“I Surrender”-Foreclosure Quandary

I can’t tell you the number of times I have been asked by friends, relatives and clients about what to do when the value of their home or commercial property drops below the balance of their outstanding loan. Frankly, from a commercial standpoint, bankruptcy is the best way to go as long as there are no personal guarantees to muddy up the process. Further, if it is a non-recourse loan, the property is in an SPE (Special Purpose Entity) and the borrower does not intend to use the SPE for another transaction any time soon, the client can simply pack up and walk away from the property. However, when dealing with single family residences or situations where personal liability is exposed, the answer is not nearly as clear. In these situations the borrowers choices are very limited because their credit is at significant risk. The sad part of this situation is that normally the borrower has done nothing to create the situation as the economic “perfect storm” has caused job loss along with real estate devaluation–both uncontrollable factors. I believe this article http://massrealestatenews.com/tag/strategic-foreclosure/ gives a very fair representation of the situation as well as viable alternatives. Speaking of limited choices, on this date in 1949, Americans got the chance to drive four cylinders of pure fascism, as Adolph Hitler’s beloved “People”s Car” or “Volkswagen” went on sale in the US.  Yes, Hitler was actually the instigator of the round design for the “Bug” when, in 1933, he met with Porsche to see about creating a car for the common German. Clearly,  Dirk Nowitski was not part of the target market.

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Posted in Uncategorized
Tags: distressed real estate, foreclosure, short sales