Strategic Foreclosure - What Would You Do?

What is a strategic foreclosure?

It's when the homeowner owes more to the bank than what the property is valued at...it's also called "underwater" and believe me, as a real estate agent who's in the trenches of today's real estate market...this is NOT just a passing phase...this is a serious problem that will be around for a long, long time. And it will effect everyone's property value...and NOT is a positive way!

Let's take an example:

Florida is a state which has been very hard hit with the tanking of housing values. If someone bought their dream home in Florida in the year 2005... for let's say, $350,000...and the value of that property in the 2010 market is DOWN say 44% (some Florida values have declined over 50%...ouch!)...that would mean that this property is now worth only $196,000.

Now this isn't rocket science. If we use the example above and le'ts say the house was bought at $350,000 with a 3% down payment of $10,500...and the principle amount of the loan has decreased over the past five years...let's say $5000...then the amount owed on the loan is around...$334,500 and the current value of the property is only at $196,000...that's a difference of $138,500.

That's a whopping $138,500 that the homeowner owes to the bank...AND will never be able to re-coup out of the property value....he can't sell the house for more than what the market will bear...which is around $196,000.

This where the strategic foreclosure comes in....Yes, the homeowner can still afford to make the mortgage payments...but why should he? He will NEVER be able to get his money back if he keeps throwing it towards this "underwater" mortgage...so why bother?

Why not just walk away from the property and let the bank deal with it.

Should you walk away from your home even if you can afford to make the monthly payments? Millions of Americans are asking themselves that same question. Most homeowners feel that they have a moral and ethical responsibility to pay their monthly mortgage payment.

Prior to simply walking away, one must consider the adverse implications of a strategic foreclosure. First, and foremost, is the loss of your home...and then of course the consequences of ruining a good credit score for the next several years and not being able to purchase another home in the immediate future. It is also recommend that one discuss with an attorney the legal issues that come along with such a decision.

By the end of 2011, approximately 48 percent of the 50 million mortgage loans across the US are predicted to be under water or valued less than the money owed on them.

That is approximately 24 million mortages underwater...and 24 million families that will possibly walk away, be foreclosed upon or have to do a short sale to be "relieved" of their mortgage responsibilties...not to mention that any one of these three scenarios will certainly ruin the credit history of that person or party for the next several years to come.

I know what I would do. What would you do?