Do you think the problems with subprime mortgages means major opportunities?

I was thinking it might mean there are a lot of opportunities to buy properties in the pre-foreclosure market.

And with it getting harder for subprime borrowers to get mortgages, there might be a greater supply of renters for properties you might buy.

Anybody else thinking this way?

Anytime people are in trouble, there are opportunities. Let’s just hope investors are there to help, not take advantage.

In a perfect world a problem is solved and the investor makes money, everyone wins. Sadly not everyone sees it that way and of course this is why many investors are seen as vultures circling a corpse.

I don’t do much in the pre-foreclosure market, but I am not a believer in the win-win scenario. When a homeowner falls behind on their mortgage and an investor takes the property off their hands for pennies on the dollar, that is NOT a win-win. The homeowner loses and the investor wins.

The only purpose of running a business is to make money. There is absolutely nothing wrong with an investor buying a property at a huge discount. If the homeowner loses their equity, then that is the result of their situation. In most instances, the homeowner has made bad decisions and is paying the price for those decisions.

Win-Win? Not even close!


We bought our house in August that was a foreclosure. I bid $230,000 and they countered with $232,000. It appraised at $285,000. We’re living in a 3,000 sq. ft house that everyone including us absolutely loves. I am not ashamed of my actions, nor should other investors.

Leaving equity on the table will significately increase your risk of foreclosure yourself, and it will increase your families risk of financial disaster. You will want to view equity as a way to lower your risk. I will take all the equity someone will give me.

“Let’s hope the investors are there to help and not take advantage.”

Do you have any clue what the sub-prime market is?

Investors, as in WALL STREET, bankrolled this mess from day one.
They saw an opportunity to make billions in a rising real estate market.

The initial theory was loan people money who have bad credit. Make them pay for it through the nose. These people are not savvy, so we’ll tease them with low starter rates. The best part, if they don’t pay, who cares, the house will be worth 15% more through appreciation when we foreclose.

It worked as planned for 6 years. But as usual people got greedy!

Who is going to bail the banks out?? ANSWER=You and me! The TAXPAYERS. Anyone remember the Savings & Loan crisis. We all paid for that screw up.

So please, don’t give me the I hope people don’t take advantage B.S.
It’s already happened. And I’d bet anything you put a boat load of people in homes funded by those mortgages.

Someone should have taken the caffeine out of their morning Wheaties… Good grief. Take a pill. We’re all homies here.

Those bombs are scary when they land close to home!

I think anytime someone starts tossing bombs amongst friends it’s scary and totally unnecessary. I have no idea why you feel the need to “toss bombs”, but good luck. May the Bush Administration be with you.


Not intending to toss any bombs here, but…While petemfa is largely corrrect about the lenders, the other side of the equation is that the borrowers bear responsibility as well. In this age of instant gratification it seems that some people believe they’re entitled to own a home and in their own form “greed” or “need” they lose all sense of perspective and/or common sense. To my way of thinking, there’s a big difference between what one really needs - and what one simply desires.
Other than an imbecile, a person should be able to grasp the concept that a teaser rate is precisely that and they should examine their ability to pay once the rate ticks up. Furthermore, whatever happened to saving for a decent down payment, improving a low CBR and renting until negative credit issues are resolved so as to obtain more favorable financing? Sheesh!!

I agree with you, DCS. I just wasn’t seeing why he was calling BS on investors taking advantage of the situation and being generally ornery when we’re all just having a discussion.

Not all subprime lenders are bad. The loans are often a rip, but some are meant to help borrowers get back on their feet or be able to get a loan when they otherwise can’t. The situation where I see subprime working best is with recent divorcees or perhaps business owners who have to file bankruptcy. They are often happy to not have to rent since they’re used to owning.

It’s a sticky topic because buyers who have bad credit will complain if they can’t get loans at all, then others complain when they can’t pay the bills. A lot of subprime borrowers aren’t very educated, so there’s companies in my area trying to educate them (for free) on what they’re getting into. Well…guess what, the classes are almost always empty.

We can blame the lenders if we want (and some really are snakes), but a lot of these borrowers need to take some responsibility too.

They were probably told by their broker that they can refi no problem when the rate goes up.

Just wait and see who’s next: All the folks that used the “smoke and mirrors” financing to buy too much house given their economic situation (many with GOOD credit). These low teaser rates are adjusting now, too and there’s gonna be a butt-ton (yes, that’s an official 'weights and measures term) of these folks unable to pay the bill…


Interesting note:

Oh well, nothing like a little price correction. Buy low, sell high.

I think that we’re setting up the perfect storm for a financial crisis in the United States.

As Keith said, many of the people with gimmick loans are going to crash and burn. In addition, we now have probably one-third of the population that is too lazy to work. Someone has to pay the taxes to take care of all those people who are entitled to receive our money without contributing. Then there is socialized medicine that is on the horizon and all the baby boomers who will be retiring. Who is going to pay for all that? The numbers just don’t add up!

For those of use who aren’t kids, I think that we’ve enjoyed the heyday of the United States. It’s all down hill from here!


The perfect storm is the perfect analogy.

I think property manager is 100% right. Look at history, there was a time when every major country ruled the world. The Middle east, Greece, Italy, Spain, England and the U.S. The party is over folks. This market is in the verge of a collapse. I’m not talking just real estate, I think the whole show could go.

With this risk will come great opportunity. Keith is right, it’s not going to end with sub-prime that is just the beginning.

Little too much doom and gloom for me. Hard times are ahead but I don’t think its going to tank our entire economy. RE prices will fall considerably, stocks will drop, we’ll all b***h and whine about our 401k’s and sure enough everything will be status quo again in a few years. The tech bubble was bad to many and so was Enron, etc but we are still here.


Yes, I think that the future is gloomy and that a collapse is a real possiblity. Something must shake this country to its senses.

The question is what can we do to protect ourselves? I don’t know what the answer iis. Obviously, people will still need places to live. The big question in my mind is who will be able to pay the rent? Will the government pay the tab or will the government simply dictate that non-paying tenants can not be evicted. I need to do some research to see what happened during the great depression.

Gloom and doom are not popular ideas and everyone thinks that it can’t happen to them. However, these collapses do occur with regularity and certainly will happen again. I need to get serious and read some books about the great depression to see what happened then and what will likely happen again.


In most markets, when market sentiment turns to doom and gloom, that’s when the opportunity to buy is best. Having said that, I think we are in for a pretty severe correction and nowhere near the bottom. Speculators have been taken out of the market and subprime seems like it will fall off the cliff soon. Once these bad loans start getting written off (and we are not even close to seeing the extent of it), you will see the reverberations well across the economy. We will recover, but a lot of parallels can be drawn to the Internet stock Bubble busting. I will have my buying shoes on when things look the bleakest. It’s always darkest before dawn.