Not Only A City Problem
by James Glaser
May 1, 2009

You read about it all the time, "Toxic Assets." Homes in big cities that banks have foreclosed on, but nobody wants to buy. The longer these houses sit empty, the harder they are to sell. In many cities people are stealing anything of value out of these houses. They might start with plumbing fixtures, doors, and any appliances left there, and then when everything of value that is easy to get has been taken, they start taking the copper pipes and copper electrical wire right out of the walls. When they are finally done, it is often cheaper to tear down the house, than it is to restore it.

When you read stories about these trashed homes, you right away start thinking about Detroit or poor neighborhoods in any large city. Well that same thing is happening here in the South, and not even in the big cities.

Last week I wrote about how I was thinking about buying a foreclosed home out in a rural area that had all the toilets, and sinks taken. Well, after talking to my banker, we decided that we could still get a loan if the bank that now owned the house was willing to lower the price the amount it would take to make the house habitable—better than habitable, in good enough shape to pass a VA loan inspection.

Well, Wanda and I decided to pursue this house. The banker told me it would be hard to get the loan approved, but not impossible. Yesterday, we went back out to the house with a camera and started shooting pictures of what had to be fixed, and also took pictures of the selling points of the house. We had to convince the selling bank that the house was in bad enough shape that they were lucky that we were interested, and at the same time convince the bank loaning us the money that the house would appraise high enough to cover the loan amount.

As I said, this was going to be hard, but I thought we could do it. At least that is what I thought before we learned that somebody had taken both outside AC units. We had to re-evaluate our idea of buying this home. We decided even if we could get the loan approved, by the time the paper work got done, more and more of the house would have been destroyed.

So, we are now looking for a house that needs no work, and one that will easily pass a housing inspection. Really, it is a buyer's market out there, and there are a lot of homes for sale. Some are foreclosures. Some are "short sales," where a person in trouble with their loan goes to the bank and tells them to sell it for whatever they can, and I guess those people are either on the hook for the balance owed, or they declare bankruptcy. Then there are the people just trying to sell their home like people have done for years and years. They either have to move, or they are retiring or downsizing or moving up. These people are hurt by this economic down-turn just like everybody else.

No matter who is selling, the value of their home is about 30-50% less than it was just a couple of years ago. People tell me to keep looking, and offer a lot less than the asking price. Everyone thinks their house is worth more than they bought it for, but when reality hits, and they start seeing what homes in their neighborhood are really selling for. So, they either take their's off the market or they lower the price by a bunch.

To tell the truth, it will be hard to offer somebody a lot less than they are asking, but I am told it is just a business deal. You offer what you think you want to pay, and they either take it or maybe counter-offer.

It might be a buyer's market, but then again the price you pay today could be way high next summer. Nobody knows for sure. After all, most people never thought this fiscal down-turn would last this long, but most of those same people have no idea now of when it will end.

Wanda and I believe that inflation is coming, and we would like to pay for a house bought now, with the cheaper dollars that we believe are coming. That is our best guess. There are people who are talking about deflation, and if that happens, we will be paying for this house with higher priced dollars. It is a gamble, but a gamble we are willing to take right now. Who knows.

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