The Minneapolis Real Estate Blog: Confessions of a Foreclosure...

...well, a near foreclosure. I have been thinking about when I would finally sit down and write about my experience on almost going into foreclosure. In a way, it is a very personal experience that I never want to live through again. But at the same time, it is an important lesson for all to understand.

See, foreclosure is often presented by the media and banks as a very bad thing. Only fools put themselves into a financial crisis where the only outcome is having the bank take back your home, right? Well, I am here to tell you that most people who face foreclosure are good people with good credit. They have families that they love, work full time jobs (sometimes with a two-income family), and want the American dream of home ownership. Most of the time they are financially sound and CAN afford the mortgage payments.

The media is only concentrating on the amount of foreclosures, and yes, there was alot of mortgage fraud. But what the media fails to spotlight is that in most cases, something unexpected happens to home owners that changes their entire lives.

Our unexpected something was a Category 4 Hurricane. In early 2004, after many successful rehab projects and flips in the Florida market, we decided to tackle another home. We started the project and had about half the work done as September 2004 came around. We were getting ready to finish the outside when Hurricane Ivan was twirling around in the Gulf of Mexico. We decided to wait and see what happened. Well, the worst that could have happened did. Pensacola was hit head on and our rehab project became a REHAB project. Many windows were busted out and most of the completed work on the inside was completely ruined. Add to that a roof half missing, with no help from FEMA on getting a tarp, and we had quite a problem. (FEMA will give roof tarps to only primary residences, not investment properties). Well, are contractor quit on us as he could make more money on smaller hurricane damaged houses, and then we couldnt' find a roofer to put a roof on. We didn't' get a roof on for 5 months after the Hurricane hit, and we proceeded to go through three more contractors in the spring of 2005 before we said enough was enough.  Our flip had turned into a nightmare, and our bank account was suffering.

So, we were left with a home that needed rehabbed and we needed to sell this monkey. Two mortgage payments were now killing us as the project was 8 months over due. Add to that a job transfer and it was like looking down  the barrel of a shotgun. Of course the Florida market decided to tank and home prices were dropping FAST. We started to get offers, but they were tens of thousands below what we needed to recoup our costs.

Fast forward another 6 months....we had now owned this home for three years!  It seemed everything we now touched turned black. We looked at our children and wondered how this would effect them. Foreclosure was a word uttered everyday, and for two people who both have credit scores in the 800's, it was looking to be a hard pill to swallow. So with only two months worth of money left to make payments, we took our last $3000 and turned to our last hope. AUCTION. We hired a local auctioneer, told her of our plight, then held our breath. Eight people bid the day of the auction and the final bid came in very low. So the only thing left to do was either take the bid, or go into foreclosure. We decided to take everything we had made in the sale of our primary residence, plus some savings, and pay back the bank the difference. So all in all we closed two months later, at a $100,000 loss.

I  know not everyone can benefit from an auction, nor has the funds to keep themselves out of foreclosure. But we were mentally drained and my husband was throwing in the towel. We had both been raised to pay off your debts, and going into foreclosure seemed the cheaters way out. He didnt' even want to put another dime into the house, let alone an auction. So I made the final decision...and thank God I did for it was our only saving grace.

Everything happens for a reason. It should go on my gravestone as it is the motto I live by. I learned alot from this experience, especially empathy for anyone else facing foreclosure, as well as the following:

• always have an exit plan for the unexpected
• don't get yourself in a position of being stretched to thin
• realize that you could fail
• don't hate yourself when you do fail
• look for the silver lining, even though that lining is REALLY thin
• make sure you have utilized every option before calling the bank
• try and work with every offer that comes in

We never expected to be so close to foreclosure. It almost ruined our lives because mentally we were letting it. If you know someone looking down the same shotgun, have empathy for them as they are not bad people.  Try to keep your chin up. Life isn't always fair, but life happens, and there is nothing you can do, but learn from it.