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 Dear
Bankruptcy Adviser,
We bought a preconstruction home in Florida. Finishing
the home took almost a year, and now loans have
changed. We can no longer buy with a no-money-down,
non-qualifying loan. We do not have the 5 percent
to 10 percent they want. What should we do?
-- Nancy
 Dear
Nancy,
You are not the first to realize that preconstruction
home purchases are a risky proposition. Like most,
you probably bought the property during Florida's
dramatic property value increase. You probably
thought that the market would not go down. Therefore,
when you needed to get a loan for that property,
it would be easy to get 100 percent financing.
Then, the subprime market collapsed. People started to see the loans that mortgage companies and banks were approving were only worth the paper they were printed on. Investors stopped buying those loans, mortgage companies stopped offering those loans and many went out of business.
The result is that you're not able to get a loan with 100 percent financing.
Now, the mortgage company does not
care about what "may have been" in the past and
is only concerned about "what is likely to happen"
in the future. What's likely to happen? Prices
will probably continue to drop all over the country,
and Florida prices may likely decrease equal to
-- or greater than -- the rest of the country.
What are your options? Come up with a lump sum to use as a down
payment. Or, sell the property immediately. List
it for anything you can, and hope you do not get
hit with a huge tax liability.
Finally, you could let the house go. You will take a huge hit on your credit report, but you won't saddle yourself with an investment that's likely to decrease in value.
Try to work out a deal directly with the construction company's lender or through the individual who sold you the unit. Basically, they don't want to foreclose -- they'll have to sell the property for less than the purchase price to which you've already agreed. And they're going to have trouble finding another buyer at all. So there may be room for a deal. You may be able to get some time from them before they foreclose; you may even be able to get a price reduction.
Nancy, if you're able to live where you are, the third option may be your best bet. With smart money management, you can restore your credit after two to three years and by that time, the housing market may have bottomed out. Until then, now's not the time to get involved in real estate.
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