Jul032012

Strategic default opposed by realtors who want short sale commissions

Realtors favor anything which generates a commission and oppose anything which fails to irrespective of whether or not this is good for buyers, sellers, or the market. For example, realtors recently lobbied against allowing bulk sales of foreclosures to private equity firms. Why? Because those sales eliminate MLS sales which would generate commissions. There is no other reason.

When it comes to short sales versus strategic default, I am indifferent. For loan owners who would benefit from reduced debt, either option solves their problems. I recently noted that strategic short sales are the moral alternative to strategic default. Perhaps the moral and ethical considerations matter most to some borrowers. The threat of strategic default is the only leverage a loan owner has to get a lender to negotiate a loan modification or agree to a short sale. If a lender says no, the loan owner can flip them the bird and simply quit paying. Loan owners should always consider this option.

realtors only want loan owners to consider short sales because that’s what generates commissions.

Strategic default is not the best option for distressed homeowners

Posted June 24, 2012 at midnight

For homeowners in danger of losing their home, walking away might seem like an attractive solution.

“Many distressed homeowners in Ventura County have been getting bad advice when it comes to strategic default,” said Jean Warnke, Certified Distressed Expert with Troop Real Estate Inc. “It has become fashionable for some so-called experts to recommend defaulting on your mortgage as a method of dealing with pending foreclosure,

Strategic default is a good option for any underwater loan owner making mortgage payments far in excess of comparable rents. Those people are just flushing money down the toilet and throwing away their money on interest. Strategic default or a strategic short sale are both viable alternatives, but as one might imagine, realtors prefer loan owners exercise the option which generates them a commission.

but this is actually one of the worst options imaginable.”

Well, strategic default is certainly the worst option for generating a commission. So what evidence can she present to back her claim?

Strategic default is a method some homeowners who are in danger of losing their home to foreclosure choose to take. Rather than spending more money trying to save the home, they simply let the bank foreclose, take the credit hit and then walk away.

Yes, it is foolish for loan owners to throw good money after bad. At some point, these people need to cut their losses and move on.

“It is unfortunate because there are so many better options available to homeowners under the threat of foreclosure than this,” Warnke said.

Like what? Loan modifications? We have seen what a dismal failure those programs are.

While strategic default can provide immediate relief to the overwhelming feeling that the threat of foreclosure brings,

Yes, it does. Once people decide, the financial distress immediately recedes. In fact, once people stop paying their mortgage, they are so rewarded that most loan owners work to game the system to stay in the property as long as possible.

it can have devastating effects on a homeowner’s future ability to find affordable housing.

It that bogeyman the best she can do? Strategic default and foreclosure has no greater impact than a bankruptcy, and it’s only marginally worse than a short sale. 

As a CDPE, Warnke makes a point to find the best possible options not just for the present, but for the future as well. “There are options for homeowners in that can have a much lighter effect on their credit while also allowing them to walk away from an oppressive mortgage,” she said.

That pretty much eliminates loan modifications. So what option does that leave? I guess you need to contact Ms. Warnke to find out. After she explains your dismal “options” she will be delighted to take your short sale listing — which you can be sure she will push on you.

Warnke can be reached at 218-0118,or send email to [email protected] For more information about the CDPE designation, visit www.CDPE.com.

I find these pseudo-news stories realtors contribute to newspapers amusing. Newspapers are obviously desperate for free content, and realtors are happy to provide this content to plug their businesses. I have contributed to the OC Register, and I probably would more often if I saw more benefit in it. The system isn’t necessarily flawed, but readers need to recognize much of this content isn’t news, and often it isn’t even accurate, and usually it is self-serving.