Herman School of Business
When Reality Sets In...Wednesday Update
We continue to use the Wednesday Blog Posting to allow you to follow the case of two people caught up in a crashing real estate situation. Newcomers should go back and review prior Wednesday postings.
Last week I mailed letters to 110 Real Estate firms, every one that is located in Cape May County, New Jersey. I followed up with calls to many of the firms. The intention was to bring attention to this house for sale, originally at in excess of eight hundred thousand dollars, now being lowered to under five hundred thousand dollars. I invited all Brokers to visit me at the house during two hours on Saturday.
No one came.
Not even the Brokers who promised they would. Not a good sign.
The highlight of my visit there was meeting my clients face-to-face for the first time. They hired me via email and after a few telephone calls. Seeing them after working for several weeks was a good thing…as they have been able to take a realistic look at their present place and understand that all they can do about it is all they are now doing. You see, moving away from a crash starts with accepting the truth about your situation. By the time they met me at the house, along with their three wonderful children, they had built up a level of trust for the information my work was uncovering.
Nobody had to tell them they were in trouble when we started together. They knew they were falling further and further behind. But they needed someone with “no ax to grind” who could shoot straight and give them a dose of reality. There does not appear to be any way this house will bring what is owed to the bank. And while we hoped to get close to the mortgage amount at the beginning of this effort, each week tells us our expectations are way too high.
My clients may have been to their investment property for the last time. Putting out any more money from this point forward would be foolish. They will fall far short of the amount they owe the bank. Doesn’t this make it the banks’ problem more than theirs? Insurance, taxes and utilities will be carried through the end of April. My clients have now come to the only conclusion possible. Get an offer now, perhaps schedule an auction for April 19th, or give the keys to the bank before May 1st and wash their hands of this mess. They have the future of their children to consider now. They will carry this financial beating for several years, but should start working towards the future and not keep pouring money into the past.
Please understand the reality here. Yes, they borrowed money from the bank for this venture but, that money was limited by what the bank felt would get them whole if things went wrong. No one calculated the market crashing this far so fast. These people have paid every payment due on time. They are not woefully behind in this case. The bank is not foreclosing. But to go on wasting money is foolish. There are no winners here. Except perhaps the eventual buyers who will pay half of what this house was expected to bring.
- Posted: 19 March 2008
- Comments: 0
- Category: Business failure
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