Over the past year I have become pretty good at navigating the treacherous waters of short sales, but it has brought up a perplexing philosophical question about the ethics of short sales.
In representing many sellers over the past year on short sales and talking with many other Realtors who have represented sellers it has become clear that there is a wide range of ideas that sellers have concerning how to treat the bank or investor who holds the mortgage(s).
I had one seller who was convinced that the only right thing to do was bring $110,000 to the table to close the transaction. She felt she had made a promise to the lender to repay the debt and she was going to honor that promise. Did I mention she had to liquidate a retirement account to do this and, by the way, the bank would have never known or asked for this account information as part of the short sale package.
I have heard of other sellers that have moved hundreds of thousands of dollars into third party accounts and waited three months to list the property so there would be no record of the funds for the lender to go after. All this to avoid bringing $5,000 to the table to close.
What happens when people refuse to honor their commitments. Does our society start to deteriorate? Do we lose trust in our fellow man? Many of the folks losing out are third party investors that relied on the system to work as advertised. If the only entity we have to buy this debt going forward is the federal government how does this impact our financial system going forward? If people start to feel that they do not need to meet their financial obligations where does this leave us?
I'm interested in your opinion on the ethics of short sales.
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