Strategic Mortgage Defaults in Atlanta (apartment complex, condo, credit report)
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Being in the finance industry and having a sibling who did a 'strategic default' of her mortgage, I can tell you that it doesn't hurt the banks one bit. When someone stops paying on their mortgage, they bank simply writes it off as a loss. Surprisingly, most banks make their profits via writing off bad debt (you would be surprised how they do it), to lower their tax liability.
My sibling let go of her underwater townhouse to foreclosure to upgrade to a larger house that cost the same amount as her mortgage of her former townhouse. When it initially happened, I seriously said 'WTF', but working in finance and seeing how things work behind the scenes... I totally understand.
Even now, a large portion of available homes are off the markets because the banks are holding on to them. Yea... they would rather have them off their books... but right now it's free money for them on the back end as those homes have been paid for by our bailout money.
I forgot to mention remodeling. I think remodeling should be viewed as an "enjoyment issue" and not from the standpoint as an investment.
The other day I ran into remodeling articles I had saved back in 2005. This literature told you how much you could "expect" to recoup with a $XX,XXX bathroom remodeling job, and various other $XX,XXX remodeling jobs.
With real estate in such a state of decline, these fancy remodeling jobs don't add a lot of value to your house. These remodeling features may be an attractive bonus in selling the house, but it's not adding that much value to your house.
Just don't view remodeling as an investment. It's an enjoyment issue. "I love how the $10,000 granite counters look."
I have to strongly disagree on this. It's pretty obvious 10k counters are not a good investment for anyone and are enjoyment only. Remodeling, on the other hand, can prove to be a worthwhile venture if done correctly and flips are still being done successfully and for profit in the right locations.
Just because you can pay the mortgage doesn't mean it makes sense.
Future health costs, due to our our aging population and all that entails, are going to leave many people hurting financially. So most folks should be saving as much money as they can.
Right! And they should have been doing the same saving when they took on the mortgage.
Quote:
Originally Posted by BearTrapped
When someone stops paying on their mortgage, they bank simply writes it off as a loss. Surprisingly, most banks make their profits via writing off bad debt (you would be surprised how they do it), to lower their tax liability..
Really? Personally, I can "write off" a lot of things too, but it doesn't make me money. It just gives me back some of the money I already spent.
Ex: I spend $500 for a big client dinner. At tax time I list this as a business expense and now get to "write it off". Basically I will now get my tax rate back on that money. $500 x 30% = $150. I still spent $350 though.
Can you provide a link to anything that explains what you are talking about?
My sibling let go of her underwater townhouse to foreclosure to upgrade to a larger house that cost the same amount as her mortgage of her former townhouse. When it initially happened, I seriously said 'WTF', but working in finance and seeing how things work behind the scenes... I totally understand.
How did your sibling get financing may I ask? I dont know too many places that will give financing to someone with multiple "30 day late's", let alone somoene with a foreclosure or bankruptcy on their books.
I have to strongly disagree on this. It's pretty obvious 10k counters are not a good investment for anyone and are enjoyment only. Remodeling, on the other hand, can prove to be a worthwhile venture if done correctly and flips are still being done successfully and for profit in the right locations.
Successfully? Yes, yes. And that is very difficult to pull off. What reputable company? Hiring an attorney? Yes! Remodeling companies seem to do projects their way and on their time schedules.
My parents built a few homes during their marriage. No mansions. Ha! Two of the projects were nightmares.
Right locations? Yes, yes, yes, yes, yes, yes, yes, yes. That's one of the keys in remodeling. Most likely an older home with charming vibes and character surrounded by more expensive homes. And preferrably mansions. Unfortunately, very few of our homes meet or exceed these parameters. Most of us live in middle class areas of town. At least to me, remodeling a Ryland home doesn't make much sense out in suburbia.
I have a magazine with Meredith Vieira's house pictures. The "after" pictures. She remodeled her house in 2006. She added an elevator for her disabled husband and added around 2,000 square feet to the house. It now looks like an Italian villa. It's gorgeous. But she spent a ton of money.
Flipping homes? Who wants to get in that business these days?
I still say most will be better off in 20 years if they hold on then not. Its a great play against inflation too.
A lot of boomers will be selling their homes in future decades. If prices do pick up just a bit, the onslaught of boomers selling their homes will put downward pressure on prices.
What goes up for a long time, like home prices, can certainly go down for a long time.
I'll take my chances going with an 80yr track record, and if you are right and prices stay the same for 25 years I will still be better off as I'll have a paid for house, instead of paying rent in retirement.
Quote:
Originally Posted by Zel Ya
A lot of boomers will be selling their homes in future decades. If prices do pick up just a bit, the onslaught of boomers selling their homes will put downward pressure on prices.
What goes up for a long time, like home prices, can certainly go down for a long time.
My sibling let go of her underwater townhouse to foreclosure to upgrade to a larger house that cost the same amount as her mortgage of her former townhouse. When it initially happened, I seriously said 'WTF', but working in finance and seeing how things work behind the scenes... I totally understand.
Is she renting the larger house? Many people are doing that now - dumping mortgages in favor of renting. That why rents have been on an upward tick recently.
The housing market is very grim, and it's going to get a LOT worse, but you have to do what's best for you and your family in order to survive. If it means dumping the underwater house, that's just what you have to do.
I'll take my chances going with an 80yr track record, and if you are right and prices stay the same for 25 years I will still be better off as I'll have a paid for house, instead of paying rent in retirement.
I hope you enjoy a lower cost of living while owning your place.
Home ownership is kind of tricky. Two key things are the price a person paid and the quality. If a person paid too much, and the quality is lacking, a person might not come out in such good shape.
Housing prices were on a roll for a long time. Maybe it can continue but I don't know.
Being in the finance industry and having a sibling who did a 'strategic default' of her mortgage, I can tell you that it doesn't hurt the banks one bit. When someone stops paying on their mortgage, they bank simply writes it off as a loss. Surprisingly, most banks make their profits via writing off bad debt (you would be surprised how they do it), to lower their tax liability.
My sibling let go of her underwater townhouse to foreclosure to upgrade to a larger house that cost the same amount as her mortgage of her former townhouse. When it initially happened, I seriously said 'WTF', but working in finance and seeing how things work behind the scenes... I totally understand.
Even now, a large portion of available homes are off the markets because the banks are holding on to them. Yea... they would rather have them off their books... but right now it's free money for them on the back end as those homes have been paid for by our bailout money.
how in the world did she manage to get a new mortgage so soon?
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