r/RealEstate • u/Eastern-Western7072 • 1d ago
I'm in Foreclosure Has anyone else also gone through a foreclosure recently? I’d love to hear your story. You’re not alone.
So before I go any further, please be respectful. I’m being vulnerable here and sometimes, Reddit is a breeding ground for superiority complexes.
So for context, my wife and I bought a house in California in 2023; we were making good money and we lived comfortably. We had money in the savings, could afford everything easily, and things were going really well. Then it hit us like a ton of bricks.
Around a year and a half after we bought our house, my company made the decision to restructure to cut costs, so they laid people off and drastically reduced our hours for the people that were left. I went from working 60 hour weeks for the past 8 years to suddenly working 35-40. It was a punch to the gut. Then a month later, we get hit with an escrow shortage and our mortgage went up $1000 a month(apparently we’re in a fire zone so insurance skyrocketed) we have a son with autism, so us working two jobs wasn’t plausible, but two jobs still wouldn’t have been enough to compensate for all that.
We spoke to our realtor and refinancing/loan modification wouldn’t have helped. We were just in too deep, so we made the decision to sell our house. Unfortunately because we weren’t there for very long, we had to do a short sale. We got lender approval and we found a buyer. The process took about 5 months, but we finally got a closing date.
Then 3 days before the closing date, our realtor sat us down and gave us the unfortunate news; our short sale got rejected. Basically, the lenders weren’t satisfied with the amount of money they’d be getting from the short sale, so they told our realtor that they’d much rather foreclose and risk taking it to auction. By then, we didn’t care anymore. We packed all our stuff, moved in with in laws, and we’re honestly a lot happier. I actually recently learned that my brother also has to sell his house for the same exact reason; escrow shortage made his mortgage go up $1000 also, so it’s just a product of the current economy.
But I’d love to hear other people’s stories. I know we’re not alone in this. Thanks for listening.
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u/nofishies 1d ago
Well, without meaning to minimize your story, be glad you didn’t try to struggle to keep it Cal fair insurance is gonna go up 30 to 40% starting in October, so that thousand a month would probably become 1400 a month.
I really empathize for the people in the middle of the state right now where fire insurance is impossible
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u/cornerofthemoon 1d ago
I had to foreclose my late father's house earlier this year after failing to find a buyer. My father unwisely took out several cash out loans after my stepmother died in the last couple of years in his life to the point where his mortgage was technically underwater. I was not aware of this until after he died. He didn't complete a will so it took several weeks to get a Letter of Administration from the court. A zombie residential development visible from the backyard coupled with the fact that I couldn't lower the asking price due to my father's complete lack of equity doomed any chance of finding a buyer. I looked into short sale options but was ignored by the bank. In hindsight I'm glad they didn't go for it. Long story short the house foreclosed, the mortgage company eventually "sold" it back to the federal government since it was a VA loan, and it's currently still on the market by the REO appointed realtor after several price reductions. Odds are it will be put into auction soon and sold to a landlord for a song. It's unfortunate as it's a relatively new house in pristine condition which happens to be at a lousy location. Even though it didn't personally affect my credit, it was still a stressful ordeal. I'm "glad" my father passed away when he did otherwise, he would have had to foreclose by now.
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u/According_Lemon2759 1d ago
Sad that so many of our seniors have to worry about losing their homes. Banks don't care - as if a few more years of mortgage payments would really make a difference to them. When you look at Dimon's salary along with other bank CEO's, executives, it's sickening.
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u/BoujeeBanker 1d ago
Sorry to hear that.
For anyone that’s financially savvy, I’d recommend managing property taxes and insurance yourself.
When insurance renewal time comes around, you should already have an idea of how it will come in based on conversations with your insurance agent.
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u/financialthrowaw2020 22h ago
To be clear, insurance is always handled by the owner. No one buys your insurance for you. That's your personal policy. Anyone allowing it to auto renew is practicing financial negligence against themselves.
