The Cost of Walking away from Investment Property

Did you get a chance to read the Wall Street Journal on Thursday, Oct 18, 2007? The article titled, "Burned by Real Estate, Some Just Walk Away" was insightful for the real estate investor with troubled property. The writers state that walking away from a mortgage is almost always a bad idea. The reason being is that you lose your ability to take out future loans, plus lenders may look to your personal assets to adjust their books. The terms of your loan and state laws must be carefully studied to determine the extend of loss you might experience. Additionally, you will most likely experience a sharp drop in your credit score and you may be taxed on part of the loan which is forgiven. An important point about foreclosure and the resultant credit score effect is the often overlooked fact of increased cost of credit if it is obtainable. The obvious is that credit might not be obtainable, but the less obvious is that when it is obtained it is at a much higher cost. This impact will have a negative impact on a person's life for many years to come.

So if walking away is almost always a bad idea, then what alternatives exist? Well the first thing a person in such financial distress should question their own ability to think through the situation and develop a solution without the assistance of an objective advisor. Second and possibly most difficult thing to do is to listen and heed the advice received. Although the investor that has experience loss should take refuge in knowing many very successful people have overcome great failures in their life.

It is important to identify and prioritize the necessary steps needed to recover from your current position and continue your progress. One of the first steps is to speak with the lender to seek a "workout" loan. Remember - lending institutions really aren't interested in home ownership, especially in a flat or declining market. Also, as an investor it might seem like the smart thing to do, that is go through foreclosure on a property that has a market value less than mortgage value. However by weighing in all the costs of foreclosure and realizing that market value is always changeing it is much easier to gain a long-term perspective for good reasons to ultimately satisfy the note. Foreclosure is quitting, giving up, throwing in the towel. Consider the great championship victories throughout history. The winners are remember for tenacity, persistance, determination! Why not you? Why not be remembered for your willingness to stick it out through the down times? Align yourself with like-minded people and work for a solution. Log on to www.russellcook.net for your assistance with your financial and real estate decisions.

Dow HIts Record Despite Losses at Big Banks

So what is the cause for investors' bullish behavior. Let's consider various points of view. First, investors might consider the banking troubles to be in the rearview mirror for the banks. Secondly, investors may be assuming that the Federal Reserve has the situation under control since they lowered the interest rate by 1/2 point last week. However, I know a lot of the adjustable rate mortgages are not necessarily controlled by the Federal Reserve lending rates but rather indexes such as the LIBOR.
What other possiblities can explain this behavior? Does this reflect expectations for the economy's direction? Do investors feel little alternative except to put their investment dollars into stocks? Is this simply a false dawn like those of the dot.gone era? What are your thoughts? Of noted interest to this blog is, how does this all affect the local housing market? Be sure to visit me at www dot russellcook dot net

So you want to buy a home?

Home buying and selling has been revolutionized with the advent of cell phones and Internet. Twenty years ago a home buyer had choices but none as desirable as today's options. In days of old, you could go find an agent, drive the neighborhoods, or study print material. The best of these choices was the real estate agent because they had all the goodies in one place. However the agent was in control of the information and the process. You'd meet the agent at the office, do a "buyer" counseling session so the agent could establish control, then the process of finding the right home began.

The Internet has totally changed this process although sometimes change is hard and possibly in this case, hardest for real estate agents. The insanity of more webtools and websites has gone on and on. Brokers contracting for office websites and passing the cost on to the office agents, agents not being able to control their own budgets due to "mandatory" costs imposed by office brokers and big franchises. Consumers seeing that they are doing more and more of the home buying and selling process using the available webtools begin to wonder why they are paying high agent fees. This lead to the cutting of commissions, agents cutting fees. These was followed by brokerage houses based on super low commission rates.

The super low commission rates and cash back at closing offers then lead to agents not providing the services buyers and sellers expected. Bottomline, it is worse to pay too little that too much because the pain of inferior service or products last long after the sale is complete.

What is essential services provided by a real estate professional

The Internet has changed many aspects of daily living and real estate is no different. Imagine the days of old where a home buyer had to go into the agent's office to look at all the houses on the market. The agent would pull out a big, 3 ring binder and tell the prospective buyer, "Go through this binder and let me know if you see anything you like then we'll go look at it." Fortunately, those days are long gone!

Today's buyer begins the home buying or selling process very differently. They begin with a common search engine like Google, Yahoo, or Dogpile or maybe by going to Realtor.com, REMAX.com, Century21.com, or Homegain.com. This process helps the home buyer or seller to begin defining the housevalues in their local area. Now a few months or sometimes even a year or more have past and this savvy Internet buyer or seller decides it is time to get serious about the process. The fiscally conservative buyer (and I think everybody should be fiscally conservative - some say, "cheap" - but those talking are probably broke) rationalizes I will save money if I continue the process with out the use of a professional real estate person.

Well in my opinion, this is the stage that the otherwise savvy buyer or seller makes their big error in judgement. You see the problem is that they've not developed a personal relationship with a professional agent since all of the initial stages of home buying or selling started in the privacy of their home or office. This consumer is rightfully feeling very confident about this real estate process as they've navigated the Internet with great ease and skill. Part of an Internet mindset is "secrecy" - "privacy" - no one knows who I am, therefore this cat and mouse game is played out in real life as the home buyer or seller enters into the world of "brick and mortar". What's the choice - maintain the fantasy or come out from behind the curtain. Oh, never reveal thyself! Yes, this is the pitfall.

They've avoided that uneasy feeling of the probing questions from a "hungry" real estate salesperson looking to receive a commission for driving around looking a home after home - just hoping this buyer would make up their mind. So the problem lies with how can a buyer or seller receive good solid assistance from a professional real estate person without all the rest of the garbage?