Is Foreclosure a Danger to Homesteaders?

Discussion in 'Homesteading Questions' started by Obser, Apr 28, 2006.

  1. Obser

    Obser "Mobile Homesteaders"

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    A national foreclosure information service indicates that properties entering foreclosure during March 2006 increased sixty-five percent (65%) over March 2005. http://rismedia.com/index.php/article/articleview/14241/1/1/

    That was less of an increase than the previous two months records, but the “improvement” was attributed to traditional spring buying increases that allowed some about-to-be-foreclosed properties to be sold.

    No distinction was made about different types of property (and certainly not to homesteads per se); however, the great increase in numbers of properties in foreclosure is disturbing (or alarming). The real estate sales industry is also reporting increasing time-on-market and increasing inventory of unsold properties in many areas (other not-so-good indications).

    Colorado, Georgia, Florida, Utah, Ohio, Michigan, Texas, and California were mentioned as states with high numbers of properties entering foreclosure.

    There are many who claim that high real estate prices of the past few years will remain high and buying will continue (i.e., the market and prices are stable). I differ with that opinion.

    A person who is heavily in debt for their real estate (particularly with adjustable rate, low down payment, or interest only mortgage) is particularly vulnerable and could quickly find themselves in foreclosure with any downturn in the economy, income loss or increasing prices for essentials.

    Perhaps homesteaders are more likely to do everything possible to hang on to their property than someone who owns a “cookie cutter” house in town (and who might be able to rent something similar with little difficulty), someone who owns a vacation home (which can be “sacrificed” if necessary), or someone who owns speculation or rental homes (who might withstand a “business loss” without endangering their own home).

    What can be done to protect one’s homestead? Short of paying off the mortgage (an impossibility in most cases) perhaps one could make a real effort to set aside enough money (or something quickly and surely convertible to money) to make several or many mortgage payments even if regular sources of income disappear.

    This is NOT a prediction of doom or a “sky is falling” scenario, but it is a recognition that economic changes ARE occurring (as those whose property is presently in foreclosure have discovered). Perhaps it would be wise to give the matter some consideration.
     
  2. homebirtha

    homebirtha Well-Known Member

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    I'm not at all surprised by this. I think there are a few factors at work here. The biggest issue is ARMs. People wanting to keep up with the Jonses and have a bigger house then their friends were lured in by super low interest rates. So they got in with these low mortgages that only last a few years. Now their balloons are due, or their rates are increasing, and they had no plan to handle that. Plus, stuff is sitting longer on the market, so those who were selling to save them from foreclosure, can't sell fast enough to beat the bank. Two years ago, if someone was close to foreclosure, they could put their house on the market and it would sell in weeks or even days. They'd pay off the bank and maybe get a little cash out. Now, people in that situation will have to sit and wait for a buyer for months. I think that has a lot to do with the increases too.

    I don't think the real market is going to tank, but it has cooled a lot. And will probably stay that way. The boom might not be over, but it's slowed down a lot, and those that bought with the idea that it would continue forever are the ones paying the price now.

    I do think homesteaders are probably, as a rule, a little insulated from the causes of this situation. We tend to be smarter with our money, try to avoid debt as much as possible, and most of us wouldn't get in a situation where we are mortgaged for way more then our properties are worth. But absolutely, it's always a good idea to plan ahead to avoid something that will put you in dire straits financially. Now more then ever.
     

  3. Corky

    Corky Well-Known Member

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    Nope! Not worried a bit. MINE IS PAID FOR! YEAH! :dance: :hobbyhors :1pig: :cow: :bouncy:
     
  4. mpillow

    mpillow Well-Known Member Supporter

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    There is a place here in my town called "Rockwood". Its very exclusive wooded and hilly full of 3000 sq.ft. 2 car carage houses where teenagers have cars bought for them....It overlooks a lake and includes beach access....
    Most homes heat with oil or propane and of course both parents work full-time so none can burn wood and save money on heat....a bunch of the houses are for sale at very high prices....I'm sure prices will be falling there seems to be more for sale than usual....and tax increases were stiff...we went from $700 to $1000 this year.....they must be near $2500 for taxes.
    And just like not being able to burn wood their "lot" is so small and wooded that a garden would be impossible.