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u/SoCalled_Gardener 1d ago
One should shop for insurance but handling it, in terms of paying it, should just lump with the mortgage. The servicers prefer that way also.
Two less things to deal with.
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u/BoujeeBanker 1d ago
I don’t trust bank/servicer to not screw it up. Never had issues doing it myself. Have heard plenty of stories of banks messing things up.
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u/buscoamigos 1d ago
I think you are probably among the exceptions in terms of being able to responsibly plan for these types of large expenses every year.
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u/financialthrowaw2020 22h ago
More than 60% of all homes in the US are mortgage free, so no, those people have to manage it themselves and they do.
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u/buscoamigos 17h ago
Yes, of course people financially responsible enough to have no mortgage are also able to plan for larger expenses like real estate taxes.
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u/financialthrowaw2020 16h ago
Right, but that's 60% of homeowners. It's not one or two people. These skills are common and expected.
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u/raiderpower1234 1d ago
I am sorry to hear that. Our mortgage increased by $1,000 or so a year into it (new construction) but we didn't have kids yet and to begin with our mortgage was <20% of our take home income. But you're right, it is rough out there even when we feel like we're doing everything right.
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u/PM_ME_YOUR_DANKNESS 1d ago
If you don’t mind me asking what caused the increase in relation to the mortgage? Asking because I’m getting a new construction myself
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u/raiderpower1234 1d ago
The first year after your close, your property is valued as the land alone by the county, not with the house built. So when your property taxes come back in year 2 after the county has valued the home and land together, obviously that bill is much much higher. Since your monthly escrow up until that point was based on the taxes for the land alone, that account held by the mortgage company is now overdrawn when the full taxes come due and therefore the mortgage company increases your mortgage payment to get your escrow account to where it needs to be.
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u/buscoamigos 1d ago
I certainly hope that someone along the line told you to expect this increase!
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u/financialthrowaw2020 22h ago
The reality is that no one will tell you anything in the US. You have to learn early that it's your job to do the research. No one should be buying a house without fully understanding property tax assessments that change within 1-3 years of you buying the house because you triggered a change in the home value.
Some properties offer abatement on new builds. No one should be going into that offer ignorant of the fact that their property taxes will shoot up in a few years after the abatement ends.
These are just the rules of being a financially secure adult. I learned everything I know using reddit and other sources. Anyone can, it's a choice not to be informed.
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u/Pepperoni_Nippys 1d ago
Property taxes aren’t assessed properly until the next year after the home is built. The lender uses an estimate for closing. The escrow payment jumps up because taxes are finally assessed and the new property taxes are a lot higher. The prior assessment was based off the land only before the house was built. It doesn’t always go up btw, sometimes your payment decreases because the lenders estimate was high.
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u/PM_ME_YOUR_DANKNESS 1d ago
I see thank you for taking the time to write that! It’ll be good to know ahead of time what to potentially expect after year 1
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u/Lyngay 1d ago
A good reminder that anyone can go from financially stable to disaster in just a few short steps, through no fault of their own.
I'm really sorry that happened to you. A couple years ago I had an escrow shortage too & my mortgage went up by $700 for the next year. It was brutal. If something had happened to my income, I might have been in the same boat as you. It could happen to most people, we just don't like to think about it.
Hope that things get better for you soon!
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u/16semesters 1d ago
A good reminder that anyone can go from financially stable to disaster in just a few short steps, through no fault of their own.
OP wasn't financially stable.
They were relying on working 60 hours a week to make the numbers work.
That's a very risky financial move, I'd not call that a stable choice at all.
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u/midwestern2afault 1d ago
Yeah I empathize with OP regardless, but I’d caution against buying something you need to work OT to afford. The banks will approve you, but the banks aren’t your friend. It’s not even a matter of willingness to do it, you’re at the complete mercy of your employer for it to even be offered. And chances are if your employer is cutting back on it, there’s a larger slowdown in that industry and everyone else is too. Sure, complete job loss is also always a risk, but OT is always the first thing to go in even a mild economic slowdown.
