A recent New York Times Article, No Help In Sight, More Homeowners Walk Away, published February 2, 2010, suggested that more homeowners than any time in recent history are electing to walk away from real-estate that has no equity, or more often, negative equity.
The article, found at http://www.nytimes.com/2010/02/03/business/03walk.html?em, suggests that the psychological threshold is often 75%, meaning that when the value of the house falls below 75% of the amount owed on the house, homeowners quickly decide to walk away. At this point, it becomes much easier to overcome any emotional attachment to the home, and much more difficult to rationalize that the home may eventually go up in value.
Homeowners are faced with the difficult decision of continuing to flush money down the toilet for an estimated 10-40 years waiting for the market to recover to the point that the homeowner breaks even, or walking away from the property and renting for much less while they rebuild their credit.
The article, published nationally, did not include the consideration relevant to Arizona, that in many cases the homeowner is protected by anti-deficiency laws which preclude the mortgage company from seeking to collect the deficiency. Even when the anti deficiency laws do not apply, the homeowner can file for bankruptcy and have any deficiency or potential deficiency discharged along with credit card debt, medical debt, and other unsecured debts.
The article estimated that 4.5 million homeowners had home values that were at or less than 75% of the value of the home, and it was projected to climb to 5.1 million by the middle of this year. In other words, 10 percent of all homeowners would have homes valued at or less than 75% of the amount owed on the mortgage or mortgages.
If you find yourself in a situation where you are under “house arrest” because you are unable to sell your house for what is owed, please contact our office to discuss your options, including bankruptcy, and determine a strategy to get you back on your feet. www.mcguiregardner.com.