The Common Californian Buyer
(The United States real estate market has been the picture of distress for many new homeowners that, for a variety of reasons, are now forced to sell. But no where is this more prevalent and emphatic than in California.)
Faint cries of help can be heard throughout the valleys of the golden hills on calm mornings as these desperate home owners open the morning paper to realize that today's market is even worse than yesterday's.
CNNMoney.com writer, Les Christie sums up the concerns and fears of many homeowners who find themselves in a similar trapped position, in her November 17, 2006 article, "Help! Home for sale - Basile and Neuffer."
"Like many other California renters in early 2005, Nick Basile and his fiancée, Jackie Neuffer, felt the pressure of ballooning home prices."
The couple had both just graduated college and bought a house as soon as possible because prices had risen about 40 percent over the prior 12 months in their area.
"We figured we better buy before things really got out of control," said Basile.
They originally looked around the Fresno area and found a house they liked but it was out of their price range at $305,000.
Then they found out that the builder was also developing a community in Visalia, 35 minutes south of Fresno, where they both already worked as environmental consultants. There was a home available, similar to the Fresno model, but was priced even higher at $310,000.
"Meanwhile, the Fresno home had shot up to nearly $400,000. That kind of action can make even a strong home buyer's knees buckle."
"We decided it was now or never," said Basile.
The Visalia homes were being sold lottery style in which some couples were crammed into a model home, hoping to get the chance to overpay for a home.
Their names were the last ones called, so they could buy a home. The only model left, however, was their third favorite choice, but what else could they do?
"The couple ended up spending $329,000, which they financed with an interest-only ARM with a home loan for the down payment. They knew their salaries would cover the monthly payments and they reasoned that if they ever got in trouble they could always sell - at a profit."
Unfortunately, they began to miss home on the East Coast and decided to pack up and move.
After trying to sell the property without the help of a professional, unsuccessfully, at a listed price of $409,500, the couple realized their dire situation. They continued to lower their asking price in $10,000 increments.
"They hired a real estate broker and lowered the price to $364,900, which, even if they get, will probably still leave them with a net loss after commission and other closing costs. Plus, they'll be out a total of about $10,000 in prepayment penalties for paying off their mortgage and home equity loan early."
They received job offers in New York and took it, all the while still paying the mortgage back in Fresno.
They have lost tens of thousands of dollars, but "I still think it was a good idea at the time," Basile said.
The majority of these home owners or especially flippers just got caught in the market at the wrong time. And it continues to happen virtually everywhere.