What are your options?

Recently I was a speaker at an Open House event that we put on in the office in Milford, which I wrote about in my last post. I spoke on Real Estate Trends, which are still going down, although not as much any more. When we took questions from the audience a young couple asked a very tough question – “When should you decide to just walk away from a home?”

These days that is a difficult question to answer, because it brings into play both logic and emotion. One can reach a logical conclusion to just walk away and let the bank have the home back, based purely on numbers – what do you owe, what is it worth on today’s market, how long can you hold out at your income level and what could you afford to bring to the table to sell it? The emotion comes into play because, as Americans, raised in a society that puts a value on meeting one’s obligations, it is difficult to bring one’s self to “just walk away.” That’s giving up. That’s quitting and we’re not a nation of quitters.

Here’s a link to a good article about the options by Ralph Roberts a local consumer advocate and writer for Realty Times - http://tiny.cc/MhTWB. As Ralph points out, there are lots of options, some of which may be better than others. Some less than forthright people and companies will try to convince you that the services that they mat offer will get you out of the mess that you are in without pain or consequence – don’t believe them. All of the options that end with you losing the house have consequences to your credit score and to your lifestyle for the next few years.

Many people say that they don’t need credit, that they’ll just pay cash for everything. That sounds great, but in a society like ours, that is credit-oriented, that is easier said than done. Almost all big-ticket items, from homes to cars to furniture are bought on credit these days. Delaying those purchases in order to save enough cash to make the purchase gets harder and harder as you back through that short list – furniture, cars, homes. Not only is your ability to purchase things hampered by bad credit, you ability to earn the money to buy things might be too. Job applicants with bad credit might get a little extra scrutiny by perspective employers and would almost certainly be asked to explain the situation that caused the problems.

So, when should you just give up and walk away? I guess I’d agree with Ralph that you should first explore and try all of the alternatives that apply to your situation. You don’t have to drive yourself into poverty and you certainly should protect your future retirement, rather than spending down your 401K or other retirement funds; however, you should seek the advice and help of professionals and do what you can afford to do to avoid the stigma of either a foreclosure or a bankruptcy.

If everything that you try fails and you end up having to do a short sale, go into foreclosure, do a deed-in-lieu or declare bankruptcy; then suck it up and start executing a come-back plan. Don’t waste time wallowing in self-pity or trying to find someone else to blame. Stuff Happens! You’re still here so get on with life.