Not Right At All!

By
Education & Training with RealtyU

On June 11th the Wall Street Journal published an article titled "Some Buy a New Home to Bail on the Old", the article discusses the fact that some homeowners are buying a new home claiming that their existing home is being rented and then simply letting the first home go into Foreclosure.  The article even states that some are being "coached" through the process by real estate agents and brokers.

Can you think of more unethical and fraudulent behavior? 

I understand the need for lenders to consider a person renting out what would be their primary home in order for the borrower to purchase another primary home ... but if the first home goes into foreclosure right after the second home is secured than their should be some recourse.  Fannie Mae is adjusting their guidelines to accommodate this situation which is not widespread, but their should be some serious laws against this type of fraud; think about the fact that you the taxpayer are going to be covering this cost.

Agents and mortgage brokers that participate in this process should have their licenses revoked.

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Rainmaker
498,247
Richard Dolbeare, R(B)
eXp Realty - Wailuku, HI
R(B), ABR, CRS...Hawaii Multi-Island Specialist

I've never heard of such a thing and have trouble seeing how it would benefit the individual.  After all, the lender of the first home doesn't have to "forgive" the remaining debt.  Am I missing something here?

Jun 13, 2008 09:34 AM #1
Rainer
62,831
Allen C. Wright
RealtyU - Aliso Viejo, CA
NS, AHS, REPS

Richard,

The homeowner is walking away from the first home and letting it go into foreclosure after they have purchased the second home.  Their is no renter on the first, or they are creating a non-binding rental agreement that is being used to prove that they have a renter for the first home ... the owner of the first home purchases the second home and after the second home has closed is letting the first home (which is upside down in equity) go back to the bank.  Their reasoning is that it is a business decision and they do not want to be paying for a home that is upside down in equity.

Jun 13, 2008 09:52 AM #2
Rainmaker
210,196
James Wexler
wexzilla.com - Scottsdale, AZ

Allen

Great piece.   It is amazing how many people are trying this approach, as you said coached by some agents.   People are actually advised to simply use equity(which really doesn't exist anymore)  to buy a new home at the bottom of the market.  It is an unfortunate situation that hurts everyone in the long run.

by the way, Do you have an outside blog that I can add to my Blogroll ?

Thanks and look forward to reading your thoughts on the world of real estate.

Jun 16, 2008 05:26 PM #3
Rainer
62,831
Allen C. Wright
RealtyU - Aliso Viejo, CA
NS, AHS, REPS

Thanks James ... it is sad that we still see people trying to shirt the bounds of ethical behavior for their own personal benefit, knowing that the taxpayers and other homeowners will have to bailout their poor decision.  Kinda makes you want to leave real estate.

Jun 17, 2008 01:55 AM #4
Anonymous
Veronica

Try getting someone compassionate and qualified to guide you through a short sale at WAMU and then reconsider people's "underhanded tactics." WAMU, who largely bought all these sub prime loans and has subsequently gone bankrupt certainly is not interested in customer service. They virtually leave homeowners to fend for themselves, and yes, sometimes that means survival mode.  Rather than spend $$ on lawyers and frustrating themselves, they might try this option.  

Jan 13, 2009 03:15 PM #5
Anonymous
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Mar 05, 2010 01:01 AM #6
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Rainer
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Allen C. Wright

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