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.