And it's why the economy of the whole country is going down the toilet. There's no free lunch, if people are getting away with not losing any money in spite of their investments going bad, the money is coming from somewhere, and eventually it bites us all in the ass. Also, if he bought it cash, he could just hang on to it for the price to go up again. Long term, real estate generally goes up, unless it's in detroit.
It is very different. There are no legal promises of monetary value attached to common stock. When you invest in stock, you do so with the knowledge that it is essentially worth $0 until actual liquidation, and its expected value to you factors in the probability of loss. Shareholders are at the very bottom of the totem pole when it comes to determining who gets to eat some of the cake, especially in cases of bankruptcy and reorganization. Of course, that doesn't stop them from suing for their money, which they do all the time anyway. Bondholders in a Chapter 11 situation, perhaps is a better analogy.
Kinda' off topic but how could you expect the banks to pay it out when the bail out already got spent as bonuses and salaries to the bank execs. Back OT, it was probably a business decision more than anything else. KM is still under contract is probably receiving a nice sum every month. His advisers probably told him to walk away instead of paying osmething 3x what its worth. Would be pretty funny if he forecloses it then buys it back later at the bank auction sale.
What do you mean its just not right? If you default on your mortgage after paying 50% of it, does the bank give your 50% back to you? Of course not! They take the entire house and end up with both your house and the 50% you paid for it. Its not fair as well, but its the penalty you get when you don't pay your mortgage. KM's doing the exact same thing, except this time the bank is on the losing end of the stick. When the bank lends out the money, there was a promise to pay but there was also an agreement that the house can serve as payment. Its just business, there is no right or wrong about it, in the same way that its not right or wrong when a bank kicks out an old lady out of her ancestral home for not paying her mortgage.
There used to be this unclaimed funds scam from the foreclosure sale during the real estate boom, when houses appreciated very quickly. Some guys would check the foreclosure sales for excess proceeds and promise the former owner the money, only if they signed a contract to give the company that found the cash, a cut. The unclaimed funds was free public information though. By the time a borrower paid off half their mortgage, a property usually appreciated by at least 30% though. If the former homeowner had bought a $300k house and paid off $150k in the principal bal. The house might have appreciated to $450-500k after about 20 years of appreciation. It may have sold for $300-350k. The borrower will get about $150-200k in excess proceeds, if we take into account $10k for maintainance, unpaid property taxes, legal fees.
It depends on the county, but I think the overage is held by some government official. I can't remember the exact title. It's something like a clerk of the court or foreclosure trustee.
I completely understand the difference and understand the pecking order of creditors in a bankruptcy. I just don't agree with not holding up to your end of a deal whether its a corporation or an individual. Based on the comments, its no wonder our economy has taken such a hit, if this many people in such a small sample size feel its ok to walk away from your debts. There are situations where people legitimately cant pay the debt but this is not the case with Kevin. Just a different set of beliefs I guess.
KM isn't walking away from the debt, he's decided to just give them the house instead of paying 3x what its worth. Its not like KM went into hiding and won't give the bank anything at all, as per the agreements like these defaulting by the burrower results in the asset being transferred to the bank. Is the bank losing money? Well yeah, but that's just the breaks of doing business. Every transaction you go into will always have a risk of not being consumated, in this case the bank lost, sad day for them. Blaming KM for the economy is putting blame on the wrong individual, the banks are at fault for lending money so freely in the first place without the proper checks and balances.
Proper checks and balances like a credit check, proof of income versus debt owed, and his word to repay the loan that he took out on a house he obviously felt was worth what he borrowed? yep its the banks fault dir loaning money to a millionaire.
My apologies but Kmart house going into foreclosure is kind of ridiculous for the money this guy makes. No way the courts let him out of this deal. I have just one question though, how do you default on a loan when you make over $10 mln and the house is only $2 mln. These guys have the worst financial planners in history.
Right, "long term" being the key. So K-Mart's supposed to wait 15 years before seeing any return on his investment? (That's about how long it took Texas real estate to recover after the crash in the '80s.) Better just to walk away. I'm sorry, but bidness is bidness.
So when the banks were taking of advantage of people's insatiable desire to buy more home than they could afford, wasn't it just business then too? Guess we can't be mad at the banks either.
