Tales From The Foreclosure Frontlines: The Little House That Couldn't

“My wife and I went through a foreclosure and bankruptcy here in Ohio (where we lead the nation in foreclosures). The long story short – we bought a house for $32,000 in 1995, but couldn’t afford to fix it up. Just kids at the time (I was 20, she was 22), we were expecting our son and found a fix’er upper. We took out a subprime second mortgage to do the much needed repairs ourselves. The neighborhood was going to hell and after seven years we wanted to get out, but we had no real equity…”

When we got our second mortgage, our home appraised for almost $90k. We listed it several times at $42k (the break even point for us) and couldn’t sell it. We relisted at $36k (which would have us in debt without a house) and couldn’t sell it. The roof was literally caving in, the basement was flooding and the porch was crumbling.

Most of what the reality agent told us on the disclosure sheets turned out to be false, but we had no real recourse as we found out so long after the closing. One example was the roof was listed on the sheets as “newer”, but the original 1910 slate shingles were still on there, topped with four layers of asphalt shingles (the building code allows for three, maximum). We were to naive to not get a home inspection before buying. We were stuck and couldn’t afford two residences.

The reason our story is amusing was the bank foreclosed and tried to turn the property on auction quickly. They couldn’t sell it either. They put a ton of work into the place. Our roof estimate alone was $14k, plus there were lots of things not up to code in that old place. They ended up selling it on their third attempt, for $19,000. There’s no way that would have even covered their costs after we left.

Currently we’re renting a friend’s condo as we wait for the credit stain of bankruptcy to wane. I’m not sure I’d ever want to invest in real estate again. We were told over and over by family that real estate is the only safe investment, but speculation is just that and we lost our shirts in the process.



  • Always get a complete home inspection before buying new property.
  • Real estate is an investment like any other, it carries risk. Risk means risk of losing all your money.

(Photo: DCvision2006)


Edit Your Comment

  1. Raignn says:

    I can really only reiterate lesson one enough: Always, ALWAYS get a complete home inspection before buying new property.

  2. B says:

    Wow, that’s a sad story, and I feel bad for Matt & Mrs. Matt. However, an important lesson here is real estate agents are about as trustworthy as used car salesmen. Never believe anything they tell you. The same goes for Mortgage brokers.

  3. UpsetPanda says:

    Very sad, but Raignn is right. Always get a home inspection. One little thing can save you all sorts of heartache.

  4. SadSam says:

    This is a sad story and goes to show that some people are not ready to own real estate. If you can’t afford a home inspection and you can’t afford an attorney to review your closing paper (an hour’s worth of time) than you can’t afford to buy real estate.

  5. davebg5 says:

    I’m sorry, but I just can’t feel bad for someone this dumb.

    Buying a home is likely going to be the single largest purchase that you will ever make. Yet, amazingly, people seem to give more thought to which shiny beer display to succumb to than whether or not they are making the right decision on a house.

    Then, it’s the realty agent’s fault, the lender’s fault, the neighborhood’s fault, the economy’s fault, Bush’s fault…

  6. pegr says:

    Wow, even at 20 I would have recognized that pig-in-a-poke. We all have our moments I guess. So the bank sold the house for the price of a moderately priced car, huh? That’ll show em!

    Can I ask what part of Ohio you’re in?

  7. ceejeemcbeegee is not here says:

    Two things speculators forget about: Due Diligence and Asset Protection.

    It sounds like he got into a crappy situation. I’m more than sure the Realtor and Mortgage companies were deceitful and underhanded. However, he could have protected yourself from these leeches.

    In addition to getting your own inspection and having a RE lawyer look over all contracts, the home shouldn’t have been purchased in his name but a business entity of some type. That way, when it all went to pot, it wouldn’t have affected his credit.

  8. cabalist says:

    “…We were stuck and couldn’t afford two residences…”

    A fixer-upper is one thing. I live in a fixer upper right now (going on year 4 and still fixing it up).

    We looked at a house early in the process of buying and found a house, we affectionately called it ‘Craphouse’ that sounds similar to this one. Our financial situation was such that we woul dhave had to live in Craphouse during the multi-year renovation. We decided to stay married and financially solvent instead.


  9. MoCo says:

    Get a home inspection, and NEVER, NEVER use an inspector that a realtor recommends.

  10. babaki says:

    a house for 32k??? ill take 3!

  11. JBlair42081 says:

    the sub prime second Matt got into most likely used an AVM (automated value model) and not even a real appraisal. I purchased what I considered a fixer uper, the home needed updating to bring it out of the 60s, but I got an inspection and knew the only issues were cosmetic. I also agree with the above comment about mortgage brokers. How do you know someone is working for you when they get paid more by how much more they charge you?

  12. Nighthawk Foo says:

    $32K? People spend more than that on a CAR nowadays!

  13. descend says:

    I don’t understand: what did they spend the money of the second mortgage on, if the house was still such a mess?