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u/charlie2135 1d ago
As someone who had the opportunity for unlimited overtime I saw a few coworkers get dependant on it. One guy worked four weeks straight doing multiple 16 hours shifts in addition to the 12 hour shifts.
I had moved by last I heard he had a stroke (he was mid 50s) and went on a medical disability.
Hope he's doing okay.
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u/financialthrowaw2020 1d ago
Yeah this is it in the end. It seems a lot of people don't understand how precarious their situation is until it's too late.
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u/LadyBug_0570 RE Paralegal 14h ago
A good reminder that anyone can go from financially stable to disaster in just a few short steps, through no fault of their own.
Shoot, one bad illness can take you out financially. Before my illness last year, I had an 800 credit score and very little debt (less than $5k).
Now I'm thinking about taking out a HELOC for all my medical expenses of over $60k.
And I'm probably one of the lucky ones.
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u/financialthrowaw2020 1d ago
I used to also think this, that anyone could be financially ruined. I don't believe it anymore.
I look around at friends and family who have spent recklessly over the past 6+ years and they're all doing horrible financially today. We didn't do any of that spending, and a lot of the time were incredulous at the expensive trips and purchases we saw being made by people who made less than half our salaries.
People spend more than they can afford. The entire economy is people spending money they don't have. Everything is a choice. They choose this.
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u/somedude456 23h ago
People spend more than they can afford. The entire economy is people spending money they don't have. Everything is a choice. They choose this.
Agreed. The "it can happen to anyone" crowd, are those who dance on a ledge and thus are not surprised when someone falls off.
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u/redditwenttoshit 1d ago
My heart goes out to OP, but your wrong. And it's this kind of appeasement "nobody does anything unwise" empathy that (a) encourages folks to continue making bad decisions and (b) gets society in a bind having bail folks out over and over.
Most people are NOT "a few short steps from disaster through no fault of their own". This is also the kind of thinking that has made the "housing first" movement a laughing stock in CA. It doesn't work and it doesn't hold any accountable.
Just no.
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u/momentuminvestment 1d ago
Did you know that if your home sold at auction for more than what was owed, you are owed the difference. For example, let’s say your loan and total amount owed was $600K, and your home went to foreclosure and sold for $700K, that $100K is owed to you. Most people don’t know that. I actually work with homeowners in getting that back to them
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u/Jon_Hegreness_AZ 1d ago
The fire insurance issue is such a big fat failure of leadership on so many levels for so many decades. I won’t be shocked if we start hearing calls to Obamacare the insurance industry. Sorry you’re going through it.
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u/large_herbivore 7h ago
Subsidizing people to rebuild in natural disaster prone areas is a foolish waste of money, doubly so given that climate change is likely to make issues like forest fires worse, not better.
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u/forceful_cumin 1d ago
wow that escrow shortage hitting right after the hours cut is just cruel timing, can't imagine having to make that call with a kid in the picture too
my aunt went through something similar last year, same fire zone insurance nonsense jacked her payment up overnight and they just walked away, moved to a rental and she says the stress relief was almost immediate, no more dreading the mail
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u/Bohottie Industry 1d ago
Foreclosures and severe delinquencies are rising across the board right now. You’re definitely not the only one, and most people are one missed paycheck away from not being able to pay their mortgage. They’re in much more financial peril than they know or admit.
Best thing you can do is just be the best father and husband you can be.
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u/thewimsey Attorney 1d ago
and most people are one missed paycheck away from not being able to pay their mortgage
This is not true.
Please don't spread misinformation.
The median American has $8,000 in a checking or savings account. 49% of Americans have 3 months of expenses saved.
A disproportionate number of these people are going to be homeowners.
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u/PenPutrid3098 1d ago
Im sorry you had to go through this. I think sometimes the relief is not spoken about enough.
I’m curious - did this impact your credit tremendously? Or is it treated separately given no payments were missed? Im always curious as to how people recover from foreclosures.
