Squandering away an extreme makeover
By: HousingWire staff
July 29, 2008 8:09 AM CST
Ever wondered what becomes of the in-need families that get a new home free and clear as part of the hit television series “Extreme Makeover: Home Edition”? Wonder no more, at least in one family’s case:
More than 1,800 people showed up to help ABC’s “Extreme Makeover” team demolish a family’s decrepit home and replace it with a sparkling, four-bedroom mini-mansion in 2005.
Three years later, the reality TV show’s most ambitious project at the time has become the latest victim of the foreclosure crisis.
After the Harper family used the two-story home as collateral for a $450,000 loan, it’s set to go to auction on the steps of the Clayton County Courthouse Aug. 5.
So the happy new homeowners — free from a mortgage — used the home as collateral for nearly half a million in a loan to start a construction business. Which failed. And left them holding the bag on a loan they now can’t afford to repay.
This is one foreclosure that doesn’t deserve to be stopped, and that’s not passing judgment on the family is question, who I’m sure gave the construction business as good a go as they could. Not surprisingly, those who helped the family back in 2005 aren’t thrilled:
Some of the volunteers who helped build the home were less than thrilled about the family’s financial decisions.
“It’s aggravating. It just makes you mad. You do that much work, and they just squander it,” Lake City Mayor Willie Oswalt, who helped vault a massive beam into place in the Harper’s living room, told The Atlanta Journal-Constitution.
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July 29th, 2008 9:35 am by aaronbav
O.K. before we get so QUICK to condemn this family, maybe we should FIRST take a VERY VERY VERY LONG and HARD look at the institution that LOANED the MONEY in the first place. Did the family have a SOUND business plan that the LENDER felt that the family would succeed in the new CONSTRUCTION company - did they have a “track” record” that the lender felt would leave to successful company (doubtful)?
What STANDARDS did the lender use to establish that they could SUCCEED with this venture?
I know NOTHING of this families background, but maybe they were simply trying to MAKE a better LIFE for themselves BY starting a construction business - and in ANY other time they might have been successful at it - except that the Residential CONSTRUCTION industry is in the CRAPPER - I know - I’ve been out of work (I’m a residential designer)since the architectural firl I worked for laide me of in JAnuary, and I’ve been looking for work since - and the Home Builder I worked for previously has had several significant layoffs over the past 24 months.
In addition to regular living expenses like food, etc, how much do you think it COST to maintain such a HUGE house, especially with the skyrocketing cost of - well- everything??!!
Some people are NOT cut out to run a a business - I’m one of those and I admit it - I love design, CAD, COMPUTERS. etc but I have NO head for business - I would need a BUSINESS oriented partner to help me do that …perhaps this family is the same - and SHOULD have had a partner or financial manager to assist - but for some reason didn’t/couldn’t.
I’m guessing they REALLY tried to make A GOOD FAITH effort to succeed, but I’m also guessing that circumstance AND a GREEDY LENDER with $$$$$ in his eyes, clobbered them big time….
OTOH, IF they went out and LEASED FANCY SUV’s (not a work truck) and SUCH then I have less sympathy, BUT NONE of the news articles I’ve seen have mentioned that.
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July 29th, 2008 7:11 pm by Josh
Who in their right mind would squander the equity in a house to open a consruction business? Most business success rates are slim within the first five years. But hell if someone gave me all that money I never really earned it so I can I respect it? Who do you think will pick up the tab for the lost loan. Hello it will be us the tax payer , so this couple basically squandered half a mil and the taxpayer will pick up the other half mil so the banks get paid back.
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July 30th, 2008 2:27 pm by Len McAdams
The remodel of this home was done for entertainment and ratings, not for any other reason. The loss of this gift is not so different from what happens to many lottery winners. Unfortunately the mortgage industry facilitated their failure and hopefully will suffer capital loss in the process…but what about the producers of this show? Every week they show our clients a fantasy about how easy it is to achieve in a week what often takes us a year to accomplish.
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July 30th, 2008 2:55 pm by Dick
All things being equal, this story isn’t about the construction industry or about the lending institution at all. It’s about a television production company so anxious to ride the wave of interest in home repairs and remodeling that it failed to do the due diligence about the recipient of the generosity of hundreds of volunteers and manufacturers who donated time and materials to help someone they thought was worthy of that assistance.
Had anyone been paying attention, it would have been a simple matter to obligate the homeowner to live in the house and prevent them from taking out a loan on it for any purpose. Clearly a contract that made it impossible for the family to sell the house or take out any loan on it should have been part of the ‘deal’. And while the family might have been worthy recipients of the largesse of the volunteers, someone should have investigated not only their need but also their character.
The ones who really were taken for a ride on this were the volunteers, the companies who donated materials and the millions of viewers who thought they were witnessing an example of America’s generosity when, in fact, they were seeing greed and abuse of the system at its worst.
