‘How we’re losing our multi-million dollar home’
Jessica Dickler, CNNMoney, March 2, 2012, link
NEW YORK (CNNMoney) — Like millions of Americans, Joanne and John Buchanan are facing foreclosure. But at a value of more than $2 million, the home they stand to lose isn’t your average delinquency.
For the Buchanans, it’s the dream house they built from the ground up in a resort community near Breckenridge, Colo., in 2003. It took them almost two years and about $2.2 million to build — and soon they will have to move out.
For years, homeowners at the high end of the housing market were able to postpone the foreclosure process, but now multi-million dollar homes are becoming more commonplace in America’s foreclosure pipeline. In fact, America’s wealthiest families are now losing their homes to foreclosure at a faster rate than the rest of the country, according to RealtyTrac.
Out of all foreclosure activity, the share of foreclosures on multi-million dollar properties — or homes valued at more than $2 million — has jumped by 273% since 2007.
For the Buchanans, losing the six-bedroom estate they helped design was unimaginable at one time, but now it seems unavoidable.
The couple moved to Colorado from California where John had worked as the director of business development at a high-tech Silicon Valley firm. They came seeking a less stressful life. John took a buyout package and the couple opened two wine and tapas restaurants, using their new dream home as collateral.
Things went well, for a while. “In 2008, we were hit up here with the slowdown as much as anybody,” John said. But “we were on the wrong end of the market,” he said. High-end restaurants like theirs were quickly without customers.
John was forced to shutter the restaurants in a Chapter 7 bankruptcy filing.
Meanwhile other expenses were also piling up, including the couple’s mortgage payment, which was more than $7,000 a month. They had gone to their lender, CitiMortgage, to ask them to modify the mortgage on their home, which was then valued at $3 million. But the bank refused.
Eventually, the Buchanans just stopped paying their mortgage. John said he hoped it would get the bank’s attention. It has been almost 30 months since they last made a payment, meaning the couple is more than $210,000 behind on their mortgage.
Sean Kevelighan, a spokesman for Citi, said the bank could not comment on specific cases. “Our first priority is to keep families in their homes,” he said.
Since 2007, Citi has helped more than 1 million homeowners avoid potential foreclosure, he noted. “Unfortunately, that is not always possible, and some cases proceed to foreclosure,” said Kevelighan.
As part of the bankruptcy filing, the Buchanans have agreed to sell their home and hand over the remaining assets to the restaurant lender after Citi recoups the $1.7 million that it is still owed on the mortgage, according to John.
“We had a lot of our savings tied up in the house and we’ll end up losing all of that,” he said.
If the house doesn’t sell soon, CitiMortgage will proceed with a foreclosure, which will further destroy the Buchanan’s already damaged credit. But selling is looking less and less like an option: The market for high-end properties in the resort community has largely dried up. The Buchanan’s house was first listed for $3.3 million in 2008. Now it’s listed for $2.3 million, and there have been very few interested buyers, according to Joan Moats, the listing agent on the property.
“Transactions dropped, sales volume is lower and prices are down 25% to 30% since 2008,” Moats said. Houses over the $1 million mark, like the Buchanans’ property, are particularly hard to move, she said. “We’ve reduced it by over a $1 million now — we’re trying to get it sold but I’m racing against the bankruptcy and the foreclosure.”
“There’s no traffic, there’s no market at this level. If we find a buyer they will have difficulty getting a loan,” John added. “The foreclosure will happen soon.”
8 multi-million dollar foreclosures
And things just may get worse before they get better. More than 36,000 homes valued at $1 million or more were foreclosed on — or at least served with a notice of default — last year. That number is likely to rise in 2012, according to Daren Blomquist, vice president of RealtyTrac.
“The longer the tough economy persists, the more of these high-end homeowners will eventually succumb to foreclosure,” Blomquist said.
After the Buchanans lose their home, they plan to move into a small rental property they can afford. “We probably won’t be able to buy anything for a long, long time,” John said.