As real estate professionals, your goal is a healthy and vibrant real estate marketplace. Lots of selling and buying of homes is a good thing, as is a healthy credit report and sufficient cash on hand by your buyers and large amounts of home equity with your sellers.
But if the last few years has taught us anything, that is not always the case. Heck, in some markets, that rarely is the case.
So being a real estate professional you also end up answering many questions about people having their homes underwater at this year’s Christmas Parties.
Economic editor Megan McArdle writing in the Atlantic has a very thought provoking post out today discussing “When Should You Default on Your Mortgage?” Here is an excerpt but you should also go read the whole article. It is an issue that is on the table for many of the people in your marketplace and may help you as a trusted real estate professional giving solid and powerful advice.
As you can see, I think that people who are in financial trouble and cannot make their mortgage payment have a perfect right to walk away–and to do so as early as possible if there is no reasonable likelihood that their circumstances will change. On the other hand, I think that if modest lifestyle changes like less steak and more hamburger, less cable and more library books, can make your mortgage payment affordable, I think you have an obligation to make those changes. And if those changes aren’t even necessary–if the default is purely and simply because you would like the bank to eat the lost equity rather than you–I don’t think that’s right.
But for all the discussion of those people, I’m not sure how many of them there are. Some, undoubtedly–in a country as big as the US, there is always some jerk doing almost anything you can imagine. But given what we know about bankruptcy, I tend to think that the overwhelming majority of people walking away from their houses are doing so because they cannot support both the home, and a basic decent life for their families. Obviously, I also tend to think that’s how it should be.
And if you have any suggestions from the trenches on Megan’s advice, leave them in the comment section. Odds are there will also be people fighting through a rough mortgage right now reading this post and they will appreciate any and all help you can offer.