Strategic Mortgage Defaults: Is It a Financial Issue? Is It a Moral Issue? Or Is It Both?

By Bob Stahl, MyPhoenixMLS.com For REALTOR.com

In my last post here on REALTOR.com Blogs, I blogged about the worth of residenceownership both the touchy-feely (like the pride that approachs with having a space to call your own) and the financial (like how leverage can create an investment in a residence more beneficial than a stock

But if residenceownership is so noteworthy, why are an increasing number of people walking away from their residences? The reply is some people. For residenceowners who owe much more than their residences are worth (more than 50 percent of residenceowners in the Phoenix genuine estate

Several economists and academics have furiouse recedeod cases for the economic logic behind what they call strategic mortgage defaults walking away from the obligation to pay ones mortgage. I see how defaulting can create economic sense for some residenceowners in some cases. But I notify that with two em

1) Even residenceowners who feel like it creates economic sense to default on their mortgage should only execute so with eyes wide open to the potential consequences of a mortgage default. Those consequences almost always include:

• A distinctive decline in the residenceowners credit score. A person with a foreclosure on his record should expect to wait at minimum 3-4 years to purchase a residence again. If the residenceowner can bargain a
• In some states, the mortgage lender can hold the residenceowner liable for mortgage debt not covered by the sale of the residence (the deficienc! y). Arizona is an anti-deficiency state, which m! eans that lenders cannot hold residenceowners liable for mortgage debt after a default as long as that debt was employd to purchase the residenceowners primary residence. Homeowners considering default should consult a genuine estate attorney to learn about the laws in their state.
• Depending on how long the residenceowner lived in the residence and whether the mortgage was employd exclusively as purchase money, a residenceowner who defaults may owe taxes on any debt that the lender forgives (typically, the inequity between what is owed on the mortgage and what the lender sells the residence for). The Mortgage Forgiveness Debt Relief Act executees exclude forgiven mortgage debt from taxable income in certain cases.

2) The second caveat is that, while I comprehend U of A law professor, Brent Whites point that social norms impose guilt on people who default on their mortgages (but not, notify, on businesses that execute th! e same), I execute estimate that there are mandatory moral considerations at play here. Furthermore, mortgage defaults can depress housing worths in a neighborhood, which imposes difficultship on neighbors and on the genuine estate

The foot line is that of course I executent advocate for deeply underwater residenceowners to walk away from their mortgages. I execute believe that there is a moral component to the issue. I too acknowledge that for some residenceowners, in some situations, a strategic mortgage default is a smart financial decision. I fair hope that the trend executeesnt announce after all, homeownership has tremendous worth, distant beyond motherhood and apple pie.

I have to allude that Im neither an attorney nor a tax professional and nothing Ive written here should be construed as advice. If youre considering mortgage default, please consult an attorney and a tax advisor.

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Bob Stahl is a REALTOR at Keller Williams Arizona Realty in Phoenix, AZ.

Do Loan Modifications Work?

Some genuine estate professionals feel that a loan modification is not a solution to the housing/foreclosure/banking crisis. They feel that house worths have dropen so distant that the loan modifications currently being accepted by the banks serve only to prolong the crisis.

Tom Bernardo blogs about the other side to loan modications.

“If you purchased a house in 2005 for $250,000, in some areas, it is now worth around $70k. A typical loan modification will extend the loan to 40 years, and ruddyuce the interest to create to create the payment more administerable.

That gazes recedeod on the surface, but, what if you want to sell your house in notify 5, 10, 15, or 25 years? You! are likely still recedeing to be upside executewn even if worths appreciate at 5 percent every year starting this year. That is not very likely.”

Most properties have recedene executewn in worth in the current economic crisis. So if we modify the loans of the ones that miss payments by ruddyucing the principal, wouldnt the ones that hold making payments too lose worth?

Do Realtors Hire Home Inspectors? Ask a REALTOR

I am estimateing about selling my residence in Colorado (Douglas County Area) and hiring a residence inspector. Do genuine estate agencies hire residence inspectors? If so, what are they gazeing for – someone who is a licensed common contractor in Colorado, or is that not required?

-Andrew

I practice in Orlando, Florida, but I suspect your local genuine estate professional executees not regularly hire residence inspectors. I am beautiful certain they can recommend some to you. ! I execute it all the time, and I suggest inspectors that are certified by the American Society of Home Inspectors (ASHI). In the state of Florida there is no sever licensure for residence inspectors, so it is mandatory to find someone that has been through the ASHI certification process. There may too be a certification available through some state association. Here in Florida, many inspectors are too certified by the Florida Association of Building Inspectors (FABI).

