The Little Guy, from Jeff Watson

November 14, 2008 |

 My lawn guy is losing his house due to foreclosure. He's quite bitter about being misled about mortgages and the real estate market, and blames the "Fat Cats" for setting this up to steal from the little guy. He refuses to take any responsibility for his actions, and says it's not his fault.

I went over to his house about 2 years ago and was surprised that a lawn guy could live in a beautiful 2400 sq. ft. house, with pool, in a premier gated community where the houses were going for $450K at the top. That same house is selling for ~$190K, if it can sell right now. I asked him if he used the services of a good real estate attorney to vet the deal and walk him through closing. He said that he didn't think he needed an attorney. He needs one now, as he's filing for bankruptcy.

As I value rational thought, I decided that the less said, the better, and didn't comment or make any judgments although I thought to myself how stupid he was. As for the personal bankruptcy, I find that unconscionable.

James Lackey writes:

It's nice of many to hold back judgment until after the fact. The only guy I know to do full disclosure and warn them good in Florida was my brother. One day he made a comment to me and to our friends at the BMX track in Feb of 2006 when another construction buddy was bragging about open land being bid up from 5k lots to 50k. It was where we rode our dirt-bikes…waaaay out there. By May I was gone to Nashville, and that was me, after being here arguing how good it was for everyone to be able to own a home from 2004 to '06, which is true, but as always, the get the joke is at what cost. Florida had many boom to busts and the lead movie in 1929 was the Marx brothers Coconuts making fun of land speculators in Florida. As for personal BK a bit of humility would be prudent. If anyone ever has a sick wife or child a couple million in medical bills and lost wages from taking care of family make it a certainty. But GM should build better cars to compete with others that have workers with national healthcare plans and more prudent savers.

Adam Robinson adds:

Adan RA question has arisen as to whether the typical little guy who bought a home was duped or blameful. This wasn't a case, in my opinion, of caveat emptor on a colossal scale.

Given the extent of the bubble, countless "little guys" were securing mortgages on properties they could not possibly have afforded in the past. Even if the lending institution had glossed over, if not misrepresented, the risks, as Alan points out, surely these new homeowners must have realized this change of affairs. Since there was no commensurate change in their own wealth or earning capacity, the sudden change in their fortunes could only be attributed not to their efforts, but rather an unexpectedly favorable turn of events — in short, good luck.

It is natural, of course, to be giddy perhaps to be the beneficiary of such great fortuity, but to expect that luck to persist, or to be without any actual or potential hidden costs — worse still, to resent it when their luck turns bad, or "the catch" in their boon to become painfully clear — suggests a level of credulity about the world, if not the physical universe, that can only be described as stupidity.

Adi Schnytzer replies:

Most people on earth are probably indeed stupid! Remember, in my family's past, I have this image of a man saying to his family in Eastern Europe in 1938 or so, "let's get out of here; I have visas and we have the money." No one wanted to know, and only he survived. No absence of innocent stupidity then or now. I'm of course not comparing the two situations in any other way. And then there are those funny surveys that ask people to name the President, Treasury Secretary, etc. and the results are incredible.

James Lackey chimes in:

Florida is pretty big…saying housing should do X when the state is in 2 climates and 2 different time zones is a tough call especially since the wealth is concentrated in 2 counties, one is Manhattan South and the other is the other side of the world to the North Side of Chicago, and one doubts there are any connections to Washington, DC and if your going to be a land holder you better be back by the full faith and political rigging of the Washington boys. I was a kid from the S side of Chicago but the only place I ever really liked was Boca Raton. Even though the West Coast are Chicago people…but in all of Florida it's hard to make friends in the business of stocks as every other guy you meet is running a scam.

PS. St. Joe is not the biggest land owner in Florida, not even #2. Think bigger.


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