As real estate professionals, your goal is a healthy and vibrant real estate marketplace. Lots of selling and buying of homes is a good thing, as is a healthy credit report and sufficient cash on hand by your buyers and large amounts of home equity with your sellers.
But if the last few years has taught us anything, that is not always the case. Heck, in some markets, that rarely is the case.
So being a real estate professional you also end up answering many questions about people having their homes underwater at this year’s Christmas Parties.
Economic editor Megan McArdle writing in the Atlantic has a very thought provoking post out today discussing “When Should You Default on Your Mortgage?” Here is an excerpt but you should also go read the whole article. It is an issue that is on the table for many of the people in your marketplace and may help you as a trusted real estate professional giving solid and powerful advice.
As you can see, I think that people who are in financial trouble and cannot make their mortgage payment have a perfect right to walk away–and to do so as early as possible if there is no reasonable likelihood that their circumstances will change. On the other hand, I think that if modest lifestyle changes like less steak and more hamburger, less cable and more library books, can make your mortgage payment affordable, I think you have an obligation to make those changes. And if those changes aren’t even necessary–if the default is purely and simply because you would like the bank to eat the lost equity rather than you–I don’t think that’s right.
But for all the discussion of those people, I’m not sure how many of them there are. Some, undoubtedly–in a country as big as the US, there is always some jerk doing almost anything you can imagine. But given what we know about bankruptcy, I tend to think that the overwhelming majority of people walking away from their houses are doing so because they cannot support both the home, and a basic decent life for their families. Obviously, I also tend to think that’s how it should be.
And if you have any suggestions from the trenches on Megan’s advice, leave them in the comment section. Odds are there will also be people fighting through a rough mortgage right now reading this post and they will appreciate any and all help you can offer.
Real estate professionals are very important people in the industry. So if you have any concern about real estate and home buying matters, you can call a real estate professional who can help you solve any real estate issue.
Excellent article!
Nice helpful content, thanks for sharing.
Hi Tom,
I am caught up with this statement "people who are in financial trouble and cannot make their mortgage payment have a perfect right to walk away–and to do so as early as possible if there is no reasonable likelihood that their circumstances will change." That is what I call reality and is actually happening in some places now. But the good news is that there is always hope out there, and this is what some homeowners need to establish more in cases like this for the fact that it can be found if done with a thorough search and some professional help.
Great post! I think, the earlier people realize that they cannot finance their homes anymore, the better. If one can still make necessary adjustments to change their financial status and find ways to finance their home easier, better act on it now to prevent additional troubles. However, if a home buyer reaches a dead end, finding no more possible ways to pay for the mortgage, then, maybe it is the real perfect time to walk away.
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This article is really nice i gathered many information
I am currently paying a little over $3K on my house that’s now at least $150K less than the purchase price ($370K) , and although both my wife and I have jobs , we are still struggling with the mortgage payments ‘coz we are also paying for babysitter ( $400 per month for 2 kids) , car payments, gasoline, etc …
This is very nice blog.i love to read it because it provides always good information regarding market.Thanks for this nice blog.
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Hi Tom! That is sad to hear but it is the inevitable truth. Like life, the real estate market has its ups and downs too. But my question is what will happen to my earlier payments if I "walk away" from my mortgage payment when i having some financial trouble?
Let me quote this from your post :
"As you can see, I think that people who are in financial trouble and cannot make their mortgage payment have a perfect right to walk away"
Hi Tom. This is a nice post. Makes me think. My partner and I are living in a new house which is of course on a mortgage we are struggling to pay. We are always discussing whether to just ditch it and just go rent or save. We decided to go down the road of saving and spending wisely and I also got a job.
I have to agree with Janice that saving goes a long way. It can save your house. Don't run away from your mortgage instead take a look at how your lifestyle is. It's really okay to cut some expenses on other things which are not important. Nice post Tom!
Great post! As a real estate professional, we have a responsibility to tell our clients whether their mortgage will just go down the drain or will have a miraculous turn around.
The year 2011 has been better than 2010, however, it is not good enough for people to buy homes. But the year 2012 promises to be a better year. I've read somewhere that real estate will have a good turn out in 2012
Great post and blog! I don’t have time to read every post at the moment but I have book-marked it and also added your RSS feeds, so when I have time I will be back to read more. Please do keep up the great work.
I think it's in every real estate professional's responsibility to be honest with their clients and individuals in general particularly when it comes to spending and maintaining their investment. Advising to walk away from a mortgage is part of that responsibility but it should not stop with just that. In many ways, people should also figure out a way to maintain property and make some changes. If some minor lifestyle changes can save the house then so be it.
awesome
Everyone of us wants to own a nice home, people can pay the mortgage and maintain their property if they have a stable job, but the problem is the economy, you never know when will be the next recession and you might lost your job because of that. It is really hard to maintain a property and have a decent life especially nowadays, price of everything goes up.