    My ordinary wood heated ranch style house(half the size of house previously mentioned no garge no basement) with 5 acres, pasture and lots of garden space is paid for.....along with everything else...

    A dream does not become reality when it is bought with credit.
     
  5. Bink

    Bink Well-Known Member

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    I think that most homesteaders are interested in more land rather than more house.

    A big honkin' house is nice I suppose, but if you don't need all that space, it takes up a lot of resources to keep it. More to heat and cool it, more time spent to clean it, taxes can be bigger, some repairs are larger.

    A big piece of land means work, too, but there's potential for return. In a down market, I think you'd have better chance making or supplementing your living from your land than you will from your house.
     
  6. Jan Doling

    Jan Doling Well-Known Member

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    Give me land, lots of land.....definitely a homesteader in that aspect....houses need too much upkeep....land I can enjoy. I can grow food instead of spending money at the store, which will keep the foreclosure wolf at bay longer.

    My problem is that the property has tripled in value, so the taxes also tripled and the insurance doubled because of the hurricanes, so I had a $7500 escrow shortage, which they wanted ASAP or in 12 payments, which more than tripled my monthly payment. Luckily, they accepted a 36 month plan, but my payments still doubled and after 3 years will probably stay at that new amount due to increasing taxes and insurance. Will they let me drop escrow at that time and trust me to pay my own insurance and taxes or am I locked into escrow forever?
     
  7. mpillow

    mpillow Well-Known Member Supporter

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    Jan I think it is determined by whatever "program" you got your mortgage thru...low down payment type VA FHA types...when you get a typical mortgage with 20% down escrows are not usually required by bank.
    The loans requiring escrow are sort of covering their butts by doing so...making sure you keep ins. and pay taxes to protect their financed portion of your home...
     
  8. Pink_Carnation

    Pink_Carnation Well-Known Member

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    Some will want escrow even with over 50% down. They don't want any chance of loosing their money due to you not paying for insurance. Some places will let you set the insurance at the amount due on the loan...but that leaves you in trouble if something happens to the house. I know in Wash. for flood insurance they won't let you do that...after all we have to protect people from themselves
     
  9. Patt

    Patt Well-Known Member

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    Personally I like paying into escrow monthly and having the mortgage company pay the insurance and taxes. You need to check into your tax laws though on your big tax increase. They tried that on us last year, our taxes doubled. The state of AR has a 6% cap on tax increases though. They have to increase them gradually by no more than 6% per year. It's a good idea too since a lot of people who have had their homes for a long time can't handle a huge increase. You can go back to your assessor and find out if your taxes went up too much. If so they have to re-imburse it. Our assessor farms out the taxes and the company they used didn't have the 6% cap built into their computer program.
    As far as the mortgage goes we are paying it off as quick as we can. We do have an open line of credit but we're still $25,000 below the value of our home. We figure if worst comes to worst we could sell at a loss and still pay everything off. Keeping a couple of payments in the bank is a good idea though.
     
  10. KindredSpirit

    KindredSpirit Well-Known Member

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    I work for a title company and I see foreclosures come through much more in the last three years than any other time in the last twenty some years. Although I live in an area that is the richest county in this state, most of the homes being foreclosed on are middle to lower income family homes. Yes, most do have at least two mortgages. This trend has been going on before the Adjustable rate mortgages gained their popularity in this last year to year and one half. I think (don't know this for sure) that most of the foreclosures are due to divorce, medical problems, job loss and just plain bad management of money. People mortgaged their homes to the hilt with refinancing the last few years and put their credit card debt on their homes. Then when they are faced with a problem they have no money to deal with it. :shrug:
     
  11. MTNwomanAR

    MTNwomanAR Well-Known Member

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    I'm with corky on this one...mine just got paid off, and my taxes are only 30 dollars a year.................on 40 acres..... :dance: I could live off the land if needed....and I'm afraid that the way this country is headed, it won't be long before I'll need to......................................
     
