Just in the last week, I've run into three people who are walking away from their houses. As in... "Mr. Bank, here are the keys. I'm really sorry."
All three are professionals in the real estate industry - two are mortgage brokers; one is a real estate agent. All three have the earning potential to carry the properties they're letting go, but at a steep cost.
Walk-awayer #1 owns a trendy loft in downtown Denver. He owes around $600,000 on it, with a monthly payment of $3900 + a $485 HOA fee. The last comparable sale in the building was at $430,000.
Walk-awayer #2 owns a beautiful home on a golf course. She owes $750,000 on it, and a comparable home down the street has been on the market for almost a year at $650,000. She can no longer afford to pay the mortgage, as her own mortgage business has taken a real beating.
Walk-awayer#3 owns a rental property that is worth about $45,000 less than she owes on it. Her adjustable loan is coming due for adjustment which will add about $275/month to the existing payment of $1500. The property rents for around $1250/month. It's located in a stable market; it's not likely to depreciate, but neither is it likely to appreciate much.
All three of these walk-awayers have analyzed the situation and reached the same conclusion. It simply isn't worth the brain damage to try to hold onto these properties and it's not the financially responsible thing to do for their families. Of course, being in the biz, they are fully aware of the impact a foreclosure will have on their credit score, but have decided that the trade-off is worth it. Preserving the FICO score simply isn't enough justification to risk financial ruin.
Sure, it's a real drag for the bank who holds the mortgage and I won't jump on the bandwagon of those saying that the "Banks Deserve it!!!" But neither will I criticize the decisions of my three friends by dismissing them as "irresponsible borrowers." Both sides will suffer, but when it comes down it, my friends need to protect themselves and their families first.
At least, that's my opinion. What's yours?
The More Fun You Have Selling Real Estate, the More Real Estate You Will Sell!
Order Your Here!