Rhode Island Real Estate, Buyers Agents, Paul Silver

Broker Bryant wrote a blog, commenting on another blog, by Richanrd Zaretzky, both regarding intentional defaults on mortgages. Bryant argues that when your home is worth less than 50% of the price paid, or mortgage balance, that in fact it might be financially sound to default.

I would like to point to some of the raminfications of this, and to discuss the moral and fiancial issues involved, however briefly.

First, let's consider that the buyer, at the time of purchase, made a good faith committment to paying for the house they purchased. A contract was signed, and a mortgage lender funded the purchase, in good faith, while the buyer agreed to pay. Later, when the market collapsed, these homes lost value.

Today, lenders have been bailed out, and are still writing down bad mortgages. Shareholders in these lenders, or in companies that invested in mortgage backed securities, took and continue to take a beating on their investments, investments without which, these buyers would not have gained funding. Stock values plumeted, just as housing prices did. This caused the market for mortgage backed securities to evaporate, which in turn led to tight lending, or nonexistent lending, for certain key market demopgraphics.

From a financial persepctive, further defaults on mortgage committments will further tighten home lending, and will further deteriorate housing prices. Intentionally defaulting then results in a further decline in the housing market, and tighter lending which then further pressures the housing market, leading to further defaults, etc. An endless loop that has no upside.

Of course, from the perspective of the buyer/owner, it may make sense to default, as Bryant says, since the values will not likely come back for many years. But in terms of financial issues, this exacerbates the problems already extant in the housing markets.

Morally speaking, would you say that Bernie Madoff made a sound financial decision when he decided to defraud his investors? For Bernie, it may have appeared so, at least until his scheme unravelled. But what he did was to steal from others to increase his own wealth and financial well being. Same as these intentional mortgage defaulters?

How about the fact that this is stealing from investors who originally put up money so that these folks could buy their homes, and doing so to benefit themselves... Sound like a Bernie Madoff routine? Where is Bernie now?

Morally, and ethically, it is a bankrupt affair. Nothing less than theft.

I see no way to rationalize this so as to get to a point where I can discount the moral issues in favor of the personal financial well being of the borrower, who as I said, entered into the mortgage with the understanding that the house was worth what they were paying, and that they would then have an obligation to pay that cost. The lenders made available loans that were at best shaky, to borrowers who perhaps lied about their ability to pay. But it is not all the lenders fault, as no one forced the buyers to buy homes. They agreed to the terms of the loan and purchased the house. Now to decide it was a bad idea, and to decide that they will simply default, intentionally, and live in the house for free as long as poosible, i sa bad financial discision over the long haul, and in the big piture, and is morally bankrupt, period. We cannot discount the moral and ethical issues in favor of our small minded financial considerations.

If you can pay, pay. If not, default, declare bankruptcy, pay the piper, and make a better decision next time. But let's not remove moral issues from the question, as these would be paramount in most other decisions we make.

We are adults who buy houses, and we have learned to take responsibility for our actions, and we teach our children to do the same. How then do we see fit to evade responsibilty here?

Well, I thought I had seen everything... but not really... check this out: an agent in my firm had a buyer whose offer had been accepted on a bank owned property. The inspection was scheduled for the next week. Because of the lender requirements, the buyer had purchased and installed two lighting fixtures over open wire junction boxes... Nice fixtures that they expected to keep using once the purchase had closed.

There were issues with leaking pipes as well, so the listing agent called in his plumber to repair the pipes. When the buyers and our agent showed up for the inspection, the light fixtures had been removed. The inspector would have to return again once this issue was taken care of. This of course would cost the buyers additional money.

The buyer agent called the listing agent to let them know what had happened. He said that the only person who had been in the house other than our agent and buyer to install the fixtures was his plumber. He called the plumber, who at first denied anything about it.

Then, the plumber finally acknowledged that when he repaired the pipes, his wife was with him, and she liked the fixtures, and thinking it was not an issue at all, he removed them for installation at his own house. @*$%!?#

What?

I say, WHAT?

You thought it would not be an issue that you stole the seller (he thought) property? You thought it would be okay? What on this precious earth where you thinking?

My agent managed to get the fixtures returned, but I have never heard a contractor say that he actually thought it was not a problem to remove fixtures from a house for sale. Never in my born days... I had seen the results of such actions, what with copper removed, furnaces removed, etc., but I had never actually had a contractor SAY that he thought it was okay to do this...

My imagination goes nuts for a few hours, but in the end, for our buyers, it worked out okay... but I think this plumber should be jailed...

What do you think, we would like to know.

Not sure what this means: A listing agent is asking for Purchase Contracts from multiple buyers, to submit to the bank that owns the property. These need to be signed by the buyers, of course. Then, in one instance, where we accomodated this, it turns out that the sale goes to a contract for some $30,000 less than our buyer's offer, which was in fact submitted 5 days BEFORE the listing went into Pending Status. Then we are told we did not get the deal. And we see that the purchase if for this much less than our buyers offer. We asked the broker, who said it was simply because the other offer was accepted PRIOR to ours being submitted.

It turns out that the agent with the accepted buyer works for the same firm as the listing agent.

I suppose I look like an idiot, but I dont believe I am actually one... but it seems my looks ,ust have swayed this broker that he could make statements that dont fit the racts, and that I would somehow just agree.

Either it is time to change my looks, or time to step on this sort of practice.

What is your opinion, we would like to know.

These days, we hear many complain that the market is sluggish, that it is impossible to get a loan, that offers are not being accepted. While this may be true in many markets, I just wanted to take a moment to congratulate our top performing buyer agent: Mandie Sullivan. In the last month, she has successfully, and smoothly, closed 5 transactions for buyers. Mandie pays close attention to details for every client, and all walk away with a beautiful home, a reasonable financing structure, and payments they can afford.

Some of the properties closing have needed 203K loans for rehab, and others have been straight FHA loans, most have been first time buyers, excepting investors. All of us here at Focus Professsionals send our warmest regards to Mandie, and to her clients. It has been a great month, and we expect things to only improve as the buying season advances this Summer.

For those interested in working with a buyer representative, who will look out for your interests throughout the purchase cycle, visit the Focus Profesionals, Inc. Rhode Island Real Estate website, and contact Mandie. She can offer great service, experience, professionalism, and an eye for your interests in the transaction.

I was reading today and yesterday some State issued guidelines for receiving two distinct types of grants for fixing up a house: 1) is a weatherization grant, which delivers government grant money for fixing windows, insulating a house, and other aspects of making a home more economical in terms of heating costs. 2) is a grant from the State (using Stimulous money from the Federal Government) to update heating and hot water systems, adding green systems, like wind or solar powered system, etc. These two grants can total upwards of $3000 combined, and more, depending on the house, income levels, etc.

With these, plus the Federal tax credit of up to $8000 for first time buyers, a first time home buyer can now save on the purchase of a house that needs some repairs or upgrades in the amount of around $11,000... Check that number: $11,000!

This would apply to a 3 family house, owner occupied, as well, so I have my son now purchasing a fixer upper, for $90,000, and he will get all the grant money indicated above. SO the property will actually cost $82,000 and he will get an additional $3000 to assist with the upgrades.

FABULOUS!

He is now on his way to being a Donald Trump, or so he says. I try to keep that a bit realistic, but hey, forward looking optimism is a good thing in these days of economic instability.

If you are interested to talk about these possibilities, please feel free to contact us.