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"Buy and Bail" -New Scam

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Frederick

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Nov 2, 2005
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Certified General Appraiser
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New Jersey
http://www.wsj.com/article/SB121314811278463077.html

This article talks about people who are "Upside down" purchasing a comparable new home at a savings and allowing the former home to go into foreclosure once the new purchase is complete.

Today we see what the lack of ethics and integrity have cost us.

In the late 1960s and 1970s when discussions of morality and ethics became controversial we were fed the lines; "who are you to judge" and "what makes your standards of ethics valid"?

The tolerance and acceptance of today's world comes at a heavy price. "If it feels good do it" and "no holds barred dealings with evil corporations" and "situational ethics" philosophies have all cost us a heavy price and undermined our social, governmental and business structures. Broken homes, fragmented families, governmental corruption and corporate greed plague us.

Character still counts
 

So Cal RealEstate

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Jun 3, 2003
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Certified Residential Appraiser
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California

Mike Boyd

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Jan 18, 2002
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Retired Appraiser
State
California
So what would you have these families do? Rentals are few and far between, in some markets, homeless shelters are full, their parents live in a senior community.

Their homes are worth less than the mortgage that's on it and the lender will not do a short sale. Is it "ethics" that prevents them from giving a deed in liew of foreclosure to the lender who screwed them in the first place....or just more of the stupidity that got them into the mess in the first place?
 

Karl

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Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Arizona
B.S. B.S. These folks were NOT suppose to be buying these homes as "Investors" Unless the Appraiser KNEW at the time they were NOT Owner Occupied & just checked the box.

They simply bought more than they could afford. So what IF the home is Not worth what they paid for it still roof over the heads. IF you buy a Stock or a Bond & it goes South you loose!! So IF you buy a house with the thought that RE only goes up as some believe & then find that it is not true. Some on here believe it's OK to walk???? Sorry but I just can't buy that, what would we be saying IF the prices were still rising like they were during the False "Boom" ??? Every one that can make an X should still be buying?? Sorry but many that bought these expensive homes instead of buying what they could afford. I have no smpathy for the majority of them & to allow them to simply buy another home is going to just make things worse.

Here's a question In Analying a purchase in todays market. Remember this is todays market with Appraiser supposingly keeping up with current events,... How many would mention that the buyer owns & date of purchase of other homes??
 

John Hassler

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Joined
Jul 23, 2002
Professional Status
Certified Residential Appraiser
State
California
As distasteful and such ethics may be, the was the greed and lack of ethicical behavior of some, and certainly the largest, lenders which afforded this option to the borrower. In fact you could say that borrowers are now acting just like the lenders, looking out only for themselves with complete disregard for others. Had these lenders shown prudence in their lending guidelines much of the current crisis could have neen avoided however that would have meant less short term profit and production bonuses. It was all about the pushing product (loans) through pipe, folks.

Even now with the lenders, it's all about about short term $$$. The REO sales rationale I see is "don't prep the property for sale just put it on at a lower price than the other REO properties for sale and get it sold now". This has created a vortex of lower prices causing even more borrowers to lose their home as they can't refinance and consider walking from the loan. Why are we suprised to see the borrower acting in his/her personal self best interest when the lenders have been doing that for years without regard for the borrower?
 

George Hatch

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Gold Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
I'm not saying I agree with it, but the reasoning I've seen put forth for this is that the borrower and the lender entered into a contract. The terms of the contract allow the borrower to hand the property over to the lender in the event they will cannot or will not pay the mortgage. The lender's retribution comes in the form of the ding on the borrower's credit. Personal honor above and beyond the terms of the contract are optional on both the part of the lender and the borrower.
 

Kevin A. Spellman

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Joined
Aug 30, 2003
Professional Status
Certified Residential Appraiser
State
Massachusetts
This is nothing new, I saw this first hand in the late 1980s when the condo conversion market went down and the owners/investors secure a loan for a single family and used the rent of the condo to be excuse from the debt service on the condo so they could qualify for a new single family purchase. They did walk away from the condo. I see this as a business decision, not so much ethics. Mortgages are a business and come with risks. The problem today I see, can an applicant demonstrates rent levels for a home in a foreclosing market or have the income to qualify for the new purchase.
 

DTB

Elite Member
Joined
Jun 11, 2004
Professional Status
Certified Residential Appraiser
State
Illinois
I'm not saying I agree with it, but the reasoning I've seen put forth for this is that the borrower and the lender entered into a contract. The terms of the contract allow the borrower to hand the property over to the lender in the event they will cannot or will not pay the mortgage. The lender's retribution comes in the form of the ding on the borrower's credit. Personal honor above and beyond the terms of the contract are optional on both the part of the lender and the borrower.

Exactly, purely a business decision. No extra vitriol need be assumed nor added.
 

Karl

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Arizona
There is one X poster I wonder how he's doing. Many of his posting's got mixed with Mike Neff postings cause although he did supposedly similar invested as Mike Neff the only actual common thing they from what I can tell, was his name was Mike also. Wonder how he's doing with all these new current events.

You all do realize who is going to be the ultimate payer for all these BAD loans don't you??
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
There is one X poster I wonder how he's doing. Many of his posting's got mixed with Mike Neff postings cause although he did supposedly similar invested as Mike Neff the only actual common thing they from what I can tell, was his name was Mike also. Wonder how he's doing with all these new current events.

Since being banned here, he's quite active on another forum... still in the investing biz too. We talk regularly, passing tips back and forth. When the market moves it doesn't mean to stop investing, it just means your previous methods and criteria must change.
 
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