Millions Of Homeowners Poised To Walk Away..What Will YOU Do?

Something HUGE is happening...are you paying attention?

Harris Real Estate University students (and future students), remember back in 2007 when we told you to be mindful when the idea of doing a strategic default (Short Sale or Foreclosure) made it into the mainstream press?….we suggested that when that occurred the mindset about housing would be forever changed…

Well, it has happened. You are about to read part of a Wall Street Journal article that proposes that every upside down homeowner considers walking away!

(We also featured videos on our blog of ABC World News and CBS Evening News doing similar stories)

What does this mean to you?

Simple, you simply must be very literate on how to do short sales. There is an excellent chance that you will be coming across upside down homeowners on roughly 3-4 out of every 10 of your listing appointments. Or, if you are in Vegas..make that 7-8 out of 10 of your potential sellers. Learn the new 2010 ways to easily list and sell short sales. Everything you think you know about short sales has changed. Watch the FREE HREU CDPD Short Sale Secrets video and download the FREE Short Sale Secrets book.

Here is the article....my comments are in bold.

Millions of Americans are now deeply underwater on their mortgage. If you’re among them, you need to stop living in a dream world and give serious thought to walking away from the debt.

No, you shouldn’t feel bad about it, and you shouldn’t feel guilty. The lenders would do the same to you—in a heartbeat. You need to put yourself and your family’s finances first.

OK, right there....WOW!

Those 2 sentences really do represent a complete wholesale change in the way that Americans have thought about housing. I remember growing up that the LAST thing you don't pay (if you are having financial issues) is your home.

The conventional thinking was..you always needed a place to stay...and that someday your home would be paid off and you could 'retire' with no worries about a house payment.

How widespread is this? More than 11 million families are in “negative equity”—that is, they owe more on their home than it is worth—according to a report out this week by FirstAmerican Core Logic, a real-estate data firm. That’s a quarter of all families with mortgages. And for more than five million of those borrowers, the crisis is extreme: They are more than 25% underwater—the equivalent of having a $100,000 loan on a property now worth just $75,000 or less. That’s true for a fifth of mortgage holders in California, nearly a third in Florida and an incredible 50% in Nevada.

Lets put this into broader terms. NOTE: my numbers are not spot on accurate but, make the point.

Roughly 50% of all Americans live in a home where they are legally 'the owners'. In other words, they aren't tenants. 50% of all homeowners OWN their homes...no mortgage. OK, that leaves the 50% that 'own their home'...but, owe money on it..they have a mortgage. Of THOSE homeowners....roughly 50% are upside down. Get it? So, 50% of all American's with a mortgage are now upside down.

Are you in this situation? Are you still battling to pay the bills each month, even when it may make little financial sense to do so?

It’s time for some tough talk.

Stop trying to chase your lost equity. That money is gone. Don’t think like the gambler who blows more and more cash trying to win back his losses. That’s how a lot of people turn a small loss into a big one.

And do the math. Even if you hope the real estate market is near the bottom—it’s possible, but by no means certain—it may still take years to see any meaningful recovery. If you are 25% underwater, your home will have to rise by 33% just to get you back to even.

Flashback to pre-bubble appreciation rates....1-3% per year was normal..wouldn't you LOVE to have just 1% rates of appreciation now?

Assume that once the markets do stop depreciating (which we think will be later this year...so, lets call later this year the 'bottom') it will take years and years for homes to re-appreciate to bubble prices. If someone bought in 05-08...they are WAY upside down now and will be for possibly 10+ years!

Agents, given the fact that this market....the market filled with Short Sales and REOs...IS the new normal...are you embracing this market or hoping that somehow the clouds will clear and it will be 2005 all over again?

Please don't wait any longer to learn what this market requires. Understand that never before have caring, competent and SKILLED agents been in such demand. If you are not doing short sales...what are you waiting for?

I have a question for you. Have you been lulled into complacency...led to believe that you didn't need to learn how to do short sales? Listen, I know that many of you are being told to avoid short sales.....I know that virtually every agent reading this post have yet to close a single short sale. 3 years into this real estate lead recession (depression?) hundreds of thousands of agents have yet to learn how to list and sell short sales...are you one of these agents?

If so, here is a quick true story for you....

Just last week I had a free coaching call with an agent who is interested in joing HREU's CDPD Coaching Program. (This is the program where you earn your HREU Certified Distressed Property Designation.)

So, this agent IS currently a coaching client of another coaching program that teaches agents to do only ONE THING. And...get this..he was told to NEVER do short sales. Literally, his coach told him NOT to do short sales...not to even try!

OK, here is where it gets interesting.....

I ask him how he is doing...how is his business...?

He tells me...that last year he sold 31 homes. Not too shabby. But, now he is going broke. I asked him..." WHY...why are you going broke?"