  14. harshmellow says:

    I haven’t heard much complaining about local property assessors’ part in all the real estate problems. They overvalue properties so the cities/counties can get more tax money. $90K? I just don’t see how that is possible…they should have been able to sell the house for the prices they were asking if it was valued at $90K. Just tells me that the assessor was WAAAYYY off.

    Oh, and I agree with all the commenters above, you’ve got to get it inspected before you buy. People should realize that inspections can benefit you in more ways than you think. They are completely worth the ~$300 they cost you. Inspectors can find code violations and other dangers that the seller MUST fix before the house can be sold, especially if you are getting an FHA loan.

  15. JayXJ says:


    With the house selling at 32K they probably didn’t get all that much money. Pretty easy to spend 5-10 grand on cosmetics alone, and you have to KNOW about a problem to spend money on it.

  16. Instigator says:

    It’s a shame that the family members who told you “over and over” that real estate is the only safe investment didn’t look out for your interests when you and your wife went house-hunting in ’95. Some sage advice – such as investigating property values, getting an independent home inspection and a real estate lawyer – would have kept you from financial ruin.

  17. JiminyChristmas says:

    @descend: Even though they said the house was appraised at $90K when they took out the second mortgage, I wouldn’t necessarily assume they borrowed all $90K.

    So, who knows. If they borrowed half of that, taking care of the flooded basement and structural deficiencies would eat through that pretty quickly.

    As with a lot of these mortgage problems, it seems like there is plenty of blame to go around. Yes, the borrowers were young and foolish. That said, you have a bank appraising a property at $90K and then turning around and selling it for 80% less a handful of years later. I’m no real estate genius, but that appraisal sounds f’ed up.

  18. ceejeemcbeegee is not here says:

    To add: have an Exit Strategy. Where you buying to flip? to hold and rent? If you don’t know how you are going to come out of the deal you shouldn’t get into it.

  19. bedofnails says:

    What’s the mortgage on a 32K house; like $200 a month?

    If this is joint income with a child, I’m really confused how this happened. Moreover, how bad is the market your living in where a property appraised at 90K couldn’t sell for .50 on the dollar?

  20. JiminyChristmas says:

    @harshmellow: FYI, assessors and appraisers aren’t the same people. It’s the appraisers, who typically work for the banks, realty companies, or mortgage brokers, who are largely responsible for the false valuations.

    Just as ethical appraisers do, assessors look at ‘comparables’ when valuing a house: houses that have sold recently which are similar to what they are assessing. So, if every other house on the market showed a 200% appreciation, and people bought the houses for that price, who is the assessor to say that price is ‘wrong.’?

  21. harshmellow says:

    @JiminyChristmas: Makes sense. Thanks for the clarification! Yeah, I hadn’t even considered the appraisers…

  22. TechnoDestructo says:


    Sounds like the appraisal missed/ignored a lot of major problems, and the house’s actual value is the price of the land, minus the cost of demolition and removal.

  23. nobodygrrl says:

    @bedofnails: My thoughts exactly. Even assuming they were 100% financed with a 9% interest rate, the monthly payment was probably around $350/mo. It’s hard to see how that wasn’t manageable considering that a single earner working full time for a $4.25/hour wage would still gross $680/month. Why would you buy a house requiring “much needed repairs” when you’ve got a kid on the way and little money in your pocket? Smells like the problem wasn’t with the agent, lender, inspector, appraiser, etc. — it’s that little gremlin that says “charge it…you can pay for it later!”

  24. pyloff says:

    First mistake was Ohio. However, how can someone loose their ass on this deal. I need someone to explain it to me.

  25. TechnoDestructo says:


    Yeah, I’m kind of surprised there’s a lot that isn’t worth 20 grand in ANY populated part of the US. Was this place a Superfund site or something?

  26. Dr_awesome says:

    That sucks about your house, but it sounds like you’ve managed to land on your feet. You’ve still got your family and a roof over your head, so things could be a lot worse.

  27. Anonymous says:

    Yeah, I’m kind of surprised there’s a lot that isn’t worth 20 grand in ANY populated part of the US.

    Two words: Gary, Indiana.

    As for the chorus of “surely they could’ve afforded the mortgage”, were property taxes and insurance separate or included? Were they living in an area with good enough public transit to be a one-car family, or did they need two cars?

  28. humphrmi says:

    It always amazes me that some banks won’t budge even when it’s clear that they are going to come out way behind unless they work with you.

    A long time ago I had a truck I leased. I ended up over my head due to some other bad luck and poor decisions and declared bankruptcy. I contacted the lease company before I filed but after I was a month behind in payments, and said “I’ll continue the loan if you’ll give me three months to catch up.” They refused, repo’d the truck, sold it at auction for far less than the lease balance, and sent me a bill for the remainder. Which promptly went strait to my bankruptcy attorney, and they got nothing. Since they were now unsecured, they got in line behind all my secured creditors, who at least got something.

    Stupid banks. If they would learn to work with people, they wouldn’t lose so much money on sub-prime.

