SunWest, REALTORS®

Last week I talked about homeowners that are just walking away from their mortgages. This occurs most often when home values fall below the amount of their mortgage. In common vernacular, they are “upside down” in their homes. These individuals have not lost their jobs nor suffered a financial disaster; they are just walking away from their mortgages as a strategic move. They figure that since they have negative equity, they will just take the credit score hit and wait for the market to improve when they can purchase again and the foreclosure has dropped off of their record.

This is a very short-sighted decision to which the government is not contributing by bailing “over mortgaged” homeowners out. Under the law, there is a doctrine known as “sanctity of contract.” It is the doctrine on which much of our system of capitalism is based. In other words, if one signs a contract they are expected to live up to the terms of that contract or the law provides remedies for default.

Think about the consequences if there is no legal remedy for all the contracts we sign in our lives. For example, you borrow money to purchase a car and about 10 months into your note, the lender doubles the interest rate. Without sanctity of contract—the premise that both parties are bound to the terms of the contract—you have two choices, either pay the increase or surrender the car. Your common sense reaction would be to pay cash for your next car. Fool me once shame on you, fool me twice…

In the case of mortgages, if the lender is continually faced with homeowners walking away from their obligations, fool me once…. A reasonable business decision by the lender would be to increase the interest rates, increase the down payment requirements and place tighter qualifying restrictions on the next borrowers seeking home loans. Increased risk requires an increased reward for the lender.

The consequences of the lender’s business decision will result in fewer qualified buyers in the marketplace. Fewer qualified buyers in the market will demand reduced housing prices before they will purchase. As homes become harder to finance, prices will fall. I always like to ask this question. What would you have paid for your last car if you had paid cash? Most people would probably say $1,000-$2,000.—about the amount of money they paid as a down payment on the car they’re driving.

The natural consequence of homeowners “walking away” from their mortgages will hurt all of us in the long run. If the government forces lenders to change their mortgages to “help” “over mortgaged” individuals thus destroying the sanctity of contract, all of us will not only pay now but for decades to come.

A recent New York Times articles, No Hope in Sight, More Homeowners Walk Away, talked about the phenomena of homeowners just “walking away” from their properties and their mortgages. This occurs most often when home values fall below the amount of their mortgage. In common vernacular, they are “upside down” in their house.

These aren’t people who have lost their jobs or their ability to pay; they are just choosing, as a so-called strategic measure, to quit paying. The critical threshold seems to be when the values drop to 75% of the mortgage amount. It is estimated that 4.5 million homeowners had reached this threshold. Fortunately, for the most part, this is not a problem here in North Texas.

The article points out that bloggers are quick to say that large scale real estate investors walk away from properties and mortgages quite often when they are upside down and the investment no longer makes economic sense. This is true but there is a vast difference between the two situations. The difference is personal liability. 

In the case of investors, the lender is looking to the investment itself as collateral for the loan. In the event the borrowers default, the lender will repossess the investment property and not hold the investors liable for any deficiency that may occur.

That is not the case with a home owner. When the homeowner signs a mortgage or deed of trust, they are pledging to be personally liable for the debt. So the lender is not only looking to the property to secure his loan but also the individuals themselves. In the event of a foreclosure and a subsequent deficiency, the lenders may pursue the borrower’s personal assets for satisfaction of the deficiency.

Feng Shui is a blend of philosophy, interior design and ergonomics. The Feng Shui symbol literally means wind (the top symbol) and water (the bottom symbol). The idea is that we should harmonize with our environments.

One of the principles of Feng Shui is the Predecessor Law. This has to do with the vibrations that remain in an environment after those who lived or worked there moved on.

Having been in real estate for over 30 years, I’ve had the opportunity to see this phenomenon in action. I remember that our real estate office sold the same home three times in six years. Each time the reason for the sale was that the couple was getting a divorce. We, the agents in the office, jokingly called it the ”divorce house.”

There was another home that we knew would be on the market shortly. Over a time of ten years, that house was sold six times. We knew that if we sold a couple that home that they would soon be moving on and all of these couples had different reasons for moving. I personally think that the home had bad Feng Shui and the sellers could never identify exactly their reason for wanting to move.

Science has demonstrated that all (yes, I mean all) elements (including us) have their own internal vibrations. Hebrews call it Ruach, Greeks, Pneuma, Japanese, Ki, and Chinese, Chi.  Because of these vibrations, our environment affects us more than we realize.

Feng Shui carries the idea of attuning ourselves with these vibrations harnessing them rather than struggling against. A good analogy might be the 98 pound lady that, using judo, can throw down a 200 pound man by aligning her energies with his and using that combined force against him. Judo teaches you to use your opponent’s energy to defeat him.

Interestingly enough, in the course of a week, I preview many homes for my clients and very few of them have what I would sense as good Feng Shui. Mind you, these are nice homes, there is nothing about their decorating that shouts “bad Feng Shui.” They just don’t “feel good.”

You know how you feel good at one table in a restaurant and not another? You work well at one desk and not another? You walk into a room and instantly feel comfortable almost like you have been there before. I will walk into a home and the home will give off good vibrations as if I have good memories in this home and yet I’ve never been there before.

So how’s the Feng Shui in your home? We have connections with individuals who will stage your home (for a fee, of course) and give it those good vibrations. They, whoever they are, say a home will sell 40% faster if staged properly. (Don’t ask me how they got that figure.)

Call us; we’re full of house information.