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3 Reasons the Term “Strategic Default” Is Misleading

by Scott Darling

In a recent study, the Chicago Booth/Kellogg School Financial Trust Index found that a full 36% of Americans would consider “strategic default”—another term for walking away from your mortgage—if they were underwater (owed more on their home than what it was worth).

Now that more than one in four American homeowners is “underwater,” I feel that it’s important for the community to know the truth about strategic default.

The truth is the foreclosure process carries with it credit issues, current and future employment challenges, issues with security clearance and possible debt collections.

That’s why it is vital to explain the 3 reasons why the term “strategic default” is misleading:

  1. There’s nothing strategic about defaulting on purpose, especially when you have options like short sales, mortgage modifications, and refinance (just to name a few) that may keep you from foreclosure.
  2. The waiting periods to apply for a new mortgage loan are at least five years less in a short sale vs. a foreclosure.
  3. A foreclosure will show up on your credit report every time you apply for a home loan, car loan, new job, etc., and will affect your financial situation for many years to come.

If you are underwater and can no longer afford your mortgage payments, you need to create a genuine strategy to avoid foreclosure, helping to provide stability for you and our community.

If you have any questions about what steps you or someone you care about should take next, contact me today, [email protected] or 610-594-7268!

5 Ways to Give Back!

by Scott Darling

Do You Have Adequate Flood Insurance?

by Scott Darling

Given the number and severity of natural disasters world-wide this year, it is no wonder that owners of Chester County real estate are becoming increasingly concerned about their insurance coverage for damages caused by these disasters, especially floods. 

Since your basic homeowner’s insurance policy will not cover damage due to rising water,. you would be well advised to research flood insurance policies for your Chester County real estate.  Think you’re safe because you live in a moderate-to-low-risk flood area?  Think again.  About 25% of all flood insurance claims come from areas with just such a designation!

The National Flood Insurance Program (NFIP) is a federal program that offers flood insurance to homeowners. Visit FEMA and Floodsmart to determine your community’s flood risk.  There are three types of policies available to owners of Chester County real estate: the standard dwelling; general property (for businesses and apartments); and residential condominium building association, and each can be purchased through most leading insurance companies at a relatively low annual fee. Average residential premiums cost about $570 a year, but a low-risk policy can be had for as little as $129.

As with other types of insurance, it’s important to know exactly what your policy covers, information about deductibles, rates, payment, and claim procedures.  One area not covered is the basement, so finished walls, floors, and personal belongings found there are not claimable.  .  Rates are set and depend on factors such as your home’s age, type of construction, and location.  Like other policies, having a higher deductible lowers the amount of the premium but will reduce your claim payment. Be advised that unless flood insurance is required by your lender, there will typically be a 30-day waiting period.

Insurers urge homeowners to inventory all of their belongings, estimate their value, and keep a copy of the list in a waterproofed spot or even in a location away from the residence.  Some property owners rely on videotapes to catalog their possessions.  Click here for free and easy-to-use inventory checklists and planners.

Lest you are thinking of foregoing flood insurance to save money, consider this:  just a few inches of water from a flood can cause tens of thousands in damage.  During the past decade the average flood claim has amounted to over $33, 000!  Best not to be penny wise but pound foolish…

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Scott Darling
RE/MAX Action Associates
403 W. Lincoln Highway #101
Exton PA 19341
(610) 594-SCOT
610-363-2001
Fax: (610) 363-5275