A good real estate professional should be give good advice and want to put their customers in a position to succeed; unfortunately, that is not always the case. However, I did get lucky when I bought my last home, I had the most trustworthy and honest agent and real estate professionals. I understand the difficulty in that search, especially finding someone with the same mindset so you can successfully purchase your dream house. The real estate professional that was so helpful was Betty Kingery at http://www.homesinfranklincounty.com/.
I´m from Canada and we have the same problems here like you had in US two three years back. Our Houses are overvalued and mortgages are so bad that many people just can´t afford them. The risk is just too high. And now, exactly as louise says, we see an economic recession coming and nobody wants to buy house, which price would probably drop.
On topic – I agree that real estate agent should advise his clients even to quit paying the mortgage. But it always depends on the situation
I'm always hesitant to give the 'wrong' information although I know in my heart that they probably should walk away. When I get this question, I refer them to the experts, their mortgage professional, real estate attorney and CPA. These are definitely scary times and I don't particularly feel comfortable making this type of recommendation–especially when I've seen people stop making payments on their own, ready to walk away and subsequently landed a job that kept them in their home.
I hope that every real estate professional have the heart and mindset to give advice that would put their clients on the safest situation.While some may not be comfortable to suggest walking away from a mortgage, if this is something that would deem practical; for sure the client would appreciate the concern. In my case, I am satisfied and lucky to find a very caring and dependable agent who helped me find my dream home from Chicago homes for sale . He makes sure that he prioritizes my sake and not merely the money that he would make.
It's always best to consult a professional mortgage lawyer if you're family is facing impossible mortgage payments. A lawyer can help you look at all the options available and help you determine if you qualify for loan modification help.
It is the foremost dream of everyone individual to have a home they can call their own. However, the present condition marked with too tight standards and requirements for mortgage approval coupled with the unstable economy makes this really hard to achieve by more and more average-earning individuals.
Thanks for this great information. I really like it and its nice.
As realtors we have a legal and ethical responsibility to be as honest as possible with our clients – even when the news is something the client will not like. If a homeowner cannot support his or her current lifestyle and the mortgage at the same time – the reality of their situation should be made crystal clear to them. What happens next is up to the homeowners and their creditors.
I agree hundred percent with you Alex. Some agents would keep these things from clients but it is our responsibility to be honest with them. These people might not know some things and the explaining is up to us.
My own thoughts? Never. I am not a lawyer and there is so much you need to know before walking away from a mortgage.
My personal take on this is to save. Ditching your mortgage is way too selfish for not sacrificing some spending for your home.
It is advisable that you check with your financial institution regarding prepayment penalty. It has been noticed that few financial institutions will waive your prepayment penalty if you refinance with them. On the other hand, loan costs are the costs that are attached to the loan and financial institution you have selected to work with.
More than anybody else, you know if you can afford to keep your mortgage. If this is something that makes your life miserable, it is better to ditch your mortgage. But if saving and changing your lifestyle can do it, I don't see why you have to turn your back to your home.
Price never counts but the quality and design counts…
Still fraud is a fraud..
maybe I should follow your advice… I am sure that I can improve my business and maybe the sales.
I dint get some statements properly, but apart from this blog I would like to say that it is well known option for the property holders and professional that one can get loan on his upcoming property, and submit it as mortgage, if any case one is not able to pay for his mortgage he/she can consult with the professional to overcome this problem.
Yes, the real estate market is very difficult for real estate developers and sellers and in all likelihood will become progressively worse throughout this new year. In our case, we started to develop a multi unit property, when the market was still sizzling hot. Unfortunately, as the building neared completion, the bottom fell out. In our case, we hired an outside real estate consulting group which provided us with a very interesting perspective and ideas which greatly helped us sell the units.
Regarding the real estate problem, the only people you're going to contact is the real estate professional. They are only the one that can give you the best solution to your problem, because they are excellent in that field. Thanks for the post. I really appreciate it.
After reading the full article I did not see any mention of real estate professionals. The article did, however, present a number of options that might help avoid such a situation.
I have had the experience of being asked clients who are currently underwater what the consequences will be wee they to walk away from their mortgage. I will always try to encourage them to consider every other possible alternative first, but, in the end, if the circumstances dictate it, they often is no other choice.
There are things that a reliable real estate agents must tell to their clients to salvage their client from further trouble. Amazing content. Thanks
I think the sooner the better as long as they have a situation that is unlikely to change. That being said there are some instances where other options may be better. Great post!