Archive for January, 2013

Most Feared Name in Real Estate today Is “Strategic Default”

strategic

Definition

Decisions  or plans designed  to impact  favorably the key factors on  which the desired outcome of an organization, game, system, venture, or war, depends. See also tactical.

 

Why do people in the Real Estate Industry today hate the word “Strategic”?  We all make decisions and sometimes we make bad decisions and have to re plan and make new decisons. Our decisons have impact on others. Sometime these decisions have negative impact on others and this is what is feared the most.

I have come to realize working in the distressed Real Estate Market that Organizations all strategize. Its a game and it all depends on which strategy you use depends on whether you win the game or loose.

To say some are allowed to strategize and others are not allowed is not fair. It gives an unfair advantage to some and is almost like cheating in a game.

I have had many discussions with Banks about the word “Strategic Defaults” and everytime I use this word I get a negative response. Why do they not like this word, well for one reason, they see a Strategic Default favors the seller and not the Bank.  I am not sure this is always the case but lets say “Strategic Defaults” do favor the Seller. Are there not Strategic Foreclosures being made that favor the Banks over the Seller? The answer is Yes. So if both Seller and Lender are both doing it then I say lets get this word out in the open and discuss “Strategies” together that benefit both Seller and Bank.

All of the Major Banks today favor Short Sales over Foreclosure. Why because this Strategy in the end is better for them. In most instances the Lender will net more money in a Short Sale than if it goes to Foreclosure. Yet inorder to do a Short Sale the Seller must show a Hardship. A “Strategic Default” is not viewed as a “Hardship”. Thus the dilemma.

I ask: Why is  Donald Trump allowed to do a “Strategic Default” and others are not?  I think the answer is because Donald Trump has money and it is better for the bank to default on one of his projects than loose the his business. In other words “Strategic Defaults” with Donald Trump actually is a “Strategy” that benefits both Donald Trump and The Banks who lend him money.

I say this concept of “Strategic Default” needs to be re-examined and allowed to happen because it really can benefit all parties in the transaction.

 

 

Written by Jack Lewitz | Discussion: No Comments »

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