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Written by Administrator
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Sunday, 17 December 2006 |
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Eight years ago, Mary Krawiec ahd won in an auction for $10 a Victorian boardinghouse in Troy, New York.
Krawiec's initial offer was $1 dollar. However, auction referee, Richard T. Morrissey, gave her a look that says he was not happy with her bid. Slightly daunted, Krawiec raised her offer to $10 dollars and swore she would never again allow the referee to intimidate her. She held firmly her offer of $10 dollars and received the title for the house.
The house bought by Krawiec did not have outstanding liens and so, aside from the $10 bill she handed during the auction, her only additional cost was the outstanding phone bill of the boardinghouse amounting to $2000.
The previous owners of the house had a mortgage to KeyCorp., Cleveland amounting to $98,500 and had been foreclosed in 1996. The foreclosure led to an auction of the property.
However, not everyone is as lucky as Krawiec whose $10 boardinghouse is now a source of income for her family who is monthly producing a rental fee of $15,000 annually.
Nowadays, there is an increasing rate of middle-class homes being sold at very cheap prices at foreclosure auctions. The reason for the decline in market value of these houses is that renovation costs might very well exceed their auction value. In addition to these, these houses are located in neighborhoods in decaying neighborhoods.
According to First American Real Estate Solutions, a data provider in Santa Ana California, about 3,800 houses were sold in $1000 or less in the first few months of the year. This trend is being experienced nationwide.
This scenario is likely to occur in places where dying industries have left behind a surplus of middle-class homes in neighborhood deemed to have poor quality schools and high crime rate. Among these decaying neighborhood are Detroit, Cleveland, and Pittsburgh.
As rhe national housing boom is heading towards a downtrend, more homes are heading for the auction blocks. For people with weak credit records, foreclosures are increasing on subprime loans.
2% of subprime loans packaged as securities this year headed for foreclosure in October, which is nearly double of the year's earlier rate, according to a recently released report by a mortgage analyst at UBS New York.
Foreclosed homes do not usually offer a huge bargain. However, there are investors who can easily spot a good buy. As lenders are stocked with foreclosed homes, they might feel the overwhelming need to get rid of these properties as holding on to foreclosed houses incurs additional costs for the lenders. These costs include property taxes, house maintenance, etc.
Recently, lenders and mortgage brokers have encouraged subprime loans. Many of those who avail of these debt are people in poverty-stricken neighborhood who refinanced their homes to have more cash.
Ma. Roma C. Agsalud |
