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Seattle Bubble Forum Archive • View topic - My aunt walks away

My aunt walks away

Myth propagated by bitter ignorant renters, or statistical reality ignored by real estate professionals?

Moderators: synthetik, The Tim, Lake Hills Renter

My aunt walks away

Postby The Tim » Tue Aug 12, 2008 11:31 am

My aunt lives down in the Portland area, and about two years ago (I think) she bought new construction in a small development (<2 dozen units). She was one of the first to buy in the development, and at the time I commented to my wife that despite my aunt's assurances that the builder gave her a "great deal," it seemed likely that the remaining houses in the neighborhood would sell for consecutively less as time went on.

Well, I was talking to my mom last night, and sure enough, that's exactly what happened. It wouldn't be a big deal of course if she had gotten a 30-year fixed, but guess what, she didn't (who did in 2006?).

Problem #1: Apparently she did some sort of financing directly through the builder that required her to refinance this year.

Problem #2:
She put practically nothing down.

Problem #3:
Since all the houses that have sold since hers have sold for less (including larger ones), her house won't assess for what it needs to for her to get a normal, sane mortgage through a bank.

Solution: Walk away. She's handing the keys back to the builder and bidding them farewell.

Now I actually know someone first hand that has walked away. Note that the fact that she is losing "her" house does not mean she's going to end up on the street. It's basically just as if she's been paying rent the last few years, and will move on with her life just like anyone else.
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Re: My aunt walks away

Postby david_mcmanus » Tue Aug 12, 2008 11:53 am

Yeah, Tim, but also there's the catch that her credit is now ruined for the next 7 years.
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Re: My aunt walks away

Postby rose-colored-coolaid » Tue Aug 12, 2008 2:33 pm

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Re: My aunt walks away

Postby rentalbliss » Tue Aug 12, 2008 3:23 pm

My Brother in-law and wife just walked away about 2 months ago, form home in California, could not be happier they did BIL said he wished he did it sooner.
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Re: My aunt walks away

Postby WestSideBilly » Tue Aug 12, 2008 3:39 pm

A bad credit score may cost you if you buy a car ($40/mo on a $30k/5 year loan) or something similar, but credit cards don't reward higher credit scores with better rates. Either way, as RCC points out, the financial penalties of a lowered score are vastly overwhelmed by being 10s or 100s of thousands underwater on your loan.
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Re: My aunt walks away

Postby rose-colored-coolaid » Tue Aug 12, 2008 6:12 pm

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Re: My aunt walks away

Postby explorer » Wed Aug 13, 2008 8:02 pm

Well, Tim, if your aunt was thinking of renting from the any landlords who are members of the Rental Housing Association of PS, they usually don't rent to people who have a bankruptcy on their records for any reason. Even if it is only one of two or more roomates, and one can carry the rent by themsleves if need be. I had a personal experience with that last year.

Right or wrong, more landlords are doing that as the economy worsens. It would not surpise me if other bubble states are doing that too. Hope your aunt finds one of the good old school landlords.

Just sayin'
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Re: My aunt walks away

Postby rose-colored-coolaid » Wed Aug 13, 2008 9:31 pm

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Re: My aunt walks away

Postby explorer » Thu Aug 14, 2008 3:18 pm

You're right RCC. My bad.

I wonder if Foreclosures will become like bankruptcies in Walk-Away cases in the same way. Do they not appear on credit reports?

I wish I could remember the source, but I read something not long ago that some people in CA were being refused rentals because of a foreclosures. Maybe it's because many people are spiraling down financially, and a foreclosure also triggers a bankruptcy?

That may not be the cause with Tim's aunt, but it is for others.
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Re: My aunt walks away

Postby The Tim » Thu Aug 14, 2008 5:11 pm

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Re: My aunt walks away

Postby leaveseattle » Fri Aug 15, 2008 5:39 am

Renting after walking away is not difficult. We walked away in Seattle, and we were quite honest with every renting agency and they did not blink an eye. A few asked for a larger security deposit, but over all they seem to be a smart group of people who realize that many who walk away right now are potentially very good renters-We were eligible to rent in much nicer neighborhoods then what we walked away from...

We also bought a car with crudy credit from non payment on the house, we actually got a better interest rate on the car then our previous car with good credit(before walking away high 700's)
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Re: My aunt walks away

Postby Robroy » Mon Aug 18, 2008 2:44 pm

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Re: My aunt walks away

Postby rose-colored-coolaid » Tue Aug 19, 2008 7:16 am

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Re: My aunt walks away

Postby Niuska » Tue Aug 19, 2008 7:36 am

If I were in that situation I would also walk away. There is no ethical issue involved. This is a smart financial move.

There is nothing "honorable" about making huge payments on a home that is a pit financially. Smart business people face this same type of decision every day. You cut your losses and move on.

In California (a year ahead of Seattle) it is becoming a strategy for people to find their new home at the lower values (20% to 30% discount to their underwater mortgage) with the same quality house.

Get a mortgage on the new home while your credit is good, then move to the new home (with the much lower payment) and mail the keys to the bank for the underwater equity home.

It is happening. I recall reading about it a few weeks ago.

For those with the income and who can afford to make their payments, even though they are underwater, this makes financial sense to do. The credit score impact of a foreclosure is not the end of the world. At the end of the process, it is a $0 balance and debt collectors are not hounding you.

You could likely even dispute it off of your credit reports within two years.
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Re: My aunt walks away

Postby Robroy » Tue Aug 19, 2008 7:58 am

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