Foreclosure…not just for the “short of cash”
Ok, now here’s something I haven’t heard banterred about yet: Using the foreclosure process to manage your real estate investement. Be it your personal residence, a duplex, or any variety of real estate holdings. I don’t believe that everyone who is not paying their monthly mortgage payments, does not have the money in the bank. I also don’t believe that every mortgage that is adjusting will force the borrower/property owner into default. I also don’t believe that everyone is totally naive to the loan documents they signed promising to pay back the money they borrowed on terms they agreed to. I do believe that some property owners are using these excuses to dispose of a “currently” depreciating asset. If you look at the history of homeownership, values increase over time. I agree that we are undergoing a change unlike any we’ve seen before. The buyers ( especially first-time buyers ) who have bought in the last 10 years have only seen property values increase, unlike their parents who have been through several cycles. Real estate is and continues to be a very secure long-term investment. What concerns me is that people’s attitude towards responsibility and not keeping their committments. I guess they figure they will dispose of their proerty now, and get rid of the debt. I do understand that it may not be easy paying on a$450,000.00 mortgage for a house currently valued at $300,000.00. But they did agree to it. If you’re not selling, the depreciated value is only in your mind. It’s not real unless you actually do sell. And of course, there are a million differnet stories of why people take this path. Some are legitimate. Loss of job, death, divorce, and I’m sure many more. I guess death is a given. They rest of the excuses don’t fly in my book. So, my advice is to hold on tight and complete the ride. Afterall, life is just that…a ride.
Wallace…
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3 Responses to “Foreclosure…not just for the “short of cash””
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Hey Wallace,
and after reading your post I seem to recall that there was some talk at our sales meeting about lenders working with homeowners that have loans that are about to reset and that there seemed to be a sense that since their homes value was still less than what they owe and they were just going to walk away even though they now can afford the monthly payments. Rediculous! So, this attitude of just throwing things away is a very waistful and hurtful attitude and has helped deminish the strength of our once all mighty dollar.
I remember when you and I were talking about this the other day…It seems just like yesterday
What could we do, what could everyone do to help curb this quickly growing problem?
I for one have a few ideas and I would love to hear from our readers as to their ideas on a solution.
Kelly…
Interesting discussion you gentlemen are having about foreclosures and people walking away from their homes. I think that it should be considered that in some cases, when you crunch the numbers, it is financially smarter to take the loss and deal with the ten years of bad credit. Some homeowners have realized that the 10 year credit hit is easier to deal with rather than the 30+ years of catch up it will take to possibly own the home. Now, I do not work in the real estate industry, so I am not 100% sure that this is feasible, but it seems that if the long term numbers say to dump the bad investment, then isn’t this a wiser option? I know this doesn’t help out the “real estate” industry or the homeowners neighbors for that matter, but one is usually looking out for his/her own pocket book and best interest anyway.
And, I know for a fact that the lenders are not working with the sellers to keep them in these homes. Many lenders are telling the borrower that they have to be X number of days past due before they will even discuss a payment program and then when that time comes, the lender tells the borrower they shouldnt have waited to call them and let them know they were unable to pay the payments sooner and they would have been able to help them out. So, this mess falls on much more than the borrower. The lender needs to think out of the box if they don’t want people walking away from these homes.
Dan
You make some valid points, however I think we need to look at the larger picture here. I agree that on a case by case basis the banks should consider working with these homeowners to find a solution other than foreclosure. This sounds as though it should be a rather easy thing to do. Yet we have to remember that some of these loans have a pool of investors that need to be considered. How do you go in and change the terms of a note that a multitude of investors have invested in? Are they not to expect the return on their investment that they were promised. Remember these investors are people like you and me.
Now, what Wallace and Kelly are trying to point out is that Real Estate has and always will be a long term investment… with peaks and valleys, highs and lows and if you are not one of the unfortunate ones who signed on for the infamous liar loans and you can still make your payments on your mortgage you don’t simply walk away from your home because this year your home happens to be worth less than what you paid for it a few years ago. Remember your homes value is exactly what the market will bare when you have to sell or when you choose to sell. I beleive most homeowners signed on for a 30 year loan and I beleive that on average most people stay in their homes about 5-7 years before selling and either moving away from the town they are in due to job placement or to simply move up so we never really pay the full amount of the 30 year loan.
Kelly…