Why not walk away?

[Anonymous]

I know several people who walked from homes they were deeply underwater in around the mid-90’s. All are happy with their decision. Their friends still like and respect them, they haven’t had serious trouble renting (although they have had some), and they saved tens of thousands of dollars, which to them was a lot. If you’re really looking at hundreds of thousands in lost money (which of course depends on what you’ll have to pay to rent a nice place) you’ll be vastly better off to walk. You’ll obviously get a lot of hate and despite here – but how much is that worth?

You do want to make sure you won’t get socked with a big tax bill and that you will be able to find a place to live you like, of course.

Somebody upthread asked what would happen if the tables were turned and the bank was underwater on a loan they could escape from by relinquishing a grossly inadequate collateral without any other effects (like a businesswide BK). The answer is the bank would dump it so fast it would make your head spin. Corporate America never pays a penny it doesn’t have to. How do you think they got so rich?

[Anonymous]

temeculaguy: “It’s going to land somewhere between 1999 and 2002 nominally. That would give you an inflation adjusted price of a little under 200k as a worse case scanrio for your parents house and that will be as low as it will go for an average property in fair condition or a new property. My guess is 2001 numbers nominally, giving it a 1999 feel, 250-280 for their house as a realistic guess.”

Man, I’ve always had a thing for the smart ones…;)

I still say lower. Wanna bet? 🙂

[Anonymous]

temeculaguy: “It’s going to land somewhere between 1999 and 2002 nominally. That would give you an inflation adjusted price of a little under 200k as a worse case scanrio for your parents house and that will be as low as it will go for an average property in fair condition or a new property. My guess is 2001 numbers nominally, giving it a 1999 feel, 250-280 for their house as a realistic guess.”

Man, I’ve always had a thing for the smart ones…;)

I still say lower. Wanna bet? 🙂

[Anonymous]

temeculaguy: “It’s going to land somewhere between 1999 and 2002 nominally. That would give you an inflation adjusted price of a little under 200k as a worse case scanrio for your parents house and that will be as low as it will go for an average property in fair condition or a new property. My guess is 2001 numbers nominally, giving it a 1999 feel, 250-280 for their house as a realistic guess.”

Man, I’ve always had a thing for the smart ones…;)

I still say lower. Wanna bet? 🙂

[Anonymous]

temeculaguy: “It’s going to land somewhere between 1999 and 2002 nominally. That would give you an inflation adjusted price of a little under 200k as a worse case scanrio for your parents house and that will be as low as it will go for an average property in fair condition or a new property. My guess is 2001 numbers nominally, giving it a 1999 feel, 250-280 for their house as a realistic guess.”

Man, I’ve always had a thing for the smart ones…;)

I still say lower. Wanna bet? 🙂

[Anonymous]

temeculaguy: “It’s going to land somewhere between 1999 and 2002 nominally. That would give you an inflation adjusted price of a little under 200k as a worse case scanrio for your parents house and that will be as low as it will go for an average property in fair condition or a new property. My guess is 2001 numbers nominally, giving it a 1999 feel, 250-280 for their house as a realistic guess.”

Man, I’ve always had a thing for the smart ones…;)

I still say lower. Wanna bet? 🙂

[seattle-relo]

So Sandiego, are you considering this because you are having a hard time keeping up with your finances and aren’t saving for retirement? Or is it because you’re pissed about your lost down payment and your condo losing more value? It seems that if you are struggling, perhaps it’s not a bad idea to walk, the bank certainly isn’t going to pay for your retirement just because you stuck it out. But if you’re doing great financially, what does it really matter? Yes the market is going down, but in the end you really don’t know how this is going to play out.
The moral issue is complicated, it’s really your call. You are the one to have to live with your decisions, no one else. I will say that I totally understand how you feel, we bought last year and have already “lost” our downpayment, it sucks and I do feel pissed on many levels, but the truth is it’s out of everyones control.
If you are considering walking, I would meet with an attorney to verify that you do indeed have nonrecourse loans. BTW, I don’t believe you will have debt forgiveness tax with nonrecourse as some people are saying…you certainly want to check that out to be sure.
Good luck with whatever decision you make, but be mindful that you need to get your emotions out of the decision you make.

