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Elvira and James Grau lost their $3 million home in Cresskill, N.J., to foreclosure when |
By Kathleen Lynn
The Record (Hackensack, N.J.)
HACKENSACK, N.J.--
Elvira Grau, a party planner who appeared on "The Real Housewives of New Jersey," and her husband have lost their $3 million Cresskill, N.J., home to foreclosure.It's one of a growing number of high-end foreclosures--a sign that housing distress is not limited to lower-income neighborhoods.
Elvira and James Grau own Space Odyssey, a former warehouse in Englewood that they bought in 2005 and turned into a 26,000-square-foot entertainment venue. Elvira Grau made an appearance on the "Real Housewives" reality show in 2010, planning a party for one of the show's stars, Teresa Giudice. But the Graus were apparently not able to keep up with the $17,500 monthly payments.
Million-dollar-plus foreclosures like the Graus' are rare, but are on the rise, according to RealtyTrac, a California company that follows the foreclosure market. Although the number of foreclosures on properties with mortgages over $1 million is still tiny--less than 2 percent of all foreclosures nationwide--it has more than doubled since 2007, RealtyTrac said.
For buyers of luxury homes, the rising number of foreclosures in this price range offers the potential for better deals, since foreclosed homes generally sell at discounts that could total hundreds of thousands of dollars.
As in the case of the Graus, high-end foreclosures often involve business owners, according to several observers.
But whether it involves a $200,000 house or a $2 million house, the basic story is the same. During the housing boom, households took on too much debt, in the form of mortgages or home equity loans. Often the mortgages were exotic loans with low initial payments that were followed by higher costs later.
When families faced job losses or other economic setbacks as the economy fell into recession, many found they couldn't keep up with the mortgage payments, said Daren Blomquist, a RealtyTrac vice president.
High-end homeowners in trouble have taken longer to fall into foreclosure because they typically had more of "a financial cushion to fall back on, to keep making their mortgage payments," Blomquist said. "They've been able to hold out longer."
Phyllis Salowe-Kaye, head of N.J. Citizen Action, the state's largest housing counselor, said these homeowners often took equity out when their houses appreciated in value during the boom.
"We've seen instances where the husband and wife both worked on Wall Street, and three years ago they lost their jobs," she said. "They're doing different jobs and living in homes with mortgages up to $1 million, and there's no way they can pay that."
But the million-dollar homeowners often have less access to help from government programs. For example, the N.J. Homekeeper Program, which helps unemployed homeowners, is not open to households with mortgages above $429,619.
Blomquist of RealtyTrac said that bank-owned properties sell, on average, for about 27 percent less than market value, mostly because the banks are motivated to sell. But Jeff Adler, a real estate agent with Keller Williams in Ridgewood, N.J., said that while lenders are quicker than other sellers to cut the price for a fast sale, they still want to get as close to market value as they can. As a result, he said, most foreclosed high-end homes sell for almost as much as similar homes nearby.
In any case, both men agreed that buyers would get the benefit of prices that have come down more than 25 percent in the region since the peak of the housing boom in 2006.
Both Adler and Salowe-Kaye said that when foreclosure looms, owners of expensive homes are less likely to accept the reality of the situation than other homeowners in distress.
The Graus bought their 6,561-square-foot, 12-room home in Cresskill in 2008. They paid $3.05 million, taking a $2.5 million mortgage from the seller, Paul Schmidt, an executive at an Englewood apartment management company. At 7.5 percent, the Graus' mortgage payments came to $17,500 a month, according to public records. They apparently had trouble keeping up with the payments, because Schmidt began foreclosure proceedings in early 2011.
Schmidt repossessed the property at a county sheriff's auction earlier this summer, when no one outbid him.
