Investor Novices Face Foreclosure Despair

Posted in Foreclosed Homes, Foreclosed Properties, Foreclosure, Foreclosures, Mortgage Rates, Mortgages, Real Estate, August 1st, 2007 |

Cambridge based Real estate consultant Paul Martinez recounts the experience of his client – a novice investor. He built castles in the air around a two-family house in Somerville. The 30-year-old debutante in this field was greatly influenced by shows and advertisements about buying, renovating and converting units into condominiums that could be sold at a higher equity within a month. But 18 months later he had run out of breath after having bought when the tide was high. But now with funds running out the retreating tide in the housing market left him high and dry. The unit remained unsold and overpriced by $60,000. It did not take long for foreclosure clouds to loom large and darken his horizon.

Martinez is skeptical about these house-flip shows on HGTV (Flipping Out, Flip the House, Property Ladder) that highly influence viewers. Novices lack the experience and knowledgeable friends to realize that the numbers are wrong. It is all show talk. Reality and actual income from real estate is quite another thing. Here there is no surety. It is the first timers who are the worst hit. They lose money and peace of mind to foreclosures.

According to figures released by ForeclosuresMass.com, during the first quarter of 2007 foreclosure listings rose in Massachusetts by 75% compared to that of 2006 during the same time. Suffolk County alone stood out with 83%. Simultaneously the number of non-traditional mortgage numbers also rose.

Many green horns had forayed in the real estate field for the first time about a year and a half ago to come out with their fingers burnt. Their units remained unsold either because they could not cope with the spiraling mortgage rates or because they had invested in the wrong locality opines broker Paul Turcotte, owner of Re/Max Destiny, Newbury Street, Cambridge.

Realtors tell the newcomers to follow a ‘golden rule’ – never to buy unless the pocket permits it and do not invest without a ready exit route. The buyer must be there even before the investor buys. Jeremy Shapiro of ForeclosuresMass.com echoes this view and adds that cautious steps should be taken backed by licensed contractors. One should know the law before anything else and also keep in mind that laws are continually changing. There is no doubt that increasing foreclosures have complicated matters making it impossible for individuals without ready resources to own a house.