[seattle-relo]

So Sandiego, are you considering this because you are having a hard time keeping up with your finances and aren’t saving for retirement? Or is it because you’re pissed about your lost down payment and your condo losing more value? It seems that if you are struggling, perhaps it’s not a bad idea to walk, the bank certainly isn’t going to pay for your retirement just because you stuck it out. But if you’re doing great financially, what does it really matter? Yes the market is going down, but in the end you really don’t know how this is going to play out.
The moral issue is complicated, it’s really your call. You are the one to have to live with your decisions, no one else. I will say that I totally understand how you feel, we bought last year and have already “lost” our downpayment, it sucks and I do feel pissed on many levels, but the truth is it’s out of everyones control.
If you are considering walking, I would meet with an attorney to verify that you do indeed have nonrecourse loans. BTW, I don’t believe you will have debt forgiveness tax with nonrecourse as some people are saying…you certainly want to check that out to be sure.
Good luck with whatever decision you make, but be mindful that you need to get your emotions out of the decision you make.

[seattle-relo]

So Sandiego, are you considering this because you are having a hard time keeping up with your finances and aren’t saving for retirement? Or is it because you’re pissed about your lost down payment and your condo losing more value? It seems that if you are struggling, perhaps it’s not a bad idea to walk, the bank certainly isn’t going to pay for your retirement just because you stuck it out. But if you’re doing great financially, what does it really matter? Yes the market is going down, but in the end you really don’t know how this is going to play out.
The moral issue is complicated, it’s really your call. You are the one to have to live with your decisions, no one else. I will say that I totally understand how you feel, we bought last year and have already “lost” our downpayment, it sucks and I do feel pissed on many levels, but the truth is it’s out of everyones control.
If you are considering walking, I would meet with an attorney to verify that you do indeed have nonrecourse loans. BTW, I don’t believe you will have debt forgiveness tax with nonrecourse as some people are saying…you certainly want to check that out to be sure.
Good luck with whatever decision you make, but be mindful that you need to get your emotions out of the decision you make.

[seattle-relo]

So Sandiego, are you considering this because you are having a hard time keeping up with your finances and aren’t saving for retirement? Or is it because you’re pissed about your lost down payment and your condo losing more value? It seems that if you are struggling, perhaps it’s not a bad idea to walk, the bank certainly isn’t going to pay for your retirement just because you stuck it out. But if you’re doing great financially, what does it really matter? Yes the market is going down, but in the end you really don’t know how this is going to play out.
The moral issue is complicated, it’s really your call. You are the one to have to live with your decisions, no one else. I will say that I totally understand how you feel, we bought last year and have already “lost” our downpayment, it sucks and I do feel pissed on many levels, but the truth is it’s out of everyones control.
If you are considering walking, I would meet with an attorney to verify that you do indeed have nonrecourse loans. BTW, I don’t believe you will have debt forgiveness tax with nonrecourse as some people are saying…you certainly want to check that out to be sure.
Good luck with whatever decision you make, but be mindful that you need to get your emotions out of the decision you make.

[seattle-relo]

So Sandiego, are you considering this because you are having a hard time keeping up with your finances and aren’t saving for retirement? Or is it because you’re pissed about your lost down payment and your condo losing more value? It seems that if you are struggling, perhaps it’s not a bad idea to walk, the bank certainly isn’t going to pay for your retirement just because you stuck it out. But if you’re doing great financially, what does it really matter? Yes the market is going down, but in the end you really don’t know how this is going to play out.
The moral issue is complicated, it’s really your call. You are the one to have to live with your decisions, no one else. I will say that I totally understand how you feel, we bought last year and have already “lost” our downpayment, it sucks and I do feel pissed on many levels, but the truth is it’s out of everyones control.
If you are considering walking, I would meet with an attorney to verify that you do indeed have nonrecourse loans. BTW, I don’t believe you will have debt forgiveness tax with nonrecourse as some people are saying…you certainly want to check that out to be sure.
Good luck with whatever decision you make, but be mindful that you need to get your emotions out of the decision you make.

