SHORT SALE AND FORECLOSURE HAVE SAME IMPACT ON FICO ENTER STRATEGIC DEFAULTER

I was reading a blog by the Fair Isaac Corp (yes they have a blog) and it talked about the impact of a foreclosure vs. a short sale on a credit report. Come to find out my advice to clients about the credit side of things wasn't entirely correct. Make no mistake a short sale still looks better than a foreclosure, but in the eyes of the credit bureaus? Not so much. Turns out they don't really care if it was a short sale or a foreclosure, your score is going to drop regardless and the magic number is 3. As in 3 years you have to wait until you can buy something again. Come to think about it, if you let a house go in 2008 and you spent the past 3 years paying everything on time and proving on paper that you are fiscally responsible, you could buy this year at rock bottom prices! Heck, you could even buy the same house that you lost close to 40-50% off. Which leads to the STRATEGIC DEFAULTER.

The STRATEGIC DEFAULTER flat out understands the game (it truly is a game). It's like the guy that gets through college doing 120 of the required 120 units to graduate, and if he did 123 units he would probably curse at his degree when it came in the mail and only remember the 1 class that he took by mistake thinking that he had to take it. I won't go on with my opinions on the world's view of college but FICO savvy people understand what's at stake. The government has made it way to easy for someone to walk away from their home with little to no repercussions financially and buy again for a lot less than what you originally owed on a property. Not only is there credit repair places that can get the short sale or foreclosure removed, but I had a guy that bought a new car and a newer, larger home and promptly stopped paying on his original home that was now worth 50% less than what he owed. He simply said, "why would I keep that home?" and though it's sad to admit, ethics and morals aren't playing a very high role in those making the decisions.

It's the world we live in and unless some kind of policy changes or we get an overhaul on individuals values we're going to continue to see these actions and this way of thinking, so everyone prepare and don't be shocked if we see foreclosures continue for quite sometime.

ECONOMY TO LIVE WITHIN ITS MEAN??? WHAT A GREAT IDEA!

So it's been a while... Not that anybody's reading this blog but it's more of my little part of cyberspace (owned by Google naturally) where I can vent, share and do as I please anyway right? So I was reading this article on www.inman.com that talked about our economy and spending and it got me thinking about my own upbringing and how much I've seen the government and economics change over my lifetime. It makes practical sense to not spend more than you make right? Well it should at least, Steve Martin even figured that out on SNL one time, but there are so many of us in the world that will do what our leaders are showing us. If our government is spending out of control, then it gives us, its citizens, a skewed view of reality. That's not to say that people can't make their own decision or be responsible for their own actions, but when I hear my 6 year old say something that he shouldn't, I need only to look in the mirror to find out where he's getting it.



Now to relate this to Real Estate... with all of the regulations now in the finance world, it's almost impossible to buy something that you can't afford. In fact I was at a training several years ago by First Magnus, and no they're not around anymore, and they were saying in early '07 that regulations were tight and the pendulum had swung... They should see that pendulum now... I recently had a client who said they wanted to wait until prices dropped even more. My advice to her was that we are already in 2003 price range and anytime you buy in the next couple of years is a great time. She was falling into the scare of the economy that so many others are doing. The picture above shows the dilemma we are running into. The majority of us are scared to spend anything, but one thing you can be sure of is that this real estate market will come back up and anytime you buy in the next couple of years will be a great time to buy.