Strategic Default- Stay or Go?
Strategic Default- Stay or Go?
Strategic Default is when a borrower chooses to stop making payments despite having the ability to pay. Strategic Default has been very common over the years in the commercial real estate sector and is now getting more and more common in the residential sector due to home values dropping so far.
In the residential sector there has been a moral debate as to whether Strategic Default should be acceptable. I can tell you from a banks point of view although they frown on it, we have had numerous successful Strategic Default transactions. We don't feel we should judge ones decision to ditch a bad investment to protect or help their family. As long as our clients properly disclose their financials and are up front and honest with the bank then I don't see a problem with it. Ultimately it is up to the bank and if they are okay with taking the loss then we are too!
We have many readers from other states so I want to point out I am writing this blog from a local market prospective. Many of our clients are hundreds of thousands under water, amounts that will take decades to re-coup if ever. There are other tax advantages available now that may not be available in future years so taking a hard look today could save someone a great deal of heartache later.
Below is a Decision Tree that may help you decide if Short Sale or Foreclosure is in your best interest. Thank you to Thomson|Conant PLC for permission to use this chart. 
Eric & Jennifer Sanchez with the Jennifer Sanchez Team at Keller Williams Realty Professional Partners operates a Real Estate team in the Phoenix AZ market and specialize in distressed properties. To contact them visit their website at http://www.JenniferSanchezTeam.com or http://www.GOwithShortSale.com