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Strategic Defaults and Short Sales

Strategic Defaults Running Rampant
I first started hearing and reading about strategic defaults in late 2009. My team would frequently talk to sellers (both non-listed and those referred to us by REALTORS®) who fit this description, and I never knew what to call it until this label was created. I’m very disturbed by the trend my team has seen lately with so many sellers who are strategically defaulting. This article describes what a strategic default is and most importantly our policy (which you may want to adopt in one form or another) for dealing with sellers who are involved with them.
My definition of “strategic default”: A seller who stops making payments, even though they have the financial ability (income exceeds expenses) to do so. The reason for the strategic default in my opinion is irrelevant. It could be with only good intentions: to get their lender’s attention so they will consider a short sale, loan modification, or other type of workout (many lenders will not consider any workout when sellers are current). Many times, sellers have no intention of a workout – they may purchase another house first (sometimes a more expensive house) and then default.
 
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