The Approval Experts | San Diego Real Estate | Short Sales

If you’ve just received an email from your bank stating your automatic payment for your mortgage has been deducted from your account then you are probably like a lot of others Americans. The idea of having the bank automatically deduct that money is seamless, yet in this market so complex.

We are now in 2010 and reality has set in with the real estate markets. We’ve all heard the terms short sale and foreclosure and that’s not going to change anytime soon. We have another wave of adjustable rate mortgage resets happening this year along with some additional issues in the jumbo mortgage market, which is on the horizon that will surely affect the markets moving forward.  This, along with an inevitable boost in interest rates, puts the real estate markets in a very unique position.

A new buzzword around real estate is the term strategic default. A strategic default is simply defined as walking away from a mortgage payment that you can afford, but would prefer to deal with the short term ramifications of a short sale or foreclosure rather than holding on to a negative asset for a long period of time. This idea of strategic default brings up some moral and ethical questions, but looking at a home as investment rather than a money pit tends to answer a lot of these questions.

Many of those contemplating a strategic default tend to think that they may not necessarily qualify for a short sale. In many instances the banks may make it a bit more difficult for the seller, but the banks know full well that the benefits are much greater for bank when conducting a short rather than allowing the home to foreclosure. The government has a program set out to incentivize banks to perform a short sale, so in the case of a strategic default there are still a number of reasons why a short sale is a viable solution.

The term strategic default became somewhat of a national buzzword when Morgan Stanley decided to walk away from 5 commercial buildings they purchased in San Francisco back in 2007 at height of the real estate boom. While having the ability to pay for these assets Morgan Stanley decided to move ahead with a strategic default on these properties rather than dealing with the long-term ramifications. There is still the inevitable meltdown for the commercial markets, which has yet to occur, but Morgan Stanley is well aware that walking away can and most likely will avoid a potential catastrophe with these assets in the future.

If you are thinking about a strategic default or have any questions in regards to a short sale feel free to call the The Approval Experts at 858-345-3825. We would be happy to help answer any questions. We always recommend that those considering a short sale consult both a real estate attorney and tax attorney as each individual short sale is unique. We are located in the San Diego area, but have the ability to assist sellers throughout California.