Foreclosure: It's Not a Get Out of Jail Free Card

This is a great article.  Thank you for sharing, I am going to share with my readers too.  Thanks.

Chris Ann, this is such a timely blog post, and I have re-blogged.  Sometimes, owners allow their egos/emotions to get in the way and think they're going to "teach the lenders a lesson".  Unfortunately, they are only hurting themselves.  Excellent post!

It's not?  Just kidding.  Kristal hit on perhaps the most frustrating side of all of this mess- the entitlement mentality many folks seem to have these days.  Are times tough?  Surely.  Are homes worth less today than 5 years ago?  You betcha.  But does that mean you walk away from your obligations without penalty?  No.  Or at least it should be no.

I've been on both the sales side and property management side of life, and it's amazing how often (averaging once every single day) I encounter folks that have "had to let their place go", or "just had to leave", or "got taken advantage of by the bank".

Some folks were taken advantage of by the banks, and those cases are indeed unfortunate.  I hope those folks fare well as days go by.  Others simply don't have the money to pay their mortgage, and that's unfortunate as well.  Still others make the conscious decision that their money is better spent on themselves and their families than the "big old bank that doesn't need it as much as I do".

The bottom line is this, though:  none of these folks should be lauded or celebrated for their actions.  Far too often, being a member of the Foreclosure Filer Family has been flaunted as a badge of honor.  And far too seldom have folks dared to utter the obvious:  whether it's the car note, the credit card bill or the power bill- failing to honor your word is never a noble thing.

Here in Washington State, most of our foreclosures do not qualify for a deficiency agreement EXCEPT in a short sale situation! So that is not an argument compelling sellers to go for a short sale!

Crazy times we live in.

Most foreclosures now are due to unemployment.  They are not strategic defaults or variable interest rate mortgages.  They are plain old 30 year mortgages taken out by responsible people who would have paid if they hadn't lost their job.  A deed in lieu of foreclosure will also address the deficiency issue.  There is no commission to be paid to agents, so I don't know how often that option is discussed with sellers.  Sometimes there are deficiency judgements with foreclosures, but if the seller is going into bankruptcy the deficiency judgment gets wiped out.  I do have an issue with real estate agents making short sales sound like the best solution.  The right solution for someone who can't pay their mortgage may be a short sale, but it may also be a deed in lieu of foreclosure, or a foreclosure.  It requires a team of experts in accounting, bankruptcy law, and real estate (with short sales expertise) to help the seller figure out the best solution for their situation.

Chris Ann,  It was all over the news today, "High unemployment drove up foreclosures in 72% of 206 leading metropolitan areas last year, including many not hit as hard by the initial foreclosure waves that pounded cities in Nevada, California and Florida, market researcher RealtyTrac reports today." 

I hear this too, great post.

I am going to re-blog.

Because it is different fomr state to state, I think that even creates more confusion for homeowners.  It's too bad that there isn't more education out there that clearly spells out what will happen in each scenario.  

I found out that my uncle (in another state) decided to "Just let it go into foreclosure" and I still don't think he realizes that the only issue at stake is NOT just his credit score. 

.... thanks again for this post!  Definitely worth a re-blog!

I think there is a lot of confusion about the effects of both foreclosure and short sales. It's important that people be well informed about the effects of their decision when they're in distress.

There are so many legal nuances to keep up with. Thanks for the post.

I always tell my clients to see their accountant or lawyer to check out what may or may not happen.  I tell them I am licensed as a real estate agent and they should consult with the professionals on the other items.  Too many ins and outs that can get them in trouble.

People do not see the consequences of just letting the house go into foreclosure - how it will affect their future, their neighbors home value, and their community. Its just the now. They need to educate themselves of their unique situation. 

Good morning Chris Ann,

Excellent post! Education is a must on all the consequences of a foreclosure. The affects are certainly long range and not to be taken lightly!