Yeah, I thought it was financially irresponsible, too, until it happened to us.
We sold our little house in 2004 at the height of the market. Put our "profit" into our dream lot after much searching and started working on architectural plans.
Well, guess what. The market tanked.
Now, after putting in an initial 30% downpayment, paying the loan every month, and sinking thousands into plans, we have to give it up. Why? Well, the value of the lot went down to about 30% of its sale price. With all the money we put in, our equity is only HALF of what we still owe. The bank won't convert to a builder's loan in that situation, we don't have another $40k to bring the equity up to balance, nobody is willing to even LIST our lot for sale because nobody's buying, and the bank doesn't do short sales on lots.
What else are we supposed to do? When we bought the lot, we had a plan, and we could afford it! The only bare lot loans offered were 5year fixed loans with a balloon payment at the end - we won't be able to come up with $80k in cash to pay that off next summer, and in the meantime, we're just sinking money into a lot that we'll NEVER get to build on.
My husband and I consider ourselves financially savvy - but even we didn't count on being priced out of the market so quickly. We don't see any other course of action. Go ahead and get mad at all the people foreclosing right now, but most of the time, it's really not that simple.
We sold our little house in 2004 at the height of the market. Put our "profit" into our dream lot after much searching and started working on architectural plans.
Well, guess what. The market tanked.
Now, after putting in an initial 30% downpayment, paying the loan every month, and sinking thousands into plans, we have to give it up. Why? Well, the value of the lot went down to about 30% of its sale price. With all the money we put in, our equity is only HALF of what we still owe. The bank won't convert to a builder's loan in that situation, we don't have another $40k to bring the equity up to balance, nobody is willing to even LIST our lot for sale because nobody's buying, and the bank doesn't do short sales on lots.
What else are we supposed to do? When we bought the lot, we had a plan, and we could afford it! The only bare lot loans offered were 5year fixed loans with a balloon payment at the end - we won't be able to come up with $80k in cash to pay that off next summer, and in the meantime, we're just sinking money into a lot that we'll NEVER get to build on.
My husband and I consider ourselves financially savvy - but even we didn't count on being priced out of the market so quickly. We don't see any other course of action. Go ahead and get mad at all the people foreclosing right now, but most of the time, it's really not that simple.