next to us went thru the flipper hell for two years, a 1928 model that was worth 45K tops, turned into a 235K sale. For the life of me I can't figure out why.

These are the same people that are driving the price of a barrel of crude thru the roof, not because it's worth it, but because they have the money, based on a gamble, to keep it going higher.

I say "fark em"

[onethatcares]

28. exackery. they took a gamble and they ..........lost

the house next to us went thru the flipper hell for two years, a 1928 model that was worth 45K tops, turned into a 235K sale. For the life of me I can't figure out why.

These are the same people that are driving the price of a barrel of crude thru the roof, not because it's worth it, but because they have the money, based on a gamble, to keep it going higher.

I say "fark em" BTW, if the guy had won, do you think he would have been "mr niceguy" and lowered any of his prices?

[L. Coyote]

32. Not to mention Realtors taking 5% every time a house flips!!

Realtors were getting rich too, off the feeding frenzy of speculation.
Realtors play a huge role in driving up prices.

[DadOf2LittleAngels]

35. They are speculators who are as much to blame for this mess

as banks and foolish buyers..

[Marr]

39. A friend of mine convinced me to meet with a guy about this.

My friend was flipping houses, and he introduced me to this real estate agent who'd gotten him into it (along with many others). The very concept sounded ridiculous to me-- like a scam. You would only make money if the housing prices went up some ridiculous percentage, and the agent shrugged that number off like it was sure to happen. It seemed to me like they were driving home prices up with this practice, and that couldn't go on forever.

My friend isn't stupid-- but he is greedy. He bought into this scheme and now he's going into bankruptcy, losing everything he worked his ass off for. All that time, just gone. I feel bad for him because he's my friend, but it really was a case of greed overcoming common sense.

[BlooInBloo]

40. Um, only the owner of the note (the bank) can foreclose....

... Heh - the article ends with ""We got blindsided."

ROFLMAO!

Americans never take blame. "I don't think anybody could have predicted..."

[flvegan]

41. The problem: "his lenders won't modify the mortgages"

I'm no fan of property flippers myself, but, ultimately the problem here is that the lenders, blinders in place, aren't willing to keep a loan performing. It's stupid. It hurts the homeowner (or flipper in this case, for whom I have no real sympathy) AND the lender, as well as the neighborhood.