No sympathy from me...They got a FREE home, and then proceeded to draw ALL the equity out of it for some pipe dream construction business...I guess they figured having a brand new home built for free wasn't enough, they also deserved their own business,so lets mortgage the heck out of the home,and see what happens...I'll bet the $$$ also given for the childrens education has been squandered ...

One of the reasons I don't care for "Extreme Makeover" is that they think they have to build them these mansions. What they need to do is make them something comfortable but affordable and "EM" could do two or three for the price they spend on doing one. For people who have "nothing", do they have to go to such extreme?

In some cases I understand the need for the larger house when there are a huge amounts of kids, however I always wonder how they are going to be able to afford the bills on the large house.

I have no sympathy for the people loosing their house either that was just plain stupid on their part.

phoggie, if they didn't go extreme then the show wouldn't be as popular and then the show would get cancelled and then no houses would be built. I don't watch the show anymore because I agree that it's ridiculous, but I guess it appeals to the masses.
I liked the show a lot better during it's first season when the budget was a lot smaller and they had to actually gut and renovate the existing house instead of flatten and place a new house of the property. The show was more about building and wondering if they could do it in a week, instead of showing all the fancy electrical equipment that they put into the house.

Don't forget that those people would have received a 1099 & owe federal & state taxes on the value of the improvements, the $100K cash, the value of their prior mortgage payoff & any other 'gifts' they received from the show. There is no "free" lunch.

/tricia

There's no 1099 for the home because there's an exception for improvements made for filming (TV, movies, etc.) that are done within a week's time.

I have been following this story.
It shows you need to teach a man to fish than give him fish.
However, I find it intresting that a 3 bdrm house down the street from this house recently sold for $29,000.
Now imagine how hard it would be to sell thE house in that neighborhood!

My oops. I relied on second hand info.

"Income stemming from the rental of property for less than fifteen days is tax-free, as are lessee improvements of rental property, the tax advantages are only applied to a valid lease."

The Clayton County School system may be about to lose its accreditation because of incompetence of the school board. A lot is riding on this years election cycle. It has to be just about impossible to sell a house there, unfortunately.

In a way, I think that the houses the show builds are a trap for the homeowners. They're giving the recipients a lifestyle, but they're not giving them a long-term way to sustain it. If you want someone to do well, it's not enough to just give them a big house and/or a big sum and walk away. If you've never had a huge asset before, you don't automatically know how to protect it or make it grow.

I actually feel kind of sorry for the homeowners in the story-- I can see how having the house enabled them to get further in over their heads than they would have otherwise. I'm sure that when they borrowed against the house, they believed that they were making a wise decision. And now on top of facing a financial crisis, they also have to deal with public censure.

If you read the article, they did have a fund for upkeep of the house.

[snip]"Beazer Homes' employees and company partners also raised $250,000 in contributions for the family, including scholarships for the couple's three children and a home maintenance fund..."[/snip]

$250,000 would cover a lot of taxes and upkeep!

You would think there would be some sort of protection for something like borrowing against the house, not allowing them to do it for such & such time at least. I often wonder how many other families have sold the dream make over houses, then turned around and down graded their houses, spending the money they walked away with.

I hope it DOES go into foreclosure, and that some deserving family gets it!

I did read the article. As you noted, the $250,000 wasn't just for home maintenance. It also included a scholarship fund for the three children. If you estimate $15,000 per year(which is a bit over the 2006 average in-state tuition + fees + room + board) and assume 4 years of college per child, that comes to $180,000 for all three children. That leaves $70,000 for home maintenance. Admittedly, $70,000 is still quite a bit of money and this is based on guessed numbers... but still.

My point is just that the gift of an "extreme" house can open the door to comfort, but it can also open the door to risky decisions that might not have otherwise been options. That's why I can feel sorry for them. I would feel horrible in their shoes. How awful to feel like you had everything set, to think you were being smart and starting a business, and then to have everything come publicly crashing down around you. It would have been kinder to give them a smaller house or better financial training than, "seek your own advisor."

Yes, but the scholarships are gone too. Spent.

just like people winning the lottery and then within 5-10 years they are completely broke. same psych basis. they are giving "extreme" new homes but not taught how to be financially independent.

the show does pay for everything including the taxes on the gift. ABC states they advise clients to procure a financial advisor.

the family viewed the house as free money to take out w/o risks. what made them think they could afford a $450k mortgage to start a business. thats another problem thinking debt is good to open any business beyond what they could afford. i am sorry to see the family lose the home.

That family needs to learn a little bit more about capitalism. You _NEVER_ leverage your own and only assets. Key is to convince someone else to go into debt for you.

If only there was some way to verify a person's income to make sure they could afford to pay it back before lending them money. This whole situation could have been prevented.

What's that you say? The lending institution was assuming that if the owner didn't pay the money back they could just forclose on the house, sell it and collect all their money back plus a series of unjustified fees. Everybody knows house values always go up, usually by double digits every year.

Yea, how's that one working out for them?

Isn't there a space on mortgage application where you have to state your intended use for the money? I know lending was lax and everything but would they really lend the money to someone if they knew it was going to finance a business? Or did they claim it was for a different use which would imply fraud?

Plus I wonder how much of that loss was related to the construction business and how much of it was related to HDTV's, Disney Vacations, SUV payments and iPhones.

Property taxes in my town on a house like that would be over $20,000/year.

Agree that someone who had nothing would be a fool to borrow $450,000 under any circumstance!!

Clayton county is a toilet. Pure and simple.

It's crazy to build a house that expensive in that county, just crazy.

I think the people who get these houses should be required to spend that week taking intensive Dave Ramsey Financial Peace University classes.

But you know that show never will because then it'll be inferring that somehow these people have gotten themselves in the mess they're in rather than just having really bad luck.

I'm more upset over the kids losing their scholarships than losing their house-it could have been such a wonderful opportunity for them to get out. I hope in the future extreme makeover does more to protect those scholarships from the parents...

Isn't there a space on mortgage application where you have to state your intended use for the money? I know lending was lax and everything but would they really lend the money to someone if they knew it was going to finance a business?

I know someone that did the same thing.. home equity loan then used it to buy a truck, start up a business, feed his kids.

I'm more upset over the kids losing their scholarships than losing their house-it could have been such a wonderful opportunity for them to get out. I hope in the future extreme makeover does more to protect those scholarships from the parents...

I didn't see in any of thew stories I read that the scholarships are gone. You would think that someone would make it so that it was in trust until the kids actually applied. It's horrible if they were able to. At some point the kids will find out about it.

Yes, you do have to state the intended use of proceeds.

It's possible they got a business loan with the house as collateral. That's common.

/tricia

Does anyone remember the lobsterman from Maine episode? Extreme makeover turned his double-wide into a 3000 ft2 log home. He's having trouble paying taxes according to an article in a Bangor area newspaper.