[Anonymous]

“Why not walk?”
That is a very good question. It probably makes the most sense to move on after consulting with a R/E attorney, a financial advisor and a CPA to review the options and consequences. A financial advisor would probably call you a fool if you stayed. The old school mentality of paying your debts goes out the window when your talking about hundreds of thousands of dollars. This isn’t about paying back your friend that loaned you $2500.

We are only in the 1st or 2nd inning of the mortgage mess. He says he could save $36k a year by walking away and renting. He says he is already 10-20% underwater. Does anyone really think that the values are only going to go a little bit lower? The ARM resets haven’t really hit yet and the Option ARM loans haven’t exploded yet. The Govt. is trying to get a freeze on ARM loans. That isn’t going to work for the people in the Option ARM loans. The majority of the people in those loans can only afford the minimum payment of 1.25%. The losses for people in Option ARM’s is going to be STAGGERING and southern CA is the hotbed for that product. 98% of borrowers were using the Option ARM as an affordibility tool when it was intended to be used as an investment tool. What’s crazy is that the majority don’t understand the loan they are in.

The facts:
He bought in 2003 before the really stupid loans(no doc 100%, 100% with no reserves, 100% with low ficos, Option Arm 1st’s with a 100% CLTV, etc) became all the rage. Was he supposed to know that Wall Street would completely lose their mind??

He put $100k down. Even though it looks some or all of it was from the profit of the previous house, $100k is $100k. He didn’t do 100% financing.

He has a 10 year fixed loan with an I/O option. He didn’t use an Option ARM loan like MANY people did so they could afford to temporarily own a home.

To me, it looks like this guy’s bed was made for him by others(wall street and neighbors). Many people have made their own bed by taking out stupid loans that they can’t afford or by repeatedly pulling out the equity from their home due to appreciation.

Very few people realize that these are the types of people that are going to get snared in this mess. Just because they put money down and don’t have a fantasy loan(option ARM) doesn’t mean they won’t be impacted. If your neighbors purchased between 2003-2007, watch out. If they used an option ARM, ask them where they are going to go after the foreclosure and don’t lend them your tools.

[Anonymous]

“Why not walk?”
That is a very good question. It probably makes the most sense to move on after consulting with a R/E attorney, a financial advisor and a CPA to review the options and consequences. A financial advisor would probably call you a fool if you stayed. The old school mentality of paying your debts goes out the window when your talking about hundreds of thousands of dollars. This isn’t about paying back your friend that loaned you $2500.

We are only in the 1st or 2nd inning of the mortgage mess. He says he could save $36k a year by walking away and renting. He says he is already 10-20% underwater. Does anyone really think that the values are only going to go a little bit lower? The ARM resets haven’t really hit yet and the Option ARM loans haven’t exploded yet. The Govt. is trying to get a freeze on ARM loans. That isn’t going to work for the people in the Option ARM loans. The majority of the people in those loans can only afford the minimum payment of 1.25%. The losses for people in Option ARM’s is going to be STAGGERING and southern CA is the hotbed for that product. 98% of borrowers were using the Option ARM as an affordibility tool when it was intended to be used as an investment tool. What’s crazy is that the majority don’t understand the loan they are in.

The facts:
He bought in 2003 before the really stupid loans(no doc 100%, 100% with no reserves, 100% with low ficos, Option Arm 1st’s with a 100% CLTV, etc) became all the rage. Was he supposed to know that Wall Street would completely lose their mind??

He put $100k down. Even though it looks some or all of it was from the profit of the previous house, $100k is $100k. He didn’t do 100% financing.

He has a 10 year fixed loan with an I/O option. He didn’t use an Option ARM loan like MANY people did so they could afford to temporarily own a home.

To me, it looks like this guy’s bed was made for him by others(wall street and neighbors). Many people have made their own bed by taking out stupid loans that they can’t afford or by repeatedly pulling out the equity from their home due to appreciation.

Very few people realize that these are the types of people that are going to get snared in this mess. Just because they put money down and don’t have a fantasy loan(option ARM) doesn’t mean they won’t be impacted. If your neighbors purchased between 2003-2007, watch out. If they used an option ARM, ask them where they are going to go after the foreclosure and don’t lend them your tools.

