Viewpoint: Feeling Guilty About Buying a Foreclosure?

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The sides in the housing crisis' morality play have been very neatly defined for us. The banks are the ruthless, faceless devils who cast out the sick and (financially) weak from their homes. A few bystanders -- let's call them renters-by-choice and anonymous online commenters -- stand on the sidelines cheering because, after all, don't we all know that you can't expect to make a deal with the devil and win?

But then there is another actor: the buyer of foreclosed homes. A recent Ethicist column in The New York Times frames the rarