Great post Jeff!

Jeff, I’m SO glad someone said this. I talk to so many REALTORS who want me to negotiate short sales when there is no financial hardship. Many REALTORS think this is OK – I’m with you and I’m sticking to my guns: No hardship = not short sale!

Everyone has the right to sell a property. If 600k is owed and the house is only worth 300k and the homeowner needs to sell because of job, family, etc, then they obviously must do a short sale. This is regardless if they can afford it or not.

On the other hand if the homeowner can afford the payments and chooses to sell because he’s mad about how unfair life is, then I say slap him with that 1099 and let him pay.

Ben, A 1099 is the easier way out for the owner. Why not make the owner/borrower honor their word and repay the money that they promised to pay when they borrowed the money.
If the borrower truly can not make the payments due to job loss, death, divorce, loss of health, etc then a short sale makes the most sense for all involved.

True, however, I just can’t swallow the fact that a person with money should be treated differently than a person without money.

A talk show on Fox said something a while back that I found intriguing. They were talking about the “people with money.” They said something to this effect. When a rich person’s vote counts for more than 1, we will then talk about changing the rules. Don’t quote me, but, I think it was something along those lines. It made me think about how Bill Gates vote counts the same as a poor persons vote in line at the unemployment office. Not sure how it all blends together, but, I thought I would share.

Thank you for the reply, Jeff.

This is a moral dilemma and a tough situation for responsible hard working people whose principles are such that they don’t believe in renegging on their promise to pay. (I hear their pain every day.) Yet, it’s pretty obvious that continuing to pay on a $600k house that is only worth 350k will lead to financial ruin. I see this in Watsonville and other areas of Santa Cruz County for people who bought during the peak of the market. In essence, they were “taken” by the greedy bankers who “underwrote” mortages to people who clearly could not afford the payments and thus drove up prices in a feeding frenzy. They are the true victims (not those who put zero down and then received free rent for months and months while in default) and they should do what is right for the financial health of their families. It’s about survival. This is one time I will respectfully disagree with Jeff Watson.

If you are underwater with no chance of getting back to even in the next 5 years, I say exercise your contractual right to give back the property via foreclosure. If a lender will accept a short payoff, release the lien AND agree to not pursue a defiency or promissory note, that’s even better than foreclosure. The sooner we get the real back bone of our economy (hard working, honest Americans) to financial health coupled the with the housing market correction, the better we will all be.

We shall agree to disagree. There is NOT a “contractual right to give back the property via foreclosure.” It is a breach of contract and a violation of the terms of the promissory note. The value of the house is secondary to the owner true ability to pay. The perceived ability to pay changes as the homeowner realizes how upside down they are. Those than can pay but won’t are making things worse for those with true hardships.

I agree with this Jeff..

“Those than can pay but won’t are making things worse for those with true hardships.”