Foreclosure 101: Why Foreclosures Happen?

The losing of ones home is a tragedy. When I started buying and selling foreclosures, I vividly remember one of my close family members scolding me from taking profit out of people’s misfortune.

The truth of the matter is that losing ones home is got to be one of the most traumatic events in ones life. I don’t know all the reasons why a foreclosure would happen but I can give you some of the common occurrences that I have encountered in my transactions:

1. Loss of job is a pretty common reason. Husband or Wife or in some instances both lose their job. And it is no longer possible or practical for them to keep paying the payment they cannot afford.

2. Drugs – either one of the spouse using drugs is usually a recipe for disaster or a single person owning the house and start using harmful substances and from there on it is just downhill.

3. Gambling – a more recent occurrence but one which is coming up more and more. Usually it is one spouse or partner doing it in secret. The other person is thinking that the mortgage is getting mailed out but in reality the money is being spent to feed the habit.

4. Divorce – couple bought the house together, now they are getting a divorce and now either one person cannot afford to make the payment or the hatred is so much between the two that they are unwilling to talk to each other to resolve who is suppose to make the house payment.

5. Vanishing Spouse – husband decided that the marriage life was way too boring and decided to leave town with his new girlfriend. The wife has bigger issues to deal with than making the house payment and the house goes into foreclosure.

6. Death in the family – Primary breadwinner death is a big reason. The remaining spouse is stricken with grief and falls behind.

7. Plain Stupidity – last year I got a phone call from a young woman whose house was in foreclosure. , I asked her what was the reason she has fallen behind on her payments and she replied that once she moved in to her house, she did not like the way the house felt, so she decided not to pay the mortgage. Go figure!