patrick.net

EBGuy,

You're probably right. Even a short sale is better than NO sale! That's just how desperate a corner they are painted into! What they will lose though is the wink, wink nod, nod primrose path that's become the crutch of a generally weak sales crowd.

In the past I'm sure if a buyer was on the fence about "upping his offer" in a bidding war on a vacation property you could always whip out the ol' "When you go to sell it... well, you know" line.

Duke,

Great comment. Actually, it's beyond just bragging about gaming the system; it's getting to the point where you're perceived as a fool if you're not gaming. The system can only bear so many free riders, however, before it breaks down entirely.

Almost more important than the economic impact of the Great Unwinding is the lesson that wlll (not?) be taught by how we handle the many, many people who lied, cheated, and manipulated the system for their own personal gain. I, for one, have no issue with the individual who purchased a home and cannot sell it for the mortgage value getting a pass on having the debt forgiveness treated as income if: 1) 1st mortgage and 2) no refinance. No exceptions. If there is a blanket forgiveness covering everyone, then the irresponsible will be well and truly rewarded and the responsible will be well and truly treated cheated.

We need to speak the truth: gaming the system isn't gaming the system, it is lying, cheating, and stealing. Of you, me, and every other honest individual in the United States. When someone doesn't pay their fair share of taxes, it's exactly the same as stealing money out of my pocket. When an irresponsible banker knowingly makes a loan that can't be repaid and then expects the "government" to ease the pain, it's exactly the same as stealing money out of my pocket. When an irresponsible borrower borrows money and spends it, and doesn't pay it back, it's exactly the same as stealing money out of my pocket. They're not victims.

At the end of this mess, will the take-away be that only fools don't lie, cheat and steal?

Ed S,

That's a good point. As far as acid tests go, I mean if it was the guy's only home, was not leveraging his income to the max for "vacation/rental" homes and either didn't take cash out OR.... used any cash out simply for repairs and maint. of the home, I've got no problems.

But in today's crazy whacked out world, how many people does that describe? What percentage of home owners actually lessened their mort. term? How many paid down/off the loan on an accelerated schedule? How many only took out the needed cash for repairs?

In those crazy days people took out whatever the mortgage broker told the appraise-whore to say! I think that's why by mid/late '05 we saw such a rash of koi ponds and other low dollar quick-fix curb appeal projects. People began to sense the game of musical chairs was just about over and were trying to get their home to the market as quickly as possible. What would really be interesting is to do a survey among say all those sellers in SAC and find out how many of them have no designs on buying if they are actually able to sell! In the past it was just assumed that any seller would also, in fact turn around and become a buyer as well. I think we'd be surprised to see an alarming rate of folks that would love to get to the sidelines and stay there until the dust settles.

Apostasy,
Thanks for the link. Cleared up all of my questions.

DinOR

I bailed in the summer of 2004 -- I'm happy that I did. I suspect that many of the goofy add-ons (e.g. koi pond) stemmed from "Flip That House" and their ilk. I never watched that many of them, but I was always amazed on the few occasions that I did with the "Add a koi pond (or some other trivial decoration). Cost: $1500. Increase in value: $8000".

Back to the point about purchasing: too many people temporarily suspended disbelief about what they were doing in the last 5 years (2002-2007). You are a financial professional -- if you went to a client and said, "I recommend that you buy 100 shares of GE" and had a good rationale for the purchase, you'd probably get a fair hearing.

However, if you said, "Hey, instead of buying 100 shares of GE, how about if we buy 10 call option contracts on GE and sell 10 put option contracts on GE; it's the same as just buying the stock but you'll have 10x the return from just buying the stock AND I can do it with no out of pocket expense (except commissions) and GE will only go up and you're going to sell it in 2 years anyway", you'd be shown the door (by most people). But this is EXACTLY what too many people have done in the last 5 years. And they lied about their experience, income, and net worth so they could do the deal. They have bought an option and sold an option; now one is in the money and one is out (too bad it's the one that they sold that's out).

If they'd have just bought the 100 shares, they could weather the storm. But they didn't, and they can't.

The more I think about the entire situation, the angrier I get.

new thread: Bill Gross insists Fed charter includes propping up housing bubbles

I probably should have declared BK about five years ago. Instead, when I realized I was not flying right I tried to work out of it by working harder. This did not work and finally the whole thing imploded (as Ebay itself is imploding) and I was no longer *able* to keep things going.

I would actually be homeless right now if it weren't for an old friend NOT a Californian and NOT living in California who's given me a place to stay. The other plan would have been to put my stuff into a storage locker, and work out various places to sleep in the bushes at night, maybe by the time the weather got cold have shelter under some program - at least I'm not a druggie etc which is not appreciated in shelters.

As a Californian by birth who's live in CA for many years, all my CA "friends" told me to get screwed or pay 'em almost what I was paying for my apartment for a single room to rent. Nice. But here I find myself in N. Arizona being treated well, damned well.

The new BK law is not unfair. You can't do a chapter 7 unless you're below your state's or area's median income. You have to get financial counseling. It's not even much more expensive than the older version of the law. I have always felt that if a person has to do a BK, it should be where there really is no alternative. No toys - you've sold your toys or as in the case of my car, had 'em repo'd. You'd better be shopping at thrift stores and cooking at home and pretty much livin' la vida 1930s. Well, I am. Not only that, but I'm getting GOOD at living la vida 1930s - nothing like hanging around a bunch of cheap old farmers to learn that. Nope no siree, when I get out of this financial fix.....

I won't jump right back into that consumerist play pool! I get my BK done and things resolved with the IRS, you won't see this kid buying a new car! Or new clothes, or any cereal other than good old rolled oats. No more of the mindless consumerism that makes our system go, nope, it will be mindful nonconsumerism. And not only that but I like to TALK about it. With all the millions who will be financially screwed too there will be plenty of listeners, look at all the frugality-themed web sites these days and how Craigs List has a frugality forum. Nope we'll have learned our lessons and being deeply moral, won't treat a BK as a Get Out Of Jail Free Card and go on our merry way, back to partying. We will go our way with stiff necks and upright mein, and we will Spread The Word.

And this will break the economy.