Foreclosure Viable Option To Some Real Estate Investors In Over Their Head

With the general US real estate market having taken a serious plunge over the last 2 years, many home owners and real estate investors are stuck upside down on their investment properties. If you're upside down on your own home, at least you can continue to live in it and put off plans to sell/move until later. But if you're an investor who was looking to flip properties that are now worth less than what you paid for them, you may be in over your head. You may also be contemplating just walking away and letting the properties go into foreclosure. But before you do that, make sure you understand the risks involved.

Consider this:

• the lender may go after your personal assets, possibly even your principal residence
• your credit score will be severely hurt/reduced for years to come
• part or all of the amount that is "forgiven" by the lender could be considered taxable
• before just walking away, speak with your lender to see if you can renegotiate the terms of your loan

And with the revised bankruptcy laws passed in 2005, it's even harder to shield certain assets, such as your primary residence, from creditors during bankruptcy.

Even so, more and more real estate investors are doing just that - walking away. The Wall Street Journal tells the story of two real estate investors who are upside down on their "flip" properties and are contemplating walking away and letting them go into foreclosure despite the consequences.

And they're not the only ones doing so. According to The Mortgage Bankers Association, in areas such as Arizona, California, Florida, Nevada and the Washington, DC area including Virginia, real estate investors are the major driver of defaults.

Whatever you decide to do, make sure you look at the big picture and the future, not just the short term consequences of your actions.

Further Reading:

Real estate investors driving rising house foreclosures by BloggingStocks

Comments

[Bobby Korey]

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