Another "Expert" advises strategic default

Industry Observer

James Surowiecki is a writer for the highly regarded financial publication The New Yorker.  He was interviewed on CNBC's Squawk Box this morning, and he feels that more people need to consider strategic default as a solution to their underwater home loans.  He cites the fact that American Airlines is strategically defaulting on their debt as support for his position.

Mr. Surowiecki may be a thoughtful writer, and he may be on to something with his comparison of Joe Sixpack to American Airlines.  He may however be comparing apples to oranges, and I don't think it's possible to get orange juice by squeezing apples. In the interview, one of his main points was that you probably won't be the object of any type of collection action after the foreclosure, at least if you live in a non-recourse state.  This sounds to me like barber shop legal advice, and it's probably a good thing that Mr. Surowiecki does not need a license to write stuff.  What happens to licensed real estate professionals when thay give legal advice?  At the minimum, they become unlicensed real estate professionals.

The comparison of a person to a corporation is perhaps a little unrealistic.  If I own a corporation and it defaults on its debt and goes bankrupt, I can simply create another corporation and start over.  Try that with a human who has destroyed his credit through strategic default.  Let's see, Joe just walked away from his home and he is in financial distress.  Let's just wipe him out and create a new Joe.  Of course it's not that simple, and the old Joe may not be happy about being removed from this planet.  The old Joe needs to go through years of poor credit history and slowly rebuild his credibility with lenders. 

If you're considering walking away from your home because the debt level is too high, you need to get some professional advice before making your decision.  While The New Yorker may be a nice magazine, you should probably seek advice from other sources.  If you're having serious financial problems, you need qualified legal and financial advice from real experts.  While not cheap, qualified advice could help you avoid disaster.

Posted by

 Mike Carlier  Lakeville, MN





This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Lending / Financial
Minnesota Dakota County Farmington
Out Of The Box!
Minnesota Real Estate Investor Group
Bartender, Make it a Double
strategic default

Spam prevention
Show All Comments
Chris Hardy
Elevations Real Estate, LLC - Fort Collins, CO
Northern Colorado Real Estate

Hi Mike-

Interesting post.  Surowiecki is a smart guy - Wisdom of Crowds is a favorite of mine.  After reading your blog post, I read his article at the New Yorker (  I didn't see th Squawk Box snippet but found the print article compelling but hardly inflammatory.  I think as Realtors we tend to hide behind the 'giving legal advice' curtain.  Simply by telling buyers "now is a good time to buy" is of a type of legal advice.  We need to be aware of strategies that can best meet our clients' needs and share them freely but with prudence and documentation that demonstrates they need to find "expert" assistance.  To simply avoid a discussion about the dangers and benefits of strategic default is a complete disservice and truly relegates us to "sales people" rather than "professional consultants".  We can't have it both ways and expect the public to have respect for what we do.

Dec 19, 2011 03:06 AM #1
Mike Carlier
Lakeville, MN
More opinions than you want to hear about.

Chris, we are licensed to represent and assist buyers and sellers in real estate transactions.  What in the scope of our license requires or even allows us to give advice and information to people about a legal maneuver to avoid paying a debt? Yes, we need to be able to explain and implement strategies that meet our clients' needs, but only to the extent that they are buying and selling real estate

I guess that any advice could broadly be considered legal advice, but advice about how to avoid paying a debt seems a bit more flagrant.  I think Surowiecki, by urging underwater homeowners to walk away, and by explaining how and why the walkaway will probably not get caught  was functioning as something more than just a writer.  Once again, he can probably get away with it and licensed real estate professionals can't. 


Dec 19, 2011 03:36 AM #2
Ron Marshall
Marshall Enterprises - Saint Michael, MN
Birdhouse Builder Extraordinaire

Bravo.  This is spot on.  Realtors, I know from experience, are not attorneys.  And, as in your comment, they can only advise about real estate transactions and nothing more.  

Dec 19, 2011 06:22 AM #3
Vern Eaton
Askov, MN
Realtor 651-674-7449

Many people walked away thinking that they would roll right into another home in no time.  many got stung with higher interest rates on their current debts.   When these peiople decide to quit this bull thing may have a chance to get better.

Dec 19, 2011 12:27 PM #4
Mike Carlier
Lakeville, MN
More opinions than you want to hear about.

Ron, although most are not attorneys, many are part time agents with day jobs.  The ones who are attorneys would probably never give legal advice without sending a hefty bill.

Vern, unintended consequences of an unintended duration can be the result of following what looks like legal advice from a writer.


Dec 20, 2011 03:01 AM #5
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?


Mike Carlier

More opinions than you want to hear about.
Everyone has opinions -- what's yours?