South Florida Paralegal Blog

Judging by the volume of calls I've been receiving in the last few weeks, we're only just beginning to see the tip of the iceberg in the foreclosure crisis in South Florida. Mark my words.... it's going to be really ugly. The politicians are already Monday morning quarterbacking, scrambling to hold hearings in order to find out "what went wrong" with the mortgage industry and the housing market. What went wrong is the usual culprits; greed, stupidity and laziness.

Last year, if you came to me and said "Dave, I want to buy a house. I have mediocre credit, I can't prove my income and I have no money to put down or even cover my closing costs", I could get you a loan. Not anymore... those days are long gone.

Why? Because the banks are finally waking up and saying "um, maybe we shouldn't have been throwing money around so easily. Maybe the eggheads in accounting should have anticipated that if people borrow 100% of the value of their house and their house value goes down, maybe they won't be so anxious to send that mortgage payment every month!"

But there's plenty of blame to go around. Mortgage brokers and borrowers themselves have to take their lumps too.

The American public has been brainwashed into thinking that everyone should own a home. It's the centerpiece of the American Dream, after all. And generally speaking, owning a home is a great thing. 

But now we live in the "buy-now-pay-later" world. How many of us have been lured by those furniture companies inviting us to come on down, pick out that shiny, new, black pleather sectional with recliners, cup holders and built-in storage for a case of beer and pay later..... as in real later..... like your kids are going to be paying for it later.

So if you have bad credit, you owe a lot of money to credit card companies, you can't save a penny, perhaps, just perhaps you should continue renting a little longer to get your financial life on track? That's how my grandparent's generation thought. I remember hearing about my grandparents buying their first home. Guess what they did? They saved money for a downpayment. My parents did too. Back then, mortgage companies required it.

In the last few years in South Florida, we experienced a housing market hotter than anything since they gave away land in the 1800s. People saw their neighbors buying homes and selling them for huge profits just a few weeks or months later. Everybody wanted a piece of this money pie! And while real estate investing is an important part of a balanced investment portfolio, amateur investors didn't understand the cyclical nature of the market as well as good 'ole supply and demand.

And now that the bubble has burst and the professional investors have walked away with their profits only to move on to other areas, thousands and thousands are stuck with homes they can't pay for or sell. In some areas, there are more "For Sale" signs than cars in driveways.

I'm receiving calls from people who speak like professional investors; "yea, I bought five properties and now the market has taken a turn and I need to get out from under them". And after speaking to them for a few minutes, I learn that these are postal workers, single moms with kids, teachers and firemen. They're not investors who have been doing this for years. And that's the sad part.

So the calls for bankruptcy will continue coming in to my office and home prices will continue to slide for another year to year and a half until all the inventory is gone. Things will eventually stabilize and then we will see normal appreciation again.

My best advice; if you have credit issues, work on cleaning them up. Start saving some money for closing costs and at least a 5% downpayment. Buyers looking to get into a nice home to live in will be able to find some great deals! Just forget about "flipping" and making $50,000 in a few months. 'Aint gonna happen!