  12. I heard this real estate news the other day on GMA. It made me worry cause I have a SIL and BIL who recently sold their home in town and are wanting to buy a new place in the country and build a new home. With the selling of their old home they have a equity of around 30K to put down on a peice of property and build a new home. They found a peice of land that they could purchase with the 30K. However they want to purchase the land and build a new house with one 20-30 year bank note. They are currently living with Nanny and Pappa so they are not paying rent or utilities. I think they should continue living with them, buy the property with the 30K, and then build the house, little by little, as they get the money. No bank notes. Then if the SHTF they would be less likely to loose what they have invested. It sounds like a win/win situation to me but they don't see it my way cause it would take too long to build the house and they would have to keep living with N an P for too long. With the money they make it wouldn't take long at all. Both of them together make about 60-70K a year. So if they continue to live with N & P, they could have a paid for house in just a few short years instead of carrying some 30 year morgage.
     
  13. Obser

    Obser "Mobile Homesteaders"

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    RH, I agree with your thoughts. Something that might make the idea more appealing to the B&SIL is to build a small guest cottage first, live in it, build the "big house", then use the little house as a guest house, kid's play house, storage, workshop, or whatever.

    Or, they might like the little house so well they never get around to building the big house. Friends of ours almost did this but weakened and built the big house -- and have regretted it ever since.
     
  14. Quint

    Quint Well-Known Member

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    Foreclosure not a problem for me either. I own my house and farm free and clear. When I built the new house I had enough money saved up I didn't have to borrow one thin dime from a bank. When I had to re-purchase my farm and homestead when I turned 18 (long story involving a crooked lawyer trying to more or less screw an orphan -me- out of his 200 acre farm which ended up with me having to buy it back) I worked and slaved like a dog to get that paid off as soon as possible. I lived in my car and in crappy apartments and took multiple jobs at once so I could dump every dime I had into paying this place off. I didn't want that debt hanging over my head or risk losing a place that has been in my family for 150+ years. Paid it off it in just a few years. I can't deal with having debt looming over me. The sort of thing that keeps me awake at night and makes my blood pressure skyrocket.
     
  15. Oilpatch197

    Oilpatch197 Well-Known Member

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    If I can't bring in a suitcase full of $100 bills, I CAN'T AFFORD THE HOUSE!
     
  16. ChickenTracy

    ChickenTracy Well-Known Member

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    Bought our house 10 years ago & I've had to personally contact the loan co once to pay the overdue taxes & twice to pay the overdue insurance. Last time I called over the insurance I told them that if they didn't trust us to pay the insurance & taxes the least they could do is take the money out of escrow & pay them on time. Haven't had a problem since! :rolleyes:
     
  17. Cindy in PA

    Cindy in PA Well-Known Member

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    Our house has been paid for since 1994, but there is no sure thing anymore. Taxes will be close to $4000 this year and they started at $900 22 years ago. Two years of nonpayment would lose the house to a tax sale. No danger now, but one major catastrophe and who knows? This is for a 1500 sq.ft. ranch on 2 acres and with the development around here, there will be no end in sight for RE tax increases. Sad that you get to pay rent to the government even after you own your property.
     
  18. stanb999

    stanb999 Well-Known Member

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    I think people get bad mortgages. The bank will let you hang yourself. But the bank won't hang you.

    We have a 30yr fixed at %6.75 on 75,000.00 No money down. But we bought in an area that was rural and cheap. I think most "homesteaders" on here wish to be hobby farmers not homesteaders. They make a high income and wish to keep the lifestyle. But dislike the rat race. They miss the point of homesteading.
    I could pay my mortgage and eat from profit from the land if need be. The total we pay monthly is $650 taxes included. Living rural can be quite affordable. But they want to "live high on the hog." That is very expensive no matter where you live.
     
  19. texican

    texican Well-Known Member

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    I'm allergic to mortgagees, so I can't tolerate em... Now property taxes are an affliction that I can't escape. Well, I could, if I wanted to live under the bridge. I'd rather have a cozy roof over my head. Since everythings paid for around here, it'd be mighty hard to allow a foreclosure on a couple hundred dollars a year in taxes...