My Story: Foreclosure Nightmare

What would you do if a foreclosure nightmare was staring you in the face? Would you spend countless hours trying to figure out how to get out of the mess and save your house? How many sleepless nights would you endure as the overwhelming stress wreaked havoc on you? Would you reflect on how it came to all of this? Where did things go wrong? Was it my fault? Was I duped? What are the ramifications if I just walk away? How will I ever recover?

The Money PitI asked myself all of those questions and more over a seemingly never ending two year saga. Now, I realize I’m hardly alone when it comes to experiencing the taxing trials of a foreclosure. My situation was a bit different, though, from most others who lost their homes because of a layoff or from those who simply chose to walk away because they overpaid and were “under water.”

My foreclosure nightmare could easily have been the script for the 1986 film The Money Pit starring a young Tom Hanks. In that movie, a con man fools a youthful couple into buying a mansion that turns out to be a “lemon.” Not too long after they move in, the house starts falling apart and the comedy ensues. The main difference from The Money Pit and my situation was that I was never afforded the opportunity to laugh. Here is my story…

[Be sure to check out the detailed photo narrative here which is also linked to at the end of this page]

Foreclosure Nightmare: The Beginning

Back in 2006, I was a sprightly 25 year-old with a seemingly bright future ahead. I was three years into my career after having graduated summa cum laude with a bachelor’s degree in accounting. Furthermore, I had been accepted into a top-ranked business school and was few quarters into obtaining my MBA. Plus, while I did not know it at the time, I had recently met my future wife and we had started dating. Except for some very longs days balancing work, school, and social activities – life was quaint. To me, it was the perfect time to start planting some additional seeds and that meant entertaining the idea of buying a home. After doing some initial due diligence, getting pre-qualified, finding a real estate agent, etc., I officially started the house hunt. The search took a bit longer than I had hoped for, but I didn’t necessarily want to settle. I finally did hone in on a property and, in June, I closed and was handed the keys – I was a first-time home owner and “living the dream.”

The First Ominous Signs

Approximately a month or so after moving in, my brother, who was staying with me at the time, called me at work to let me know there was leak on the ceiling of the downstairs hallway (which was below the two upstairs bathrooms). I thought, “yikes, this stinks”, but I knew maintenance costs came with the territory of home ownership and I took it in stride. Plus, the sellers had been “kind” enough (or so I originally thought) to throw in a standard 1-year home warranty through a national company. I ended up calling the problem in and a plumber was dispatched. He made some caulking repairs to the guest shower and that was the end of that…

It All Comes Crashing Down

Fast forward to early Spring 2007 and, one sunshiny morning, I opened a kitchen cabinet to see significant water leakage seeping into the wood. I instantly knew this was no good at all. I called the home warranty company, but they refused to take any action because the leakage source could not be identified. A bit baffled and irked, I called my homeowner’s insurance and they immediately sent a representative out. The representative could do nothing at the time either since he was not authorized to remove the cabinets and that was necessary to figure out what was really happening. He recommended a handyman and, for a nominal fee, the handyman lowered the cabinets down and revealed any homeowner’s worst dream come true: extreme water damage and dreaded mold!

Foreclosure Nightmare

I had to get a separate contractor to come in and cut open the wall to see just how bad things were on the other side. We also needed to identify the source of the leak for insurance purposes. The surreal scene intensified when the drywall was cut away. I was aghast to see the wooden frame completely rotted through, metal brackets fully rusted, and, of course, insane amounts of mold. My house was two stories and there was no telling how far up and down the problem stretched.

Kitchen Damage Closeup

Initial Plan Of Attack

It had taken nearly a month for things to unfold thus far due to having to schedule everyone to come out. At that point in time, the plan of attack was to hope I would soon be getting a disbursement for my insurance claim. I was on edge, though, because I was warned by the representative my claim may be denied depending on the still to be determined source of the leak. In other words, if all the damage was due to a gradual leak then it would be a policy exclusion and I’d get nothing. I ended up catching a bit of a break (one small ray of sunshine in a colossal storm) as the insurance representative eventually concluded the claim was valid. Unfortunately, his estimate for repairs was pretty low and it was also capped at a small payout. In the end, I received a few thousand dollars which was nowhere near enough to handle the repairs especially since the true extent of the damage was still completely unknown.

Now What Are My Options?

It was mid-summer by then. At this point in time I was spinning my wheels in an attempt to figure this debacle out. I reached out to family and friends for advice, but mainly received sympathy instead of solid suggestions on what to do. Also, and in retrospect it was a foolish idea, I asked my girlfriend to move in with me and she agreed. The damage in the kitchen area had been cordoned off and the mold was covered up. At about this time, the original leak in the downstairs hallway reappeared and a new trouble spot appeared  – several areas on the upstairs hallway carpet started to become saturated. The Money Pit, right?

I finally connected with a family acquaintance who formerly worked in the real estate industry. She advised I look into possible recourse against the sellers because, based on everything I had described, it sounded like they should have known about all of these problems and did not disclose them during the purchase (which is a legal requirement). I had long suspected something was awry with the whole situation – how could the sellers not have encountered any of these issues? All the problems started right when I moved in? Yeah, right. I mean, the wooden frame was rotted completely through and the metal brackets had so much corrosion. Damage like that takes years to accumulate. Here’s the real kicker – the kitchen had been remodeled not too long before I purchased the property! In fact, the sellers had even left some extra floor tiles and the paint they used on the walls (I would later learn there were definitive cover-up signs at other damage areas as well, but I’ll get to that in a bit).

Oh, by the way, I’m sure many readers are wondering if I had a home inspection done before I bought the house. I most certainly did and he missed everything! Talk about negligence.

Now that I had been pointed in the “right” direction, I set off on doing research and finding the proper law firm to engage.

The Path Forward

I retained a law firm in early September 2007. The firm specialized in environmental law and had an impressive list of previously won cases involving mold. The lawyer laid out a plan which included getting mold testing done on my house as well as having a contractor prepare thorough repair and mold remediation estimates. In the meantime, he was going to contact the defendants (which included the sellers, real estate agents on both sides, the real estate companies, the home inspector, and the home warranty company) as per normal protocol.

I was cautiously optimistic at this point in time, but still a bit wary at what the outcome would end up being. It took an extended amount of time to get the mold inspector scheduled and even longer to get his official findings afterward. He finally sent his report to me in November. Among his findings:

  • Air and surface mold testing revealed a multitude of various mold types including stachybotrys a.k.a. “toxic black mold”
  • The kitchen leak was actually caused by the upstairs master bathroom sink dripping down (the bathroom was located right above the kitchen)
  • The “original” downstairs hallway leak (which, by the way, had now also started to grow external mold) showed obvious signs of previously being patched and re-painted
  • Signs were present in the nearby laundry room of patching and re-painting – the inspector believed the chances for mold damage behind the walls was very likely
  • Signs of repairs in the master bathroom (the source of the kitchen leak) and the guest bathroom (including linoleum that did not match nearby areas)
  • The HVAC unit in the attic did not have a condensate tray and there was  heavy presence of mold. Water had been dripping down into the lower levels of the house and was the cause of the saturated carpets in the upstairs hallway.
  • The upstairs hallway carpet was partially pulled up to find even more mold growing and, get this, mushrooms too!
  • The damage in the the kitchen was so bad that the siding on the side of the house was bulging out

Kitchen Damage LowerDownstairs Hallway

It took almost 2 more months to finally get the contractor’s repair estimate and mold remediation reports. The grand total? A mind boggling $124,440!!

A side note – the lawyers had trouble locating the sellers. I took the initiative upon myself and eventually tracked them down via social media profiles. Guess what they had been up to? They took their equity and opened up a tattoo parlor about 10 minutes away. Far be it from me to be a judge of character, but that fact combined with the photos they had posted and comments on their pages left little doubt in my mind…they were shady characters.

Upstairs Hallway Carpet

The Toughest Decision Of My Life

Everything weighed so heavily on my shoulders by now. The stress (and maybe the mold!) caused every breath to be so difficult – as if my lungs were being squeezed. I realized I could no longer conscionably allow myself, my girlfriend, and our pets to continue living there. Doing so was too much of a health risk. So, we arranged to temporarily move in with my sister-in-law who had recently relocated to a nearby apartment.

We spent a few weeks there attempting to collect ourselves and scrambling to figure out alternative arrangements. By this time I was so desperate I was brainstorming far fetched solutions. For example, I was good borrower and still had the means to make the normal mortgage payments – I just couldn’t afford the $124k to do the repairs (and doing so wouldn’t have made any sense anyway since by then, with the overall economic recession setting in, I was upside down in the house already). My idea was to see if I could work with a lender to swap my house/deed with a bank owned (REO) property of similar value. I contacted a few real estate specialists in the area who had never heard of such an idea and quickly shot it down due to the environmental liability.

There I was – out of options. The only choice left was to rent an apartment and stop making my mortgage payments because I certainly could not pay for both. The concept of going into default was hard to swallow for me – a guy who had never had a late payment on any obligation…a guy who had never even paid a cent of credit card interest/fees in this life! In January, we signed a lease and I made the fateful decision to walk away from my house.

I do want to point out that over the next few months I did try to work with lender to come to some sort of alternative solution. However, it was the height of the economic crash and, to them, I was just a number. I was never really ever to have a serious conversation – just automatic robo calls and debt collectors telling me I must pay.

Enough Is Enough

We spent the next 6 months living in completely bare apartment. We couldn’t bring our “mold exposed” furniture into our new place. We did splurge on a new bed and that’s all that we had! Eventually, in late May, we did salvage what we could from the house when it became apparent the nightmare foreclosure was imminent.

Meanwhile, the pursuit of legal action was creeping along at a mind-numbing pace. A case was actually filed in the court, but not much happened after that. Furthermore, my lawyers seemed quite inept. Maybe it’s par for the course, but I was the absolute lowest priority to them it seemed. They would never contact me. I would call in and leave a 30 second voice mail and they’d charge me 30 minutes at $200/hr to listen to it! They’d never call back. I never once heard from the lawyer to whom my case was assigned! It was just a miserable experience. Meanwhile, my bill kept running up and up. When the tally got to about $15k I realized this was probably a fruitless endeavor especially with no guarantee that the sellers would even have the wherewithal to pay if I won the case. In other words, being left high and dry owing God knows how much in legal fees was not an option.

