A very disturbing and potentially damaging trend seems to be emerging in several real estate markets across the country. Especially those markets with flat or even declining values.
The trend seems to be born from both desperation and greed and it could create so many headaches, heartaches and financial troubles down the road that they all can’t be mentioned in this article.
The trend? Well, it seems that some very less than scrupulous folks have resorted to promoting foreclosure to people wishing to move and having trouble selling their current homes.
Did you read that right? People promoting foreclosure? It can’t be true.
It is. Here’s one example.
Word on the street is that smart real estate agents out there are urging clients to take advantage of lower prices by “moving up” homes – moving to a much more expensive home. That makes perfect sense and now is the time to do it. You can actually make a nice “home equity” profit by moving to a more expensive home.
The problem is that these folks have a current home to sell before they can move up. And in some markets it may take months or even years to sell their current home. Not many homeowners are willing to pay for two homes at the same time. They’ve heard the horror stories of their friends who are stuck with two mortgages. So more often than not, these folks wait to sell their first home before buying another.
As a result of the slow market and people reluctant to hold two mortgages, a few “rogue” agents hungry for a commission are instructing people to move and just forget about their old house should it not sell in a reasonable time. Just walk away and don’t worry about it, some say.
That’s what happened to Christopher Kaufman of Farmington Hills, Michigan when he considered selling his condominium and moving to a bigger house.
“I knew homes, and especially condos, were moving slow in my neighborhood. I told my agent point blank that I refused to carry two payments,” Kaufman said. “Her reply took me by surprise. She told me to take advantage of the down market, buy the new home, and just stop paying on the condo. I couldn’t believe my ears. She was actually instructing me to go into foreclosure. Her reasoning was ‘what do you care, you’ll already have your next house?’ She basically was telling me it wouldn’t make any difference.”
Bad advice.
Here’s what may happen if you go into foreclosure:
- You lose all equity you’ve built in your home
- Your foreclosure will stay on your credit report for 7 – 10 years and may damage your credit
- You may not be able to get another mortgage until your credit is repaired
- You may have trouble getting other loans, such as automobile and even student loans
- You may still be held accountable for the debt of the foreclosure, including income tax obligations
- Even when you do again finally qualify for mortgages and other loans, you will probably pay a higher rate and therefore have a higher payment than someone with undamaged credit.
It’s not worth it. Foreclosure is a terrible thing for you, your community, the mortgage company, and the economy in general. Advice to voluntarily go into foreclosure should be taken with a big grain of salt. Well, make that a truck of salt.
Let’s all hope this greedy practice of giving people really bad financial advice stops soon or people may be paying a high price for that bad advice – for years to come.
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