Tag Archives: walk away

Walking Away from a Foreclosure & Strategic Defaults – 60 Minutes

The other day 60 Minutes ran another report on “Strategic Defaults” as they are called – home owners who are underwater in their mortgage and walk away from their home (causing a foreclosure) even though they have the ability to continue with mortgage payments.

The most interesting thing about the story was a University of Arizona paper entitled “Underwater and Not Walking Away: Shame Fear and the Social Management of the Housing Crisis”  (Typical University title for a paper!)

It’s a fascinating read if you have some time.  We can debate all day long the ethics of home owners walking away from their obligations, but the fact that it’s happening isn’t in dispute – and real estate agents, investors and other professionals should be thinking through the ramifications of it for their business.

Most home owners don’t realize (or maybe don’t care) that there are many alternatives that are much better than a foreclosure – a loan modification or short sale are all much better alternatives to giving up and walking away.

Here is the 60 minutes segment

USA Today Housing Roundtable – Just Walk Away?

I had the opportunity recently to participate in a USA Today roundtable on the housing market .  It was a great way to share some of my thoughts on investing, foreclosures and what home owners should do given the current housing market.  I was surrounded by some very smart people from various industries.

One of the questions posed by the reporter was “What if you can’t pay your mortgage, yet can’t sell your home for enough to pay off your mortgage? Should you mail in your keys and walk away?”

Unfortunately, one of the supposed “experts” actually suggested this is a perfectly rational choice for many people –

People should consider the risk to their credit rating vs. how much
they can save. In some cases, walking away might be a perfectly
rational choice. People may owe $500,000 on a home that is now worth $300,000. You (might be able to buy a much cheaper) home across the street and put $200,000 in your pocket. That might be worth the risk to your credit rating. Furthermore, since this is happening on a very large scale, my guess is that plenty of lenders will still be happy to issue loans in a couple of years to people who walked away.

I am amazed that this continues to be the opinion held by some in our community.  Home owners need to take personal responsibility and try to work things out with their lender. “Just walk away” is the head-in-the-sand type of attitude that got many home owners in the place they are in.

If you are a home owner facing foreclosure, the very first thing you need to do is call your lender, be up front about your situation, and try to work out a payment plan.  Most lenders are very willing to work with you.

If you can’t work something out with your lender and you have some time, list your home at a discount with a real estate agent.  Find someone who is very experienced with short sales, be sure they have closed successfully on at least 2 or 3 as the listing agent.

If time is short, call a reputable real estate investor in your local market.  Experienced investors can purchase your home quickly and prevent a foreclosure on your credit report.