Ouch, no good deed goes unforclosed.

I always wondered how people were going to afford the beautiful houses the show built. Even just the utility bills on some of the homes would be substantially larger than what the families appeared to be able to afford. I also wonder how some of the families' spending habits changed once they moved into their new homes as well. Larger house of shiny new things tends to cause more shiny new things to be bought to fill said house.

Yea I was always curious how those people were going to afford property taxes, energy, etc etc.

It's the same with winning a free car. The property taxes and sales taxes will bury you. Just give me money plez

I cant blame the tv show though. They did a good deed. They can sell the house, make a ton, move into a lower priced house.

errr, one of the foreclosures happened becuase the homeowner took out "a bad loan".

Don't think that EMHE should be blamed for that.

@FLConsumer: jinks. u owe me a coke

Well, some of it is the family's fault. Take for instance this extreme makeover family ([www.denverpost.com]) who used their home as collateral for a $450,000 loan to finance a construction business. Is that the show's fault that the family did this and now has to pay the bank back? I don't think so.

And to add to this story the company who built the home raised $250,000 for the family which included scholarships for the kids and a home-maintenance fund.

I think you are painting way too much of a sympathetic picture of the families and making the show and others out to be the bad guys.

the one I heard about was in foreclosure because the family mortgaged the property for $480,000 for a business that failed. I'm pretty sure Extreme Makeover pays off the mortgage. I'd like a little more in depth investigation. Everytime I've watched the show (admittedly it's been awhile) they always say the house is paid off and they are giving living expenses

One article I read said that EMHE gives the recipients enough money to pay the property taxes for 25 years.

So yeah, while the utilities would probably be an issue for a lot of these people, greed and bad financial choices appear to be a factor in many of these cases.

@Bladefist: Maybe, but those houses tend to be really hard to sell. Aside from the questionable workmanship of the repairs, you're looking at a house that's suddenly worth a lot more then the surrounding houses. Anybody able to afford it is more likely to want a place in a more exclusive neighborhood, or one on a larger lot.

@CreativeLinks: I was just about to say...

Re: bad loan guy. Would you blame the lottery for the number of winners who ended up broke 2 years later? This guy needs to take some personal responsibility for his own poor choices.

The problem is two fold. Yes, the homes are just far too large to maintain, utility wise, for most of these people. They'd be better off building smaller, but just as nice, homes, with maximum energy efficiency throughout, which would cost the same or less than the massive homes they're building, and cost them only as much or less than they were paying before.

Secondly, there is absolutely no reason these people should be taxed on the new homes value. Laws need to be enacted to freeze the property tax rates for charity homes until they are sold. Property taxes are a big enough scam without forcing people into eternal poverty conditions because they can't afford to accept the charity offered to them.

I guess, small, plain, modest houses dont make for good ratings.

Hell!, I would have sold the house & bought a smaller, older one.

I haven't ever watched any of these shows... are the houses paid off at end of the show? If the families were paying rent or mortgage before the home improvements, wouldn't not having to pay a mortgage anymore make up for the difference in utility bills and property taxes?

Also... who builds/remodels houses these days and doesn't do a lot of work on making them energy efficient?

@MadameX:
[www.thedigeratilife.com]

What Financial Preparations Are Afforded The Players?

* Players are granted lump sums to cover tax liabilities, such as in the case of Rocket Science Laboratories, which produces Fox's "Renovate My Family." But such tax payments are considered income so adjustments are made to ensure that ultimately, NO tax is owed. You win a ranch and you get additional bucks to cover the taxes: now that is SWEET!

* The players are encouraged or advised to refinance their newly refurbished house, and with the increase in equity, they will be able to pay off the additional property tax generated.

@samurailynn:

You know... that would be a good new program model. A tv show that greens your home (or builds you a new one) in the newest money-saving green technology.

deserving families don't equate to the most fiscally responsible families.

If I won a prize as big as that, I'd be a lot more fiscally responsible than the idiots who would put a huge loan against their HOME.

Time to rent out some rooms and help pay the bills. There is no shame in having such a sweet pad and renting the rooms out to people willing to share the costs.

There were issues like this with the HGTV dream homes the first two or three years. They gave people the home but no further money to cover federal taxes on the "gift" income or the property taxes. The property taxes alone on some of these houses was insane. They were in exclusive areas with higher tax rates and they were huge swanky luxury homes. They had the related massive utility bills too. After the story of the first few winners not just having to sell the homes but ending up in the hole they started adding some cash to cover expenses but it wasn't enough.

The extra cash might cover property taxes and upkeep until you could sell it if your lucky. If you couldn't sell the place within about a year you would start losing your own money.

@samurailynn: Shows that are more worried about installing granite counter tops to make the reveal more dramatic.

@samurailynn:

Energy efficiency is probably there. But leaving the lights on, running the giant subzero fridges and plasma screens sure eats up juice. The owners don't know how to conserve.

