Shop, Swap, Drop
I just heard a new term today in class from my real estate agent students: Shop, Swap, Drop.
Agent says it's becoming more common for a homebuyer to be shopping for a move-up home; a nicer home in a nicer neighborhood.
The buyer has an existing home far underwater with some variation of an undesirable mortgage: Option ARM, interest only, etc. They don't qualify for any kind of loan mod because they are making enough money to keep making the payments on the existing mortgage.
Buyer selects a nicer home, qualifies with both payments, closes on the new, better home and then defaults on the underwater home.
No need to even try for a short sale because they won't qualify: They have assets. So they default and let first house go back to the bank, trash their credit score for awhile but now have a nicer home.
I can't imagine this will become too terribly common. Most people can't qualify for two mortgage payments. But I could be wrong.
I'm going to post this on RCG to see if we can get any agents confirming a possible trend.
Agent says it's becoming more common for a homebuyer to be shopping for a move-up home; a nicer home in a nicer neighborhood.
The buyer has an existing home far underwater with some variation of an undesirable mortgage: Option ARM, interest only, etc. They don't qualify for any kind of loan mod because they are making enough money to keep making the payments on the existing mortgage.
Buyer selects a nicer home, qualifies with both payments, closes on the new, better home and then defaults on the underwater home.
No need to even try for a short sale because they won't qualify: They have assets. So they default and let first house go back to the bank, trash their credit score for awhile but now have a nicer home.
I can't imagine this will become too terribly common. Most people can't qualify for two mortgage payments. But I could be wrong.
I'm going to post this on RCG to see if we can get any agents confirming a possible trend.
Comments
Guess I watched too many John Wayne movies growing up, such behavior doesn't seem 'right' to me, just like the 'shop, swap, drop' attitude behavior seems immoral to me.
For example, say Morgan Stanley walks away from five office buildings, causing a teacher's union to lose 20% of their pension money, then property taxes go up to make up the loss. And such things happen over and over until the "moral" people are left working until they die, at Wal-Mart too since their higher-paying jobs were outsourced.
I support people taking every possible advantage against big business, if only in a vain attempt to even the score. People who Shop, Swap, Drop paid a premium for their mortgage in terms of higher closing costs, in non-recourse states. They paid extra for the contractual right to walk away from their former houses.