Buy and Bail, A new trend
For the past few years adjustable rate mortgages, 103% mortgages, interest only and other no down payment financing options, coupled with artificially high appraisals and prices have resulted in many homeowners being upside down in their homes. They owe much more to the bank than the home can sell for. When nearby foreclosures sell for thousands less than the paying homeowner owes, it may take years for home prices to recover. Some paying homeowners with good credit, have bought new homes, moved and simple stopped paying on the first home. Hence the term buy and bail. The people who do this give up their good credit to get out from under a devalued property.
I recently visited a newly foreclosed home on behalf of the bank, to determine if the home was occupied. I met the former homeowner to arrange for the family to move out. The neighborhood was one quarter built out and the rest of the lots were overgrown with pipes sticking out. The homes were large and attractive. The buildier had gone out of business and at least one third of the new homes were foreclosed and for sale ast substantially reduced prices. The man I spoke to told me he had paid $344,900 for his house and the same plan a few doors down just closed for $280,000. He had to move for his job and could not sell his house. He could not afford to pay for a home he did not live in and felt he had no choice. He had good credit and was able to buy in his destination city before he stopped making payments on the home he was leaving.
While this is wrong on so many levels, this trend is part of the new reality. BUY AND BAIL. Not recommended.
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