See, I knew it wouldn't always work out. A lot of these houses have what I can only imagine are huge utility bills and the property taxes probably skyrocket as the house value is now much, much more than it was previously. Also, I'm wondering what kind of taxes they need to pay/claim on all the new stuff they've been given for free. It's like when Oprah gave all those studio audience members free cars, but a lot of people didn't realize they had to pay taxes on them.

That is one thing i have always hated about the show. For the amount they spend on that one house, they can build a fairly large town home complex for several families.

While I am on a rant: what is with all of the upper-middle class families they choose? I understand that the kid/adult has some heartbreaking problem. I feel really, really sorry for them. But there are many, many, many more deserving families out there who can barely afford a roof over their head. These families at least have that.

Typically, from the 3 eps I've seen, the recipients of the house usually get a large sum of money to go with it.

Enough to cover the increase in taxes and what not for a while... but yeah I always wondered how they eventually payed for that when the gift money ran out.

" Here's an extreme makeover for you: how about giving the people a house that fits their budget?"

The pilot episode for "Moderate Makeover: Home Edition" flopped pretty hard.

@G99: Cynical answer: People like to watch shows about people like them. Poor people are not a demographic advertisers want to cater to.

Two comments:
1. the people borrowed against the house for a business that failed. Businesses fail all the time. Bear Sterns failed, and those people are supposedly experts at what they do. So it may or may not have been a good decision at the time, hindsight is 20/20.
2. People could always start selling off the 50" plasma TV sets in the house. I think every EMHE has 2-3 of them.

the people who took out the business loan against their house don't deserve more charity. they took something completely donated to them and tried to turn into a profit.

if ehme gives them 25 years worth of property tax money and tehre was a load of money mismanaged by the family after the show was done, again, they should get a financial adviser and learn to deal with their mistakes since.

i can understand where the utilities would take a chunk out of the wallet, but that's also poor money management. if you saw a huge jump in the first month or two of your utilities then you should learn to conserve. especially since it would probably only be in whatever it was that did the heating. the cooking, water usage, electricity (besides heating) shouldn't have changed all that much because those are dependent on people using them, not just the house being there. my friend recently bought a condo, just got her first electricity bill and she thought "wow, that's a freaking lot" so she tries to conserve energy.

i dunno. things like this are a windfall. when you get something spectacular you shouldn't treat it as if it'll happen ever again. those that did will just have to face the music.

@G99: most of the episodes i've seen did NOT have upper middle class families.

My mother always says your home isn't a bank. Don't use it as such. Using your home for a loan on a business is just plain stupid.

@taney71: Exactly: Don't have all your eggs in one basket... I understand that nobody takes out a loan against their house thinking their business will fail, and many massively successful businesses didn't get where there are without their founders spending lifesavings, getting three mortgages etc. And if you are willing to take that risk of losing it all, more power to you - but don't risk it all when you had nothing and now have been given a helping hand back up. People need to learn to be content with what they have. With a paid-off mortgage and property tax most people could afford to work minimum wage and still pay for their utilities, food etc... why did these people have to reach for even more

@G99:

I agree. After they had their show here, our local newspaper discovered that the family who received the home had an annual household income of over $200,000. That's just plain ridiculous, and some of the people who actually volunteered a little on the home felt a little cheated about it. Someone with that much income and a little sense is very well off compared to most other people.

These stories have been around for 2-3 years. Back then, the big deal was that they had to list the house as income, then pay income tax on it, since basically it's game show winnings.

This seems remarkably similar to the majority of lottery winners who lose everything within a year. 90%? Maybe the producers could solicit monthly money management counseling to go along with all the construction donations.

Seriously? You people are complaining about utilities costs? Utilities costs are all that's left!They build these house and give the recipients: a fund to pay taxes for 25 years. a fund for home maintenance. and as often as not college funds for the kids. I could work at MCDONALDS and afford utilities on a 4000 sq ft house if I had no home payment, and a fund for taxes and maintenance, and didn't have to save for my kid's education.

Also, what you consider "extreme" is important. My partner and I live in a house that's about 1400 sq. ft. (and that's all, there's no basement that's not counted in the square footage but is available for use.) If I won an "extreme home" prize, I'd probably want to build about 1800-2000 sq. ft. of high-quality, energy-efficient, well-designed home.

However, while that home would play well in Dwell, it probably wouldn't be the sort of thing ABC viewers were all hot about. I'd rather have a highly energy-efficient house than a media room. I'd rather have a well-sized, well-equipped kitchen than a 30-foot ceiling in the living room, and I'd rather have a reasonably-sized home in a city neighborhood than some McMansion in the 'burbs, so I'm obviously unamerican. That undergrad in architecture has rendered me a freak. :)

@GearheadGeek: I agree with you. I dont want a 4k square foot house. Id be happy with 1500 ft and a nice yard. They can even leave the material and the land, ill take care of the rest.