[Anonymous]

“Why not walk?”
That is a very good question. It probably makes the most sense to move on after consulting with a R/E attorney, a financial advisor and a CPA to review the options and consequences. A financial advisor would probably call you a fool if you stayed. The old school mentality of paying your debts goes out the window when your talking about hundreds of thousands of dollars. This isn’t about paying back your friend that loaned you $2500.

We are only in the 1st or 2nd inning of the mortgage mess. He says he could save $36k a year by walking away and renting. He says he is already 10-20% underwater. Does anyone really think that the values are only going to go a little bit lower? The ARM resets haven’t really hit yet and the Option ARM loans haven’t exploded yet. The Govt. is trying to get a freeze on ARM loans. That isn’t going to work for the people in the Option ARM loans. The majority of the people in those loans can only afford the minimum payment of 1.25%. The losses for people in Option ARM’s is going to be STAGGERING and southern CA is the hotbed for that product. 98% of borrowers were using the Option ARM as an affordibility tool when it was intended to be used as an investment tool. What’s crazy is that the majority don’t understand the loan they are in.

The facts:
He bought in 2003 before the really stupid loans(no doc 100%, 100% with no reserves, 100% with low ficos, Option Arm 1st’s with a 100% CLTV, etc) became all the rage. Was he supposed to know that Wall Street would completely lose their mind??

He put $100k down. Even though it looks some or all of it was from the profit of the previous house, $100k is $100k. He didn’t do 100% financing.

He has a 10 year fixed loan with an I/O option. He didn’t use an Option ARM loan like MANY people did so they could afford to temporarily own a home.

To me, it looks like this guy’s bed was made for him by others(wall street and neighbors). Many people have made their own bed by taking out stupid loans that they can’t afford or by repeatedly pulling out the equity from their home due to appreciation.

Very few people realize that these are the types of people that are going to get snared in this mess. Just because they put money down and don’t have a fantasy loan(option ARM) doesn’t mean they won’t be impacted. If your neighbors purchased between 2003-2007, watch out. If they used an option ARM, ask them where they are going to go after the foreclosure and don’t lend them your tools.

[Anonymous]

“Why not walk?”
That is a very good question. It probably makes the most sense to move on after consulting with a R/E attorney, a financial advisor and a CPA to review the options and consequences. A financial advisor would probably call you a fool if you stayed. The old school mentality of paying your debts goes out the window when your talking about hundreds of thousands of dollars. This isn’t about paying back your friend that loaned you $2500.

We are only in the 1st or 2nd inning of the mortgage mess. He says he could save $36k a year by walking away and renting. He says he is already 10-20% underwater. Does anyone really think that the values are only going to go a little bit lower? The ARM resets haven’t really hit yet and the Option ARM loans haven’t exploded yet. The Govt. is trying to get a freeze on ARM loans. That isn’t going to work for the people in the Option ARM loans. The majority of the people in those loans can only afford the minimum payment of 1.25%. The losses for people in Option ARM’s is going to be STAGGERING and southern CA is the hotbed for that product. 98% of borrowers were using the Option ARM as an affordibility tool when it was intended to be used as an investment tool. What’s crazy is that the majority don’t understand the loan they are in.

The facts:
He bought in 2003 before the really stupid loans(no doc 100%, 100% with no reserves, 100% with low ficos, Option Arm 1st’s with a 100% CLTV, etc) became all the rage. Was he supposed to know that Wall Street would completely lose their mind??

He put $100k down. Even though it looks some or all of it was from the profit of the previous house, $100k is $100k. He didn’t do 100% financing.

He has a 10 year fixed loan with an I/O option. He didn’t use an Option ARM loan like MANY people did so they could afford to temporarily own a home.

To me, it looks like this guy’s bed was made for him by others(wall street and neighbors). Many people have made their own bed by taking out stupid loans that they can’t afford or by repeatedly pulling out the equity from their home due to appreciation.

Very few people realize that these are the types of people that are going to get snared in this mess. Just because they put money down and don’t have a fantasy loan(option ARM) doesn’t mean they won’t be impacted. If your neighbors purchased between 2003-2007, watch out. If they used an option ARM, ask them where they are going to go after the foreclosure and don’t lend them your tools.

[Author]

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