No. of Recommendations: 155
But for the vast majority of us, we behave ethically. We pay our debts, stand behind our promises, and don't try to renegotiate terms of a sale after the fact because of our own, personal, cash-flow problems.

If Sonny, or anyone, can pay the debt they racked up speculating on RE, but chooses not to, that is the behavior that has significantly contributed to the RE crash and this recession.

Amen, Naj.


This thread is stale. Which is a good thing, too, since what I am about to say will not earn me friends here. I don't care. And I'll state up front that I have enjoyed very much Sonny's posts. All of 'em.

There has been way too much PC tolerance expressed for this specific episode: way too much sympathy and too little investigation into the transaction. You can like Sonny and detest what he did. Which I do.

And since Sonny, asked, I am going to afford him a thorough answer to his question, and thereby denounce the actions in the certain terms which they merit:

So do my wife and I qualify as among the “greedy speculators” that helped create this mess? After all, it was a second home with 100% financing. Back in late 2006, as we contemplated this purchase, our income for 2006 was down; but our average income for the past three years easily qualified us. Standing behind our income was a strong stock portfolio. I was confident that we had acquired this property at such an attractive price that if I needed to sell in the future, for whatever reason, that would not be a problem.


You absolutely, positively qualify as "greedy speculators" and are very much like those who "helped create this mess." You are the essence of it.

100% - just like your preferred form of financing.

Let's revisit some of your speculative greed from the time:

Of course, if the housing doomsayers are correct, if the slide in housing prices is just gathering steam, if a recession in 2007 is looming, then I have just stepped in front of a speeding train. My actions speak for themselves. Housing prices are bottoming and there will be no recession in 2007. More importantly, areas where the baby boomers will be retiring are just in the opening innings of a major boom. We have made an outstanding long term investment. In five years, when our youngest heads off to college, we will sell our Roswell home and retire to Lake Lanier. By then, we can roll our weekend house there into a year around house.

"Just stepped in front of a speeding train"?

That's a joke.

You were safely on the platform shoving an equally greedy creditor on to the tracks before an on-coming train. You put no skin in the game beyond the carry cost for the call option you financed on housing gains & continued economic expansion. And note above that you were already booking mental gains on your impulse purchase.

Two days later, you're still talking about the appreciation this place is going to enjoy:

Property on Lake Lanier will continue to appreciate even more than in the past. Retiring baby boomers are looking for warm, beautiful places....

We are going to surprise our two teenagers Christmas Eve day. The story is that after brunch, we are driving up to Lake Lanier to say hello to clients we have not seen in awhile and taking them with us. Only after we get there will they learn that we have finally bought a lake house. It will be fun and it will be a money making investment.

So. Yeah.

I think any fair reading indicates that you were very largely motivated by anticipated gain from the purchase; as a discussion-point, it was seemingly the primary focus of purchase (at least here). And if that is an overstatement, then anticipated gains placed a very close 2nd.

Two teenage kids... right ahead of college.

We did 100% financing, so our loss was two years of mortgage payments

Unless you rented it out and generated cash flow from it, the purchase was completely speculative. You want to talk "investment"? How much education would those two years' payments afford the kids?

A couple weeks later....

After we were under contract, I asked our mortgage lender to have a conservative appraiser, familiar with lake property, do the appraisal. I wanted to be very sure, in my own mind, that this was as good a deal as I thought. The appraisal came in yesterday at $450,000. We have an immediate gain of $30,000 before we even close. So why is this such a good deal? Is the seller unaware of the true value of his property?

Not only were you booking future appreciation at the time, you were also booking immediate mental equity. Based on what? An appraiser's estimate? One you've repeatedly claimed was "conservative," most recently with the first post in this thread:

We paid $420,000 in January, 2007, on a lake house that a conservative lake appraiser priced at $450,000.

Pl-ease... kid yourself all you want on this - you have incentives to do so. But as a professional valuator of unique assets myself, I see no basis for repeatedly describing him as, "conservative."

Not only were you immediately booking future appreciation & immediate equity back in the day, you were also discounting your own real cost burden.

As for real estate, I am buying that second home up on Lake Lanier with 100% financing. I fully expect to pay it off with depreciated dollars. Real estate where the boomers are retiring will do just fine, thank you.

"Gains" + "Gains" + "Gains" = Speculative Greed

There are people - like Naj & me - who don't proffer their signed pledge casually. You claim repeatedly that the decision to purchase this place came only the morning after "Stuart" walked. As real estate professionals, your financial prospects were already closely tied to the local real estate market - by assuming responsibility for a second home, you levered up.

That's known as, "a Texas Hedge."

You made recourse to 100% financing - many won't fault you for it, since it was available. There is nothing honorable in that justification. My guess is that you did so precisely because you wanted to leave yourself a backdoor to dumping this place back on the creditors. You did.

You made a $400,000 impulse purchase. You pledged your name in a contract.

I'm a cash-rich family man with a second child on the way. For ten years of marriage, my wife & I have saved a third, spent a third, and shipped a third of our income to the taxman. We have also remained renters, because we were sickened by the prospect of competing on price with people who apparently were incapable of basic math, or who cared so little for the pledge that their signature meant so as to make casual recourse to loans they could never credibly honor. We just suffered through an age where too many dismissed and treated their pledge as nothing more than just another chunk of collateral to be casually levered. As a result of having to compete with fellow Americans like you, we have remained renters.

So yeah. I do consider you as quintessentially among those who created this mess.

Here comes the horrible punchline to this. Your penultimate line from the original short-sale post in this thread:

All the while, the nice folks in Washington, determined to “do something”, will continue to create money out of thin air.


Of all people.

100% financing of a six-figure asset you did not immediately need, that you hadn't earned, that you clearly couldn't (or really didn't wish to) afford, in which you subsequently made no apparent effort to establish incremental ownership, and that you eventually dumped on someone else.

Begrudging the creation of credit out of thin air.

Oh, the irony,


P.S. Regarding Stuart's firing of you as his agent, and eventual submission of a written complaint against your decision to purchase the house he walked from a day earlier. There is a possibility that I did not ever see you entertain in your defense of your action.

Namely, that Stuart, in fact, wanted that house; but he wanted to see if he could eventually get it for less. So, he walked.

As someone who put a bid down on a house recently, I made clear to my agent that we would not go above asking. That was a fiction - we were absolutely prepared to go higher. The fiction was designed to motivate our agent to negotiate on our behalf - to control the agent, whose compensation benefits from a higher transaction price. Where buyer agents earn a percentage of transaction cost, the incentive structure of compensation plays havoc on the notion of "agency" itself. I represent that we won't bid higher to my agent so that my agent will represent that across the table from a seller's agent.

Similarly, Stuart may have hoped that you would return to the seller's agent and sought to knock more off the price to his advantage. Or, that he may have hoped to return to make an offer after hoping the house sat unsold for several weeks or months. He may have indeed been trying to negotiate hard with both you & the seller.

Granted, if so in either case, it backfired.

Watching the agent he is hoping will go back and haggle hard on his behalf, however, instead go ahead and purchase the place might explain his sense of betrayal. Just a thought....
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