"Building a house that fits their budget?" If some of these people had a budget for a nice house then they wouldn't be in the predicament that they were in the first place.

Sounds a little like poor money management in some cases. The one article has a guy talking about how his heating bills were 300 a month for the winter. My grandparents would pay that much if they weren't on a budget from the gas company. A lot of utilities tend to have budgets for those with low income.

If everything is paid for, utilities shouldn't be a big deal.

Yea.... I only skimmed over some of the other comments, but many of them are saying the same thing when I read this article.

As I understand it, the house owners are given the house already paid for - so only thing they need to worry about are taxes. (and if they were already paying a house payment, any smart person would put that money into an account to pay for the taxes)

.... but for the few episodes that I caught, the house owners are not exactly brain surgeons.... and I believe most of the problems is (1) they are taking loan out on the house and defaulting or (2) not saving money to pay for taxes.

Anyway, even though I know Consumerist does not like to hear this - but with this story, I believe in most examples it is the home owners fault.

(and if not, then the owners should own the house - sell it and then use the profit to move into a house they can afford. Simple.)

@coan_net: Just because someone took out a half million dollar loan against their awesome new house doesn't mean ABC isn't responsible.

Wait, that makes no sense.
Consumerist is starting to do quite a few articles about bad consumers instead of bad companies.

As a habitat for humanity volunteer, it sickens me to see all the excess splashed on to a single family. The families that get to live in one of the habitat houses are very modest and live within their means.

On a South Central LA build, we installed only one piece of extravagance into the town homes....a $30,000 solar panel system to help pay for utilities. The rest of the houses had very modest particle board with laminate furnishings and about 1200 sq. feet of living space for a family of 3.

One of the episodes built a huge new home for a family of like 10 but used lots of solar panels and other energy efficient upgrades. They said their bill on the new house that was 3x the size of their old one was $50 cheaper than their older, smaller, less energy efficient pad. Besides, as said above, if they pay off their mortgage and all they have to pay is utilities and property taxes, it really shouldn't be a struggle. I pay about $200 a month in electric bills during the summer in my new home, easily done on burger flipping pay.

In California, as a side note, property taxes are paid on a property based on the last appraised value when securing a mortgage. So if a home is remodeled like that here and the current mortgage was based on a value of say $120,000, property taxes will be calculated on that amount until, or if, the home is reappraised for a new loan (which an EMHE house really shouldn't be). They enacted this legislation to protect older homeowners who bought their little craftsman homes in the 50's and never refinanced so they wouldn't have to pay property taxes on super inflated modern day values for the home they paid $20,000 for 50 years ago.

@tex1ntux: There isn't anything wrong with that, is there? Not many sites address "bad consumers".

The problem is actually the TAX system. It seems to be based on the value of the house and land. Here in Australia the local taxes are only based on the value of the land, and are about $1000 per year.

@numberoneasa:

They would have to preserve a single original wall to make that tax valuation work under prop 13. A lot of homeowners do that to keep the prop 13 loophole.

As far as I know...EMHE houses are complete demo projects, starting from a flat slab.

@GearheadGeek: If ABC gave someone an appropriately sized house with energy efficient gear inside in a walkable neighborhood they wouldn't be able to help sell people on the idea that they need all this crap.

Huge flat panel TVs, stainless steel commercial appliances, granite counter tops and enough room to house a museum. Even wonder how this became the defacto American ideal of the perfect home? Because it sells lots of expensive stuff for Home Depot.

Maybe I see past it because I am an architecture geek and see more benefit out of the planned simplicity of an old craftsman style home than a McMansion.

I'm pretty sure the first Extreme Makeover family took a loan out and used there House as collateral. I can imagine what they were thinking after the first month of settling in there home... "Free Money!!!"

I guess they should change the show to Extreme Financial Makeover and give them money to make even more bad decisions with it.

I can't find it (I'm too lazy to look too hard), but I recall reading an article about how EMHE (or one of the other home makeover shows) pulled off the projects and avoided some tax consequences. The production companies "rents" the property from the owners for 2 weeks, completes all of the improvements during those two weeks and the improvements are then "forfeited" to the owner at the end of the lease.

@numberoneasa:
As per Proposition 13 [en.wikipedia.org])

Damn computer, as I was saying, As per Proposition 13 [en.wikipedia.org]):

"Under Proposition 13, the annual real estate tax on a parcel of residential property is limited to 1% of its assessed value. This "assessed value," however, may only be increased by a maximum of 2% per year, until and unless the property is resold (not refinanced)."

As long as they don't transfer title to the land, the taxes won't go up more than 2% a year.

I never thoguht about that.before...damn. That really does suck...well, at least they could sell those giant houses right?