  29. zolielo says:

    @babaki: I wish houses in my neck of the woods where in the 32K range, hell even the 320K range would be great. In some parts less than 20 miles way they are 3,200K…

  30. MarkMadsen'sDanceInstructor says:

    To put that $350 a month mortgage payment in perspective, I paid $600/mo in college to SHARE A ROOM. A tiny room too at that. How could you get foreclosed on with a mortgage that tiny. Even doubling that mortgage, I can’t imagine how you could get foreclosed on.

  31. humphrmi says:

    @zolielo: You know that it is, of course, all relative? Places where houses cost $32K have much lower average wages than places where houses cost hundreds of thousands of dollars.

  32. D-Bo says:

    @bedofnails: Me too, something just doesn’t ad up. They should have, even making minimum wage, been able to make some headway on such an inexpensive mortgage.

  33. D-Bo says:

    I was just thinking about it and my grandfather paid about that much for his property in 1959…

  34. D-Bo says:

    Or was that my parents first house…. Err NVM I’ll be quiet now.

  35. Boberto says:

    @TechnoDestructo: Come to Buffalo, NY. They will GIVE yo the lot, house ALL to absolve them of the liability. There are some pretty bad neighborhoods in Urban America.

  36. zolielo says:

    @humphrmi: I cut this out of my previous post as I like to not share everything about me. But with the job that I have I should be able to maintain my income for the most part. There would be a region adjustment down, almost certainly.

    But I am not yet willing to move to Ohio.

    @Boberto: A member of the car club that I am in, moved to Buffalo, NY to make a new life for himself in real estate. For a while there was profit to be made but last I heard from him he has 3 houses and 2 warehouses on the market with no buyers.

    It was a risk and it looks like the situation is not going to turn in his favor anytime soon. But them’s the breaks.

  37. VA_White says:

    They made every rookie mistake there was. This is yet another illustration of the need for comprehensive financial education in public schools. And some more math classes.

  38. BoorRichard says:

    What’s the knock on Ohio?

  39. B Tex says:

    Hey it’s not the Realtors fault the disclosure statement is false. The SELLER fills out the disclosure and how is the raltor supposed to to know they are lying?

  40. Youthier says:

    @kozicki4: I tend to agree. When we were buying our house, my realtor helped us interpret the disclosure but told us that if we were in anyway uncomfortable with it, we should consider consulting a lawyer (we didn’t and we ended up fine).

  41. olegna says:

    He didn’t get the property appraised before buying. Now instead of saying “I learned my lesson” he’s saying “despite what everyone told us about buying real estate, they’re wrong and I’ll never do it again, boo-hoo.”

    What’s wrong with “next time, I’ll be sure to do due diligence and hire a third-party appraiser”?

  42. Mr. Stupid says:

    “reality agent”

    Nice typo. Ironic.

  43. gibbersome says:


  44. gibbersome says:
  45. razorbacker says:

    Once we discovered that real estate folks might not have our best interests at heart, we decided that one of us should know a bit about the subject. So my wife took enough real estate courses to qualify as a realtor. She never actually went into the business, but we’ve saved enough on subsequent home purchases to make it one of the smartest things we ever did.

    Repeating a previous post, real estate folks are salespeople. They make money by selling you something, not by holding your hand.

  46. k4_pacific says:

    The house down the street from me had a roof like that. I asked my
    neighbor what was up when I noticed the same crew of five or so guys
    had been peeling shingles off it for a whole week. It had, from top to
    bottom, two layers of asphalt shingles, a layer of plywood, four more
    layers of asphalt shingles, and finally the original layer of cedar

    Can’t imagine what that must’ve cost to fix.

  47. FLConsumer says:

    @Raignn: Let me add one more thing to this. Get a full home inspection PLUS hire qualified specialists (contractors) to examine anything which might look shady. The home inspector said the AC at my home was in decent shape, only needed a few minor things. Bullshiat. After I moved in, facing $350-$400/mo electric bills, it was plainly obvious to me that it wasn’t. Called a few contractors, took apart the entire system and discovered that it was a total hack-job, not even a permit pulled. No way in hell it’d ever pass an inspection. It was cheaper for me to deep-six the entire system (including ductwork and refrigerant lines) than to repair the heap.

  48. bedofnails says:


    Uh, how is that relative? – either you have the money to invest in a house or you don’t. Even 2 people living at poverty level (12K) – will take home a combined $1,800 a month. Even if the mortgage is all in at 32K, that’s less than 20% of their combined income.

    Come on. This sounds like crap to me.

  49. cabalist says:

    The “wrap-around” mortgages are not that much better. Often times they are being used to sell properties to people who are truly unable to afford a property of that expense. While they might be valid and useful in certain markets, they are used elsewhere, and widely, a) to make money for brokers and b) put buyers in untenable positions down the road.

    While it provides a short-term answer for the broker and buyer alike, the buyer is sure to get a wake-up call later, out money and with a credit report that will make similar purchases more difficult in the future.