His response was telling.."7-8 out of 10 sellers I come across are.....upside down. They have to sell. However, they need to list as a short sale. I was told by my coach to never do short sales...so, I simply never called them...avoided them..."

But, now he can't avoid them...he learns how to list and sell short sales or...he will be replaced by agents who do.

His local market was quickly sinking in value and agents like him (We call agents like this 1 spoke wonders...HREU Students know what I am talking about...agents who only know how to do ONE thing to generate leads) ....are simply and slowly going broke.

Next question I asked him...

"If you knew how to do short sales...if you knew how to easily list short sales..quickly generate multiple offers...and most importantly...close these short sales listings...how many listings could you take per week?....how much more money would you make.."

His reponse surprised me....seems as if he was anticipating my question....

He replies, "Well...just today...when I looked at the number of expired listings in our market...there were 47...out of those, 33 were upside down sellers...If I had listed just half of those upside down sellers...and they sold...that would equal at least $60,000..in commissions"

Lets stop there for a second..are you like this agent...are you too avoiding learning how to list and sell short sales?

Let me ask you...why?

Challenge yourself to set aside whatever negative thoughts you have about short sales. Challenge yourself to actually learn the right way...right now...how to easily list and sell short sales. Watch the FREE HREU CDPD Short Sale Secrets video and download the FREE Short Sale Guide Book.

Obviously, now this agent is now earning his HREU CDPD...and...in his words..."Will be my markets go-to short sale agent"

Back to the article...

Is that likely? And over what time period? Even if home prices rose by 5% a year from here, that would still take six years. And during that time you could instead be building fresh savings elsewhere.

If you are reluctant to give up on “your” home, realize that it isn’t “yours.” If you are in negative equity, it’s the bank’s home. You’re just renting it. And right now you may be paying way above market rates. You need to be ruthless about your cash flow.

OUCH...that stings!

Are you worried about the legal consequences of walking away? Certainly, you should check with a lawyer before doing anything, but the consequences will probably be more limited than you think.

In “non-recourse” states, the mortgage lender may have no right to come after you for any shortfall. They may have no option but to take the home, sell it and eat the loss. According to a survey last year by the Federal Reserve Bank of Richmond, such states include negative-equity hot spots California and Arizona. Even in “recourse” states, lenders may have limited ability to come after you. Often they’d have to jump a lot of legal hurdles, and it’s just not worth it for them. They’re swamped with cases anyway.

“In my experience, right now they’re not really going after anyone,” says Richard Nemeth, a bankruptcy attorney in Cleveland. “They just don’t have the resources.”

That has been our observation as well.

If you’ve taken smart steps to protect your money, you may be safer still. For example, money held in a 401(k), Individual Retirement Account or pension plan is sheltered from creditors.

Sure, a strategic foreclosure may hurt your credit score. But if you’re in financial difficulties, it’s probably already suffered. And your credit score is not the only thing in life that matters.

Still, when it comes to the idea of walking away from debts, many people are held back by a sense of morality. They feel it’s wrong to abandon their obligations. They don’t want to be a deadbeat.

Your instincts, while honorable, are leading you astray.

The economy is fundamentally amoral.

Sometimes I think middle-class Americans are the only people who haven’t worked this out yet. They’re operating with a gallant but completely out-of-date plan of attack—like an old-fashioned cavalry with plumed hats and shining swords charging against machine guns.

Do you think your lenders would be shy about squeezing you for an extra nickel if they thought they could get away with it?

They knew what they were doing when they wrote your loan. Many were guilty of malpractice, but they pocketed good money and they’ve gotten away with it. And if they thought your loan was “risk free,” how come they were charging you so much more than the interest on Treasury bonds?

If you’re only a small amount underwater on your mortgage, it’s probably the case that you’re going to be better off staying put. But if you are deeply underwater, it’s a different matter.

Last week we reported on our blog that new studies prove that the the rate of strategic defaults skyrockets when a homeowner is 25% upside down....or $70,000. Banks know this...and are now working on ways to literally PAY people to stay.

Whether we like it or not, walking away from debts is as American as apple pie. Companies file for bankruptcy all the time, and their lenders eat the losses. Executives and investors pocketed millions from the likes of Washington Mutual, Lehman Brothers and Bear Stearns when the going was good. They didn’t have to give back one cent of that money when the companies went into bankruptcy.

Limited liability, after all, is one of the main reasons every business from your local dry-cleaner to a major multinational gets incorporated in the first place. They’re not shy about protecting themselves if things go wrong. You shouldn’t be either.

Popularity: 1% [?]

Similar Posts:

1. How Much Underwater In Your Home Before YOU Default? | HREU CDPD Short Sale Designation How much underwater does a homeowner have...
2. Why Would YOU Keep An Upside Down Home? | Real Estate Short Sale Designation Let me be 100% clear…I didn’t...
3. 2010 IS The Year Of The Short Sale! | Do You Have Your HREU CDPD? 2010 IS the year of the...