…Lots of people are asking….”what’s the deal with Strategic Defaults? How is that going to affect me?”

Ummm….err…I don’t know?

I’ve been chewing through scenario after scenario, and for Hood River Real Estate, it kind of boils down to this…..This is going to be a symptom of a larger issue, (like employment outlook) and as such, it will hit neighborhoods differently.

Be sure of this, however, there is no such thing as a free lunch. Walking on a house while you can still afford the payment may sound nice in the short term, but it is again, one more example of short horizon thinking, and could lead you to a long period as a renter, with poor credit, and ultimately you might STILL owe the balance of your loan…..

However, right before I sent out the newsletter last month, This popped up in the NYT.

It outlines the issue, and a couple of interesting factors I had not thought of, and one of them is this….

Not paying your mortgage helps get you back on your feet again.

Ok, I’ll buy that, but like the old story goes, “be careful what you wish for….you might get it.”

I still think there is another phase of the bank crisis in this, as it’s a fundamental shift in the way the public at large views the trust/bond with their banking institution. Once that veil is pierced….the public no longer views the bank as having any power over them, and the bank wont trust anyone….well that’s a recipe for disaster in my book.

The bank pushback to that of course is the long term damage that will do to the individual borrower. There are literally a dozen scenarios of default….deed in lieu, judicial foreclosure, non-judicial, workout, bankruptcy….each version extracts a toll on your future ability to access credit….and in many ways, access to credit determines your standard of living (not in a jet ski/ATV in the driveway kind of thing, but more in a general, need to pay the bills kind of thing)

Did You Know?
As an example of some recently discovered pieces of the puzzle, consider the following tidbits:
1. Your debt relief in the event of a short sale is taxable income.
2. In many short sales, (and I think in foreclosures too) The issue of recourse is now in play.

  • It depends on the state, and your documents, but in common instances, you could give up your house to the bank they could sell it for a loss, and then come after you for the balance (they can do this in a  number of ways, too)

 

Crazy eh? It’s never easy, and I return to the aforementioned axiom:

“There is no.such.thing. as a free lunch.”

OK, Now to Hood River Real Estate……….
Quality is great. Nice inventory, motivated sellers, few buyers, (still pooling at $300 and lower) but the financing is working, and I’d argue even better after the great starve-off of mortgage brokers. My last couple of deals have had total pros working the files. What a joy.

I’ve noticed that there isn’t as much attrition in Real Estate Agents…….yet. I have noticed that the sales have spread out among a laaarge list of agents, many of whom I know are operating out of less than formal locations.

Robert Reich wrote an article last month about the supposed “entrepreneurial boom” that is occurring in the United States. He basically said that wasn’t so much of a boom as it was a sign of desperation, of “basically unemployed” people trying to “do something,” anything to improve their situation……

A single Broker office, that does two deals a year is an example of that. Is this market headed that direction? Probably not, but it sure isn’t headed in the direction of the national chain either. As with all things, it will be a balance……

Hope you enjoyed the posting. Get out and enjoy the sunshine! See you next month!