I am sorry but I do not think the poster did anything wrong besides making a stupid decision to purchase a home near the top of a bubble. That was lunacy and the seller is a poster child for why we should not have 0 down loans, or for that matter FHA loans. Forcing buyers to come up with equity (in my opinion at least 20%) would lead to a much more stable market.
So given the first mistake that the buyer made, the way that the buyer dealt with the problem was perfect. Haters who want to blame the buyer should blame all of the other entities, including our govt for enabling the buyer. Blame the lender who originated the loan, blame the party that purchased the security, blame the ratings agency that took the security and probably gave it a triple A rating, and blame the govt for promoting all of this. If there was a simple 20% equity rule this person would have never been able to buy the home in the first place.
As for moving forward the problem I see is that nothing has changed. This buyer can still get into a home with a miniscule equity payment, is still going to count on appreciation, and is MUCH MORE ENTICED to enter the market now due to lower prices and lower rates. The probabilities of further market decline ON THE SURFACE seem much less then in 2003. However what happens if after a few years down the line interest rates spike and property values drop say another 20%? What will happen to this buyer and millions of others like him. Some will stay and some will walk again… As much as the haters want to blame them, they are working within the confines of the system that is established. Don’t hate the player hate the game.
It is also probably fair to assume that if someone has done something that is hard to do once, it becomes slightly easier to do later. That is, if the events warrant it, why not walk a second time.
I am not so sure that urging this person not to buy because there is a probability that they will walk again is valid. I think urging them to evaluate their finances and start to save money rather then living without savings is valid. Personally I wouldn’t do what they are doing with regards to buying a place but that is just me. To say that is enough but to project on them and say no you shouldn’t buy because the odds are that you will walk away is not really fair. If they buy and the market craps and they are throwing thousands on a turd asset then they SHOULD WALK AWAY and sell it short… again.
