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We were watching House Hunters and this stupid young couple decided to short sale their condo, simply because the value went down. It was just in his name. Now they are buying a much more expensive SFH in her name.
What is wrong with people? I have heard of this happening over and over. People who CAN afford to pay their mortgage, but choose to short sale or go into foreclosure simply because they don't like what happened to the market.
Why is this allowed? Doesn't anyone have any honor anymore? Doesn't signing a contract mean anything to anyone anymore?
Heritage,
It is strictly a business decision. Period.
That is why they did it.
Business is business. Nothing personal about it.
If he got hurt and for some reason they couldn't pay the mortgage,
the mortgage company would forclose in a second on them.
That is how money works.
Like the banks lending out money with no capital.
They do it because they can.
When they overextend themselves, who has to pay?
The taxpayers. You and I.
Is that honorable? No.
No honor in making stupid, greedy business decisions and
buying up all the Congress to work for you and not the country.
No honor in Bank of America not paying a dime in Federal Income taxes
for 2010 and having the money to give the CEO"s giant bonus. While
the poor working guy who pays taxes to the federal government has to go
into debt yet again, to bail out these greedy banks because they are
"too big to fail".
Honor is a word of the past my friend.
Honor and ethics are out.
Legal and NO regulations are in.
So the little guy has to play by the same rules sometimes.
Like the big Banks and Corporations....so goes our country.....
Heritage,
It is strictly a business decision. Period.
Wow. Maybe I am old school, but I honor my word. If I owe you something, I pay it back. If I make you a promise, I keep it. And I don't blame other people or circumstances for my problems.
This world is really going down the crapper. Some people suck!
Quote:
Originally Posted by Silverfall
It is called a strategic short sale and they have been around for a while.
Why is it allowed if you have the ability to pay? What good is a contract of you don't have to abide by it? We aren't talking about people who are injured or out of work. We are talking about people with plenty of money to pay their obligation, but walk away and buy and even more expensive house.
Why is it allowed if you have the ability to pay? What good is a contract of you don't have to abide by it? We aren't talking about people who are injured or out of work. We are talking about people with plenty of money to pay their obligation, but walk away and buy and even more expensive house.
Where is the personal honor?
They have to miss payments and trash their credit. The property will go to foreclosure so the lender can try and save money by doing the short or not. Some will do them, some won't. Typically the seller has to bring money to close the transaction.
The contract is good. Strategic short sales/defaults are strictly a financial decision. The contract spells out that the bank gets the house if they don't pay. Some people are so far underwater that it makes little financial sense to stay in the house. So then a person has to weigh the moral implications of walking away from an agreement vs. the financial consequences to stick around. It really is a straightforward personal financial decision that an individual has to make for themselves. You'd think it would be straight forward but if you bought a house in 2006 and paid $400,000 for it and it is worth $150,000 now, it would be tempting for most people. You'd be throwing $250,000 plus interest away over 30 years and most people can't afford that kind of a loss. Renting would be cheaper for most people and so it makes little financial sense to stay. So then it becomes an ethical issue.
There is some talk that banks are trying to target and go after strategic defaulters for deficiency judgments but not sure how that is really playing out right now. They have also been banned from have a Fannie Mae home loan for 7 years.
I agree its a business decision. I think people put morals on it when its individuals and not corporations. People say that all these individuals defaulting are putting a burden on tax payers, well corporations do the same thing. In grand scheme of things, I have mixed feelings on it. I have a very nice and much larger home in foreclosure across the street from me. More than likely it will eventually sell for less than what I paid. The flip side is, if I lived in a rotten neighborhood and had a snow ball's chance in hell of selling it, then I can see where default would be an option.
I know two people that did strategic defaults. Both could afford the mortgages. One bought a house a few blocks from her current home. She bought during the boom and paid a lot for her small rancher. When the real estate bust took over, she was upset that a home twice the size was selling for less than what she had paid. So she bought the second house and dumped the first. The other person dumped and then waited out the 3 yrs to buy again. He ended up in a much nicer neighborhood. The biggest thing I noticed is that very nice neighborhoods are now starting to become mediocre. High real estate costs kept out rif raft. Not so much the case anymore.
Wow. Maybe I am old school, but I honor my word. If I owe you something, I pay it back. If I make you a promise, I keep it. And I don't blame other people or circumstances for my problems.
This world is really going down the crapper. Some people suck!
When a buyer signs a contract with the bank, there is basically two things a buyer must do to fulfill the obligation:
1. Make monthly mortgage payment
OR
2. Give the lender keys to the house.
There's nothing wrong with choosing option 2. It's in the contract. Promises go both ways, if the lender promised to forego the buyer's debt by accepting the house then that's the way it is. Don't feel sorry for the banks and don't feel contempt for the borrower, both sides fulfilled their obligations. It's pure capitalism at work here. Even Donald Trump did something similar, of course he walked away from an obligation that's worth tens of millions but that's another story.
When a buyer signs a contract with the bank, there is basically two things a buyer must do to fulfill the obligation:
1. Make monthly mortgage payment
OR
2. Give the lender keys to the house.
.
Thats not true. Option 1 is what the buyer does to fulfill the contract, Option 2 is the banks remedy if he does not. Just like if a renter gets evicted if he doesn't pay rent.
in this case, i blame the bank that gave her a mortgage. how crazy do you have to be to lend to people whom you know don't honor contracts?
the problem is that the banks know that the government will bail their sorry butts out if that contract is broken, and that is where it needs to change. if the banks want to engage in stupid behavior, let the banks fail.
when are we going to have a government that honors that simple principle-which is the only thing that makes free markets work?
Buying a second home, then ditching the first is known as "buy and bail." This is a realatively new term this century and the reason for requirements of equity in the first home in order to count rent when qualifying someone. Imagine how many more we would see without this in place.
We do see many strategic defaults.......a so-called unemotional decision. But I don't buy it. I've seen the after-effects, and more often than not, those folks have some psychological baggage revolving around their foreclosure. Short sales and deeds in lieu also have some leftover baggage. There are some that are unscathed, but not many. Most that contact me post house loss, have the provebial tail between their legs.
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