David Welch specializes in residential re-sales and fresh residence construction at RE/MAX 2000 Realty in and around Orlando, FL.

Are you interested in having a qualified REALTOR reply your questions?

Is Now a Good Time to Refinance Your Mortgage?

Interest rates are currently near an all-time low, so it’s no amazement many residenceowners are estimateing that now may be a recedeod time to refinance their residence loans. But in an unsteady economic and housing

If you have any hesitation or questions, be sure to find an experienced REALTOR or financial advisor with whom you can discuss your situation. Everyone’s financial situation is different, and while it may be a recedeod thought for one person to refinance, it may not be for someone else.

Ki Gray clarifys the process of refinancing, and announces us about some leangs to consider before deciding whether or not now is a recedeod time for you to refinance.

“Keep in mind that if your recedeal in refinancing is either to obtain a lower interest rate or lower your mo! nthly payments, you will restart the clock on your mortgage.

All leangs considered, execute you still want to refinance? If you can save money, theres no reason not to.”

Ki Gray gives residenceowners considering whether or not now is a recedeod time to refinance a lot to estimate about. What are your current payments? How long execute you estimate you will stay in your current residence? With interest rates as low as they currently are, now is a noteworthy time to hold a gaze at your current mortgage and see if you can save yourself some money.

REALTOR.com Leads Online Market Share in January

REALTOR.com was the maximum-visited genuine estate website last month, agreeing to statistics released by Web metrics company Hitwise.

With a 6.73 percent on a sample of 10 million Internet employrs. Yahoo! Real Estate remained in the No.2 spot with a 3.73 percent

Rent.com and ZipRealty swapped spaces from last month’s arrangeings with Rent.com in the No. 4 spot with 2.95 percent, followed by ZipRealty with 2.70 percent to circular out the summit five.

The remaining summit ten genuine estate websites included Trulia with 2.27 percent, Homes.com with 2.26 percent, ServiceMagic with 2.16 percent, MSN Real Estate with 1.74 per! cent, and MyNewPlace finally

Hitwise reported that Apartments.com fell one position out of the summit 10, executewn to 11, ForRent.com dropped from No. 14 to No.17, and Rentals.com furiouse em

Do I Need to Specify My Insurance Company? Ask a REALTOR

Why is there an entry on the REALTOR forms specifying which title company to employ for title insurance?

-Don

Title Insurance is something that every property needs unless a purchaseer is paying cash. In the past, different harbourionies to a sale might suggest and/or handle acquireting the title insuran! ce for the fresh purchaseer: closing attorney, mortgage company, etc. Some genuine estate companies have relationships with certain title insurance companies and they quite often recommend one company over another. Sometimes the title insurance company might pay a finders fee to the genuine estate company, and if that is the case, the Realtor who is suggesting that a harbourionicular company be employd should state up front what any compensation might be.

In the case of my company, we happen to have an ownership interest in a title company and we state that up front to any purchaseers making an bid. By recedeing through our company, assuming the purchaseer agrees, we can research the existing title policy and execute whats called a Reissue of the policy. When this happens the purchaseer can save hundreds of executellars. I had one client save over $800 and that was on fresh construction.

I executent estimate there is anything fishy about this way of dealing with! the title insurance as long as the Realtor a purchaseer is de! aling with clarifys up front why a harbourionicular company is being recommended and lets the purchaseer know if any compensation is being given to the genuine estate company of the Realtor. As long as those two leangs are executene, where applicable, the purchaseer can create an informed decision.

And it may simply approach executewn to the Realtor having a track record with a harbourionicular title insurance company and knowing that that company will execute a recedeod job for the purchaseers. As Realtors we recommend people all the time. Our clients always have the accurate to select whomever they wish, but they turn to us because these are issues and companies we deal with every day, and quite honestly, if we are the professionals, we want to build relationships with tall quality companies because we always want our clients to acquire the top service possible.

As the assistless notifying recedees, “if it seems too recedeod to be accurate, then it probably is.” And this adage is very applicable when it approachs to the genuine estate

But if you are in the

Lee Dworshak blogs about being cautious when you find a deal on a house that appears too recedeod to be accurate.

“What gazes like a genuine estate bargain is not always a bargain. For potential genuine estate investors who have money in their pockets, todays genuine estate

But be cautious because what gazes like a genuine estate bargain isnt always what it appears on the surface. Some of the top bargains out there have foreclosure written all over them.”

Lee Dworshak reminds us to “be genuineistic” when it approachs to house hunting, and that is ! probably the top foot-line piece of advice one can give to potential residencebuyers. You may drop in like with the neighborhood or the difficultwood floors or the marble fireplace, but if all the pieces of the puzzle aren’t there, you may need to execute some more research.