SHORT SALE AGENTS CAN MAKE A KILLING
According to Wikipedia, a strategic default is “the decision by a borrower to stop making payments (i.e., default) on a debt despite having the financial ability to make the payments.”
In late January of this year, a report on strategic defaults issued by the Nevada Association of Realtors seemed to confirm the findings of the two studies I’ve discussed. The telephone survey interviewed 1,000 Nevada homeowners. One question asked was this: “Some homeowners in Nevada have chosen to undergo a ‘strategic default’ and stop making mortgage payments despite having the ability to make the payments. Some refer to this as ‘walking away from a mortgage.’ Would you describe your current or recent situation as a ‘strategic default?’”
A growing number of seriously underwater homeowners are beginning to sense that their property’s value will not return to what they paid for it for many years, if ever.
The findings of a shocking new survey reported jointly by trulia.com and realtytrac.com were released on May 18 of this year. It revealed a dramatic change in consumer attitudes about when the housing market will “recover.” Only last November, 37% of those polled believed the recovery would begin no later than the end of 2012. That number plunged to 18% by April.
Most ominous in the report is that 54% of those surveyed thought the recovery would not occur until “2014 or later.” This percentage was only 34% in November 2010. Such an extraordinary shift in six months tells me that the number of potential walkaways is growing by leaps and bounds.
Of those surveyed, 23% said they would classify their own situation as a strategic default. Many of those surveyed said that trusted confidants had advised them that strategic default was their best option. One typical response was that the loan “was so upside down it would never have been okay.” What seems fairly clear from this Nevada survey and the two reports is that as home values continue to decline and loan-to-value (LTV) ratios rise, the number of homeowners choosing to walk away from their mortgage obligation will relentlessly grow. That’s good news for short sale real estate agents.