The basic gist is that we found a foreclosure. It needed a lot of repairs, but it would have been a great investment.
However, after two months of work, we lost it last week. I mourned like a Pink and Rick missing a meal.
Our lender said they wouldn’t lend us the money because the repair costs would be too expensive. Basically, the bank said the home would need $8,000 in repairs and they wouldn’t lend us the money. I came to two conclusions: banks have no imagination, and I wish we had cash.
The system really favors cash buyers–or buyers who have access to cash through a partner or relationship with a lender. No wonder all these real estate investors seem to get rich off foreclosures. They can buy the properties with cash or leverage that ordinary people can’t get financing for. If we had a connection with a lender or were independently wealthy, then the foreclosure would be ours.
I believe that the foreclosure house we wanted to buy was a truly good deal. But, because there was sub-flooring work that needed to be done–and electrical work– and potentially a body in the pool– the bank wouldn’t lend us the money. Even with great credit scores and a 20% down payment– which we have.
It’s a interesting world.
I learned a ton. I think this will sum up my real estate lesson. Buyers fall into two groups, traditional and non-traditional. Traditional buyers buy houses close to sticker prices and can get loans from banks. Some traditional buyers get great deals, but they are the exception. Non-traditional buyers get deep discounts for fixer uppers or by buying a property when the sellers need cash fast. Non-traditional buyers typically need cash or access to it.
This all goes to show that building wealth in America favors people with money. Particularly, people with liquid cash or access to liquid cash. I’ve always known this, but I didn’t realize that even in small deals– like a $46,000 foreclosure– it is still true. Our experience is just a small example. Think of millionaires and billionaires in our country. These people can sway politicians to make laws in favor of them. While the rest of us are excited about an employer match into our 401Ks, they are using their cash to build a country that works for them.
I’m not sad about the foreclosure-kick-in-the-face that we just received. I’m wiser. I’m happy we tried. I’m happy we know the rules. I’m happy we learned. Well, happy isn’t quite the word for it… just yet.
Honestly, my feelings don’t matter. This situation isn’t good or bad or fair or unfair. It’s just how it is. It’s facts. It’s how the game is played.
So, we will play by the game’s rules and go find some cash or connections. We will play by the rules until we can make the rules. Isn’t that how life is? You play by other people’s rules until you make the rules.
We lost the house. But, now we know how the game is played, and we will win next time. Watch out real estate moguls everywhere! I just need to find a pot of gold. Maybe it’s under Pink and Rick’s bowl. But, if it was they probably ate it…
Thanks so much to everyone who asked about the house over the last two/three months! So sweet. We will get them next time.
What do you think about my real estate lesson? Am I way off?
psst… if you like this post, please follow my blog. Just type your email address in the box in the right hand column. Then, you will get an email when I post something new/crazy. It would mean a lot to Pink and Rick. They always brag to other dogs about how many followers they have.