Flood

What happens when there is a flood? Your house ends up underwater. This has happened to two of my friends. In this case, it's a market flood, not an actual water flood. One guy is staying put for now, the other has reached an agreement with the bank and is short-selling his house. A couple of years ago it was valued at $300,000. I don't know how much he paid for it, but he has had the place for several years.

Now it is listed with the realtor for $275,000, but that price is just a number to put in the ad. The price will go down ever week. At the end of 75 days, the Realtor will take all the bids he has received and forward them to the bank. The bank will decide which offer to accept, and the house will be sold. The Realtor thinks the actual sales price will be between $125,000 and $150,000.

My friend has lost whatever equity he had built up, but now he will also be free of his obligation to the bank, though I don't know what it will do to his credit rating. Meanwhile, he is obliged to stay in the house. Vacant houses attract transients, and if they take up residence, they will need to be evicted before the house can be sold. That takes another 45 days.

Rumor has it that repossessions cost in the neighborhood of $50,000. That sounds a little high to me, unless you are counting depreciation due to market conditions.