The Bank Is Foreclosing!

I was somewhat intrigued by a news item this evening.

A couple borrowed several million dollars to buy a farm. They already had a block of land and were able to get 100% financing (this was a couple of years ago – toward the end of the property boom) on the new farm.

To get the equity required they had their original block revalued.  They say that they felt the new valuation was too high but it was that that enabled the purchase of the new block.

They borrowed and additional $200 thousand to make improvements.

Long story short – they were unable to get the returns they expected/needed, the land values have plummeted post property bust so they are facing bankruptcy.

They are blaming the banks for giving them the money and not making sure their business was a sound investment.

I am sorry, but borrowing 100% on a farm is a recipe for disaster. The nature of farming is such that if you need maximum returns every year to meet your bills you will fail.  Sooner or later a bad year (or string of bad years) will come.

What did you think would happen when you are millions of dollars in debt and you fail to make your payments?

Obviously they thought they would grab the capital gains, but under a forced sale they have now made a (significant) capital loss.

Some people may pick themselves up again from this point but probably not those who are living in a world of blame and denial.