Tuesday, January 22, 2008

During the real estate boom, a lot of lenders effectively stopped requiring down payments. One consequence is that, if the value of the house drops, and the buyers want to leave, they can hand the bank the keys and walk away without losing anything. If the price drop exceeds what little principal they've built up, they literally have nothing to lose.

Apparently, there are bankers that feel that people who are doing this are somehow letting the banks down; one from Wachovia complains that some of them "had the capacity to pay, but basically just decided not to."

Well, one thing that gets said of troubled homeowners is that they made a deal, and if it went sour, then maybe they should have thought more about it going in. If that applies to poor zhlubbs who got pressured into a bad snap decision by pushy realtors, then it surely applies to the banks.

Then again, maybe this is just the new American ethos, in which forgiveness is only for big shots. One off-beat thing that's shaping my perspective on this a bit is seeing the reactions to a much-loved local ice cream shop that got into tax trouble, and (making no excuses) is asking for those with a will to extend a little help. Now, mind you, I don't see this personally as a charity thing. I make my charitable donations elsewhere, and I'm giving them a little cash because I've made a cold, hard-hearted, purely self-centered calculation that come summertime, I'll want their ice cream. But if you read the comments on their impromptu blog, it's astonishing how many people there are apparently offended by the idea that people might want to help a friend who's in trouble, even if some of it is their fault...


Blogger Byrne Reese said...

In reference to my article on majordojo I think you miss the point. It is not about pushy realtors at all. It is about a climate in which buyers are rushed into a decision because of the market climate, not because of a realtor. For example, a seller naturally has it in their self interest to sell their property quickly - possibly because they face a financing contingency on another house they are purchasing. I mean hell, if you had a choice between selling a house in 5 days or 30, which would you choose?

2:33 PM  
Blogger charles said...

Well, it matters more to my argument that people feel pressured than by whom. That said, if that open house happened any time within the past few months, it's the realtor. Mind you, what they said wasn't a lie. I'm sure they would take an offer at 1:00 PM the day after tomorrow. Or, almost certainly, at 3:00 PM the day after that. Or the following Friday if it were more convenient. For you. Not for them.

I know someone who sold a house over there who was startled and rather distressed by the way the market had turned. This was a very nice place in the heart of the valley, and he spent tens of thousands of dollars staging it. (All that snazzy interior design that looks so hot that you can't quite believe real people live like that? They don't). And yet the place sat on the market for months --- more than a year ago, and things have gotten worse since. Yet if anyone had asked the realtor the same question you did, I expect they would have gotten pretty much the same response.

I'm hardly advising you to buy --- I made a decision to keep renting in Boston years ago because things looked overheated to me even then. But if you do, take your time. Offer what you can afford to pay, or a substantial discount on whatever they're asking, whichever is less. And, if you like, tell them that they have until the day after tomorrow to decide whether they'll accept the lowball offer. That's hardball, but sometimes it works.

4:26 PM  

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