Tia
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u/According_Lemon2759 1d ago
Unfortunately, even ppl who have paid off their mortgages are losing their homes bcuz they can't afford the escrow (especially property taxes). Some cities/states DO give seniors a reduced property tax rate but there needs to be more done to help ppl with homeownership. I owned my first home at 23, so didn't my parents plus a summer home and on one income. Now it's almost as if you have to be wealthy to own and renting can be just as bad. I feel sorry for my kids and others who haven't been able to afford a home yet. Of course my plan was to help them until my own home got unlawfully taken from me.
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u/JerseyGirlinSweden 23h ago
Yeah but in California we have Prop 13 which actually protects the homeowner from their taxes going up more than 1% annually. Which means in 10 years you will be paying far below market rate for your property taxes. It’s a smart policy that keeps people in their homes in their retirement.
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u/OptionConcoction 17h ago
But screws over new home buyers.
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u/JerseyGirlinSweden 16h ago
No it doesn’t?? The tax rules say that the house is re-assessed at fair market value upon sale. Most but not all states actually use FMV. As each year goes by the state of California makes it so that you don’t get taxed out of your home by wild and sometime extreme market value spikes.
We voted to reset and then only allow it to increase 1% a year. Once you buy you would have the same exact deal.
In Texas the base property tax rate is double of Cali and they can raise the valuation and your property taxes 10-20% every year. So then seniors lose their homes when ever the market appreciates, even though the value is theoretical and non liquid.
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u/OptionConcoction 15h ago
The effective tax rate in California is .7%. That's the rate everyone would be paying to get the same amount of tax revenue. However, since so many long term owners get their tax rate capped then the rate is actual rate is 1.3% to get that same amount of revenue.
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u/trashedandtossed 1d ago
Escrow shortages on relatively new loans is a scam. I can’t prove it but I believe they purposely deflate the escrow amount. I’ve never met anyone who wasn’t hit with a $300 to $1000 monthly increase after the first recalculation. When my granddaughter was in the market I explained how it works and to be prepared for a huge increase. Should be part of the education for first time homebuyers.
That said, I’m sorry this happened to you. Starting over sucks in so many ways, today especially. Best wishes for your future.
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u/nofishies 1d ago
It’s absolutely not especially in California. Property taxes are very often not understood by the bank that goes by with the last person paid which is always incorrect, and California fair insurance going up large amounts as also pretty common in these areas
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u/FutureSelection 1d ago
Same thing happened to us. They initially calculated based on old people’s property taxes (which meant they paid almost nothing).
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u/FriendlyCoat 1d ago
Escrow amounts are generally calculated based on the prior year’s taxes, which are generally public information. There’s absolutely zero reason for banks to deflate these amounts, especially because if the numbers are low, the bank has to front the money to make up for it. Calling this a scam just perpetuates misinformation.
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u/Appropriate-Ad-4148 1d ago
Shhh. They don’t want to see conservative estimates , they want to “stretch their monthly payment” then face reality in a year or two.
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u/financialthrowaw2020 22h ago
Yep. These replies are full of people willfully choosing to be negligent and claiming it's someone else's fault.
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u/dankroll69 Agent Atlanta 1d ago
I am not in california but i believe that in California property tax is based on the value of when you bought the house. So if the seller bought the house at 500k you pay say 500/m. So when you buy it at 1 million, your mortgage might be calculated at the 500/m that the seller paid, but when you transfer the property, you actually end up paying on the current value of 1 million which is 1000/m next year your bill comes out. That on top of insurance changes makes it not only plausible but almost always guaranteed ocurance. My own house in GA bought in 2021 was 2500 and now is 3500 mortage partially because we dont lock property tax to purchase price here.
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u/JerseyGirlinSweden 23h ago
Yes but then after that Prop 13 protects homeowners in California from the property taxes ever going up more than 1% in a year. That means in 10 years you are paying far below the market rate for property taxes.
