The story from the Orange County Register doesn't seem to make sense. One out of every five homes sold recently in Orange County was sold at a loss. This means that 20% of homeowners sold their homes for less money than they paid for it. Why would anyone do this? The answer is a strategy called "strategic default."
A strategic default is a deliberate default by the borrower. They are commonly employed by mortgage holders who have weighed the costs and benefits of defaulting on their mortgage rather than paying off the mortgage and determined it more beneficial to default. Currently, banks have their hands full with an extraordinary amount of foreclosures. Smart homeowners who may be able to pay their mortgage now but know that they will not be able to do so in the future due to unemployment or other reasons, might choose to default on their mortgage. By defaulting on their mortgage a borrower gains the attention of the bank increasing the probability that the bank will approve their short sale.
For some, the idea of a strategic default may seem immoral. After all, if a person promises a bank that they'll pay off their mortgage, shouldn't that person uphold their promise? Well, not necessarily. The first thing borrowers need to understand is the difference between making a promise and entering into a risky business contract. According to the Rasmussen Law Firm, "when a homeowner enters into a mortgage agreement with a bank, both the bank and the homeowner are entering into an agreement whereby both are taking a risk on the assumption that home values will increase. The expectation is that, in the end, both the homeowner and the bank will "win" in the deal." As many homeowners in Orange County know, they did not "win" on the deal. The banks, however, are not suffering as the homeowners are suffering. Even though they, in partnership with Congress, were responsbile for crashing the housing market, it has been the homeowners who were left to suffer the consequences. You can click HERE to read more about why strategic defaults are morally permissible.
If you have thought about your future and believe it unwise to continue paying your underwater mortgage, it may be time to think about a strategic default and a short sale. The strategic default and short sale process is legally and technically challenging. Before you default on our mortgage, consult a real estate attorney. If you decide to short sell your home, be sure you are working with a real estate agent with a proven track record of short sale success. The national average for short sale closings is only 20%! The Rasmussen Law Firm and Fitzpatrick and Prince Real Estate have teamed up to successfully close 95% of the homes they short sell. They have a proven record of success, are knowledgeable about what you need to do to avoid drowning in your underwater mortgage, and can provide their services to you, the seller, at no cost. That's right, absolutely free. Start the conversation today. Give Mark, Whitney, or Blake at Fitzpatrick and Prince Real Estate a call: 800.880.9962.