Other considerations were coming into play as well. I’ve already mentioned the insane amount of stress. My health was starting to seriously suffer. The mirror showed a man who looked much older than he was. Worse yet, I developed some severe sinus problems and, while I’ll spare you the squeamish details, it eventually lead to sinus surgery that June. Plus, I was trying to finish up graduate school after three long years of balancing it with 50+ hour work weeks. Speaking of work, it was not going well either. I was in the banking industry and the banking crisis was in the midst of unfolding. On my birthday in August of 2008, I was laid off. A few days later the foreclosure nightmare was finalized and the lender repossessed my house.

Enough was enough…I was ready to give in. I needed a complete fresh start and had to cut ties with this never ending mess. I contacted my lawyer and said I couldn’t go on. I ended up settling with all of the defendants for nominal amounts. Thankfully, the combined amounts were enough to cover my legal fees with a few thousand left over.

Foreclosure Nightmare: The Aftermath

The fallout from my foreclosure nightmare has lingered for years. To be honest, while I did eventually land on my feet so to speak, I’m still feeling the effect nearly 5 years later. One of the hardest hitting ramifications was to my credit score which has had an impact on so many areas of my life since. Another detriment was trying to recover from the money lost (down payment, legal fees, etc.). On the other hand, there were some positives to come out of it as well. For example, I was fortunate that the timing of this foreclosure nightmare occurred under the Mortgage Forgiveness Debt Relief Act. Otherwise I probably would have been hit with a whopping tax bill on top of everything! I also learned a countless amount of lessons chief among them – I’m stronger than I thought and no matter how difficult circumstances seem at the moment, I can persevere (even if the end outcome isn’t ideal).

Thanks for reading my foreclosure nightmare story. I’ll finish with two quotes that helped me out along the way:

“Remember, no human condition is ever permanent. Then you will not be overjoyed in good fortune nor too sorrowful in misfortune.” – Isocrates

“Bear patiently my heart – for you have suffered heavier things.” – Homer

Click Here if You Would Like to See More of the Shocking Photos from My Foreclosure Nightmare

7 Responses to My Story: Foreclosure Nightmare

  1. Tortoise Banker July 17, 2013 at 1:12 am #

    Heavy story! Kudos to you for surviving and starting fresh. Keep up the great posts.

  2. Financial Samurai August 19, 2013 at 5:42 pm #

    Holy wow……….. $128,000 to fix the house is brutal. I can’t believe the sllers, or the bank who sold the mortgage wouldn’t pony up for negligence. Also scary that the home inspection didn’t find signs of problems… I would they they are liable too for something? They have insurance against such cases as well.

    Man… 2008-2009 was such a brutal time. I relieve it before every crazy purchase to make sure my head is on straight.

    “They would never contact me. I would call in and leave a 30 second voice mail and they’d charge me 30 minutes at $200/hr to listen to it! They’d never call back. I never once heard from the lawyer to whom my case was assigned! It was just a miserable experience. Meanwhile, my bill kept running up and up. When the tally got to about $15k I realized this was probably a fruitless endeavor especially with no guarantee that the sellers would even have the wherewithal to pay if I won the case. In other words, being left high and dry owing God knows how much in legal fees was not an option.”

    This is the worst.. lawyers are killing us!

    I’m glad you recovered. Maybe you’d like to write a “Lessons Learned From My Nightmare Foreclosure” that provides things you would do differently and strategies to protect your wealth or make some money back on FS one day. I’m sure you’ll get a lot of exposure and comments.

    Sam

  3. Little House September 30, 2013 at 6:48 am #

    What a nightmare! That’s just awful. It’s hard to believe that the realtors who were working with the sellers either missed that whole issue of water damage or continued to sell it and pass it on to the buyer. That’s just scary. Glad to hear you’ve recovered.

    • Mr. Utopia September 30, 2013 at 8:26 pm #

      The recovery is still going on, but I’m definitely on the “downhill” portion as time goes on. The foreclosure will still be on my credit report for about another 2 years. In any case, yeah, looking back it still seems so surreal. I still just shake my head at the sellers and their agent and how they stooped to such levels.

  4. Practical Cents October 7, 2013 at 7:39 pm #

    Thanks for sharing this nightmare story. As a new homeowner I worried about things like this all the time during my purchasing process and I still do. It’s a shame that there are such shady people out there. All the best to you as you move forward in your recovery.

    • Mr. Utopia October 9, 2013 at 7:59 pm #

      Thanks. Yes, one of the lessons I’ve learned is to always be leery. You just never know when someone might be purposefully steering you wrong or trying to pull the wool over your eyes. So, when making a huge financial and life decision such as buying a house, you can never do too much due diligence. That said, don’t constantly worry over things if no problem is present – that’s counter productive!

  5. Jeff April 13, 2015 at 8:10 am #

    This sounds exactly like my current situation, thank you for sharing.

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