Strategic Defaulting On Your Virginia Beach Real Estate

Strategic defaulting, as opposed to economic defaulting, is the practice of homeowners voluntarily ceasing to pay the mortgage on their Virginia Beach real estate even though they have the financial ability to make the payments—and it is on the rise. This increase is generally attributed to the ever-growing number of underwater loans, falling home prices, the unemployment situation in the U.S., multiple “how-to” websites on-line, and advice from financial “experts.”

A recent study by the Mortgage Bankers Association warns that this practice may well have dire negative consequences on Virginia Beach real estate markets and points to widespread media coverage as the reason for the continuing growth of strategic defaulting. Recently, the overwhelming media coverage of the current financial crisis has made homeowners aware — or at least alerted them to become aware — of their equity position in their home,” said Michael Seiler who headed the study for MBA.

“While the merits of such a choice can and will continue to be debated, what is indisputable is that the possibility to strategically default has certainly been brought to the attention of current homeowners like never before, with potentially negative consequences for housing markets,” said Seiler.

For owners of Virginia Beach real estate who are experiencing or facing and underwater loan situation, the temptation to strategically default is often very powerful. After deciding not to make payments any more, the borrower can live free of the costs of a mortgage payment until the lender forecloses, which may take from several months to a year and may use this time to pay off or negotiate other debt.

There are, however, several negative consequences—on the owner and on the community– for taking such action. Personal repercussions include, but are not limited to, damage to one’s credit rating, inability to obtain another mortgage for a long period of time, and legal action by the lender to collect monies owned by the defaulting homeowner. However, the consequences of strategic default are not limited to the borrowers. Their neighbors are affected as well. Foreclosures cause the value of all the homes in a neighborhood to decrease simply because they will end up being sold at rock-bottom prices. Once that lower value is established as a recorded sale, it drags down appraised values for future sales. This is why strategic defaults can quickly be detrimental on a larger scale and should be considered a moral/ethical decision as well as a financial one.

Search all Virginia Beach VA homes for sale.

April Partida is a Professional, Experienced and Results Oriented, Top Virginia Beach VA Realtor committed to meeting your needs.

April has distinguished herself as a leader in the Virginia Beach Virginia real estate market. April assists buyers looking for Virginia Beach VA real estate for sale and aggressively markets Virginia Beach homes for sale. April is also a Short Sales and Foreclosures Resource Specialist (SFR). Avoid foreclosure and short sale expert, committed to helping families in financial hardship find options to foreclosure.

You can reach April at 757-227-1777 or by email, april@remaxvb.com. ALL of the information, NONE of the obligation!

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s