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u/financialthrowaw2020 22h ago
It's up to the homeowner to understand the numbers behind their PITI payments. Simple interest loans and property taxes + insurance are not difficult concepts, these are basic financial literacy concepts. Every adult should be taking the time to learn how they work just like they learn how to drive a car, neither of which I was taught in school.
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u/Vast_Cricket 1d ago
At least you should approach the lender ask cash for keys. My impression you could stay there for free until lenders transferred to NOD 3rd party for auction. I am aware a few CA homes that owner has not paid anything for more than a few years still dragged on with people inside.
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u/nathanreed_me 10h ago
Thank you for sharing. I hope you and your family can go through this situation
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u/Weird7954 Broker/Landlord 18h ago
I don’t see how this is superiority but here goes…
Your poor choices are a product of the economy??
Did you ever think that maybe California was too expensive to live in? I don’t understand people like this. Sure, I’d love to live in California, but I can’t afford it. But I don’t go around blaming other things for my poor choices. I’m sad for you and your child with autism, but come on, live below your means in order to get ahead. We all do it if we want to build wealth
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u/Responsible_Hunt7762 1d ago
I don’t understand escrow shortages. The buyer should know what is being escrowed for property taxes and insurance and can do the calculation themselves to confirm there will be no shortage at year-end. . You should be buying the insurance and not lender force placed so there would be visibility and you can shop around. I don’t understand how someone is surprised insurance can go up year to year. I think a lot of homeowners don’t realize the added costs of owning homes before buying and factor in a buffer. Unlike rent, it is not a fixed annual cost unfortunately. That combined with low down payments can quickly put you underwater if you have to sell into a declining market before enough equity has been built up
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u/NoSeaweed2881 1d ago
In the case of our house the escrow was based on the taxes the previous owner paid. So they were only paying $900 (senier freeze)
As this is my 3rd house I knew the taxes would jump to around 4-5k once the house was re-assessed. I was prepared.
For us, we got to pay that $900 the whole first year and then the whole second! So that was some $6k we had extra for renovations.
I just think its important to keep your home affordable. Buy less than you can afford.
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u/Padded_Bandit 1d ago
Insurance companies re-price their risks, increase premiums to cover expected losses, and bam! there you go. In states with more... consumer oriented governments, Insurance companies generally try to maximize their premiums as often as possible, to protect against the effects of getting fewer chances to raise premiums.
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u/financialthrowaw2020 22h ago
Your premium going up should not be a shocker and you should be shopping your rates every 2 years.
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1d ago
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u/Intendno_BS 1d ago
Fact Check: “…Since Obama bailed out the banks." The bank bailout (TARP) was passed in October 2008 under Bush. The foreclosure abuses came out of the 2000s mortgage boom and securitization, so they predate Obama's presidency.
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u/paoloathem 1d ago
Unless your house was worth less than what you owed on it or in an undesirable area, I think you didn’t get good advice from your realtor (not really their strong suit). Covid has raised values like crazy and they keep going up in mid to good markets. You should have been at least be able to break even or only slight loss barring what I mentioned.
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u/dankroll69 Agent Atlanta 1d ago
prices are not really going up in most markets. sellers are giving more incentives and closing cost, builders are giving away massive buydowns and sitting on inventory. The average price is going up because of the K shaped market but your listing experience will be very much disappoint for most seller.
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u/DHumphreys Agent 1d ago
As someone who worked in short sales and foreclosures, I can empathize with your situation.
In one particularly harsh situation, the husband made the majority of the money, the wife did hair part time. He got diagnosed with a very aggressive cancer. They needed to move closer to specialized care. They had a first mortgage, took out a second for some home remodeling and it was not worth what they owed.
We set out to do a short sale. It is mind boggling how cold the banks were, I get it, this is business to them. But to have this couple jump through the same hoops over and over and over and over while trying to get through this was incredibly sad.
They ended up moving in with friends, I became the primary point of contact in the transaction and we finally got it done. Watching this from the stage was sad, but I was so grateful I was able to help them through it and move on.