Friday, July 18, 2008

Thoughen Up! You Made a Mistake.

by Osman Parvez
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A few weeks ago, we did a poll on walking away. The majority of House Einstein readers wouldn't walk away if their home dropped in value (72%) and didn't know anyone who had (75%). In To Walk or Not, Portfolio.com's Felix Simon writes about an anonymous reader with a second home that has dropped significantly in value. The homeowner is considering his options, including allowing the property to fall into foreclosure despite the fact that he can afford to pay. The catch is that the homeowner's income and other assets are high enough that the lender might go after him.

Obviously, there is a moral question here. It's clear that most people say they wouldn't walk away in the face of declining property values. Yet many people are doing precisely that in markets that are suffering a massive correction, thankfully something that is not happening locally.

Putting the moral question aside for a moment, I agree with the Simon who writes;
My advice would be to talk to the lender. Explain to them that you don't live in the house and that you have no desire to keep it, and ask them if they would accept a short sale. There will be some negotiation -- you might want to get yourself a lawyer -- and with any luck you'll be able to come to an agreement which will preclude any legal action against you. After all, the lender would much rather have you fully on board, actively selling the house in good condition, rather than being forced to go through expensive foreclosure proceedings.
As you can imagine, the article generated strong feelings in the comments section. It's worth a read.

image: riot jane



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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

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