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July 30th, 2008 3:11 pm by Brian Bandy
Look at the number of professional athletes who make millions, the bad choices they make and how they end up with little or nothing. It is truly sad that a family in need would take a gift such as the home they received and put it in jeopardy to pursue an uncertain dream….. The only business riskier than construction is farming (in my opinion). Once the keys are handed over, it’s up to the new owners to keep the house I guess. Who knows their thought process??
I wonder if there are any other “Makeover” homes that have been lost or are on the verge?? This is the only one publicized. Not a bad track record if that’s it.
While I like the entertainment factor of the show, I’d like to walk a couple of the houses after a few months to see how they’re holding up “cosmetically” after the heat/AC has been running for a while. I’d hate to be the punch out man! And some of the “theme” rooms for the kids would cost a few bucks to remodel after they’re outgrown!
Maybe ABC could pick it up at auction, do a Makeover “makeover” and pass it on to another family. -
July 30th, 2008 4:27 pm by Dawn M. Tuskey
Perhaps if States adopted strict licensing requirements for builders and remodelers then this family would not have been able to just pick up a hammer and open a construction business which ranks as one of the top 5 riskiest business ventures for small businesses. I mean afterall, it doesn’t take any intelligence, skill or education to run, operate and work a construction business. Heck, anyone can do it without studying the various crafts and trades for years, without any business education or experience, and without any knowledge of the high degree of organizational, financial, and human resource skills needed. I’m fed up with the attitude that anyone can do this work. That attitude puts the largest investment of most Americans at risk by there being no baseline requirements to indicate skill and ethics to work on a structure that people live under. In order to take someone’s money and invest it, I need to comply with SEC requirements and licensing. But to work on an investment worth that same amount and needed to survive on a day-to-day basis, I need nothing to prove that I know what I’m doing.
Of course, I do know what I’m doing. I’m educated and disciplined in business. I grew up working and studying the trades for years. And, guess what, that still isn’t a guarantee of success in this industry, but it does guarantee that I’m not going to destroy someone’s largest investment or take their money and disappear when things get rough.
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July 30th, 2008 6:30 pm by Dick
Dawn:
I agree wholeheartedly with your licensing suggestion but that’s not necessarily a certain solution.
Case in point: I live in Oregon, which has a state contractor’s licensing board and a somewhat regulated industry. There are enough loopholes in our laws to drive a semi through.
For example, once a contractor has a license, he can hire pretty much whomever he wants to do the bulk of the work. This means that undocumented, unlicensed workers can do a substantial amount of the work and, as you might expect, the lowest bidders often get much of the job.
This is coupled with the inspection process that relies upon whatever inspector handles the process; in the case of a project currently under construction next door to my home, the inspector is mostly retired, working only three days per week and his ’short-time’ status means that inspections usually consist of a cup of copy with the contractor and the swapping of a couple of the latest jokes. Unfortunately the latest jokes appear to be the inspector and the ‘workmanship’ of the contractor.
Where does that leave the hapless homebuyer? He or she must rely on trusting the builder…which means that the industry MUST police itself.
If you’re honestly concerned with the future of the homebuilding industry, you must be willing to ‘rat out’ the fly-by-nighters and point out shoddy work when you see it. I’ve personally steered a couple of potential buyers of the places next door toward an independent pre-purchase inspection by a reputable third party, suggesting that they pay particular attention to mold, which is growing rampantly in the crawlspaces of this new construction. I know, because I’ve seen it myself — and I’m not even in the building trades.
Remember: if it was easy, everyone would be doing it.
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July 30th, 2008 6:33 pm by Dick
Ooops…obviously my most recent post should have said “cup of coffee”, not copy.
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July 30th, 2008 7:08 pm by D.J. Walters
I’ve been a class A contractor since 1998, have made it throgh divorce,engagement and now losing my home because of the construction slow down and a greeding morgage lender. I’d beg to have someone help me save my house that my children and I live in. I never did anything wrong in business. I’m just a victim like alot of other people.The worst part is my house is only half way remodeled,I can’t even sell it.I’m totally stuck with a house that’s value could be twice what it is now if I could only somehow keep it and finish the remodel but instead the bank is going to get a property that is worth less than what’s owed. If they would be rational and lower the payment to a more realistic one then everyone would win. Losing this house is going to break my childrens hearts.Anyone with any ideas feel free to contact me.757-560-5079
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July 30th, 2008 11:36 pm by Arrow Enterprises
I am a remodeling contractor who started in business 5 years ago. I never even considered using my home as collateral. I did things the hard way. Saved my money, took on small jobs, re-invested profits, gave up vacations and frills until the business grew enough to start making money to sustain itself. I am not a believer in “free homes” for nothing. I understand hard times and sympathize with those who have had some bad breaks. This couple had balls, not just nerve, to take the donation of others and gamble it on such a venture. They pissed away the sweat and generosity of others and if they end up out on the street, they are reaping what they sowed. How could you go from “rags to riches” and be willing to gamble that. I will be building a home for my family over the next couple years and already know the struggle and hard work it will require. I would never risk that for anything.
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July 31st, 2008 6:26 am by C. Watts
My heart goes out to the Harper Family and all of the volunteers that supported this effort. I really believe that Mr. & Mrs. Harper wanted to do something to help other people, the way they had been helped. Their idea of a construction business was not a bad idea. The construction business can be a very profitable business which could really help people achieve financial wealth and help homeowners achieve home beautification. Mr. & Mrs. Harper may not have done enough homework nor sought the advice from people in the industry regarding operating a construction company in this slow market. Mr. & Mrs. Harper had the right mind set; the timing was just not in their favor. Every one of us has fallen short at some point in our lives, have made a decision that did not yield our best interest. No one has the right to pass judgment on this family. They deserve a second chance, just like the Martha Stewarts of the world. Had the family not have been an African American family the story would begin and end differently.
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July 31st, 2008 12:48 pm by Larry Schaffert
Following the extreme theme, this sounds like a case of “Extreme stupidity”. I started my construction business in 1989 with $20k obtained through home equity financing. With a sound business plan and the experience to make it work, my wife and I made the investment. It was barely enough, but 19 years later we are still in business and profitable. I cannot conceive of how anyone could possibly blow $450k in 3 years starting a construction business. Starting a business is an investment, where you are investing your capital with a plan to acheive a return on investment commensurate with the risk. Bad plan, no plan, bye bye investment. So, no sympathy here, no matter what the excuses. Any excuses such as blaming the lendor, the state licensing agency or anyone but the borrowers are just plain silly. They are adults, right? There are times in life where you are responsible for yourself and you own actions. This is one of those times.
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August 1st, 2008 6:28 pm by D Ward
I am a builder and been in business since 1976, and I never started off with no large amount of money, it never took that much, I blame both party, the bank and the homeowner for what happen, the bank should never had give that much money to start with with out the owner having good credit, but then the ower could have told liars to get the money, I would never had give my house up to start a business , it would not had cost that much to start a construction business, I agree with one writer that said the Extreme Makeover should had check out the family real good before building the house , and added a clause in that it could not borrow money on the property, when things like this happen it make you think harder to help people , when some one else ask for help. Both party are responsible for what happen , but the tax payer are the ones who are going to pay for it now.
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August 6th, 2008 5:43 am by Rich
One they more than likely started a construction company after watching all of these pathatic home shows. These shows only show a very simple side of what actually happens, even more so after seeing there new house built in a week. Just because someone can do simple maitainance does not qualify them to be a contractor. Let’s not forget that they were broke to start with, just like ever other episode, and already could not afford much. It does not suprise me at all that they wasted away something they would have never had. We can deffinately expect to see more of these foreclosing or sold. Keep in mind that this show is giving people with a limited income a new house that not only triples there energy usage alone but taxes are reassed.
I have personally seen the end results of everbody’s favorate home show, pick one, for a room “make over”. It is normally very poor in quality and workman ship. They are completed for the eye of the camera only. That is when we get the call to come fix it and unfortunately at an additional cost to the home owner. Yes, most of these shows are not free. They only provide a discount for there house to be on TV and a labor buget to barely afford a simple handyman compared to a quailified contractor.
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August 6th, 2008 11:45 am by Allison
I like Dick’s suggestion on July 30th that the homeowner be given a contract not to mortgage the property after they received the makeover and had been made debt free.
I would like to counter the first poster, Aaronba on July 29th saying the lender should have demanded a busines plan.
I am an Atlanta mortgage banker and I see it’s a home loan and not a business loan on the Clayton County files. So they weren’t asked for a business plan when they re-mortgaged the home. I don’t know the lender nor the basis on which the loan was given, but it had to have been on their past employment and not on their future prospects as that’s now how home loan underwriting works.
It is sad that they were caught up in the housing boom in Atlanta and thought that starting that business this way was the way to additional prosperity. Most everyone did not see the bubble bursting because our town has been booming for over 20 years since we are a transportation and financial hub in the Southeast with great weather, natural resources and plenty of cheap land.
I hope my comment has added more understanding to the conditions surrounding this story.
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October 10th, 2008 4:49 pm by Paul
It sure would be nice if I my wife and I could afford to buy a home, have a child, etc. I mean, I figured we should have the same crack at it as everybody else. But, hey, how about instead of fulfilling all of those dreams, we just go ahead and send all our money over to the government for taxes so we can cover all of these morons who squandered their opportunities. Apparently $80 grand a year isn’t enough for us to outrun this mess and we want to assure you that we skipped our 4 day vacation this year to have more money to help you out. So if you bought a $400,000 home (worth $150,000), have a sweet boat, wifey drives the kids to Hollister in the Escalade and refuses to buy off the sale rack because it’s embarrassing, and you cry about payments being too high for you to find a way to take your trip to Mexico, or buy that snow mobile you think you so deserve, and still make those mortgage payments without having to let go of your football season tickets, give my wife and I a call and we can just fork over the money that was going to be used on our dreams to bail you selfish, greedy clowns out. It breaks our hearts to see you suffering so!!! ps. hope you can still find a way to cover those $50 Coach luggage tags! (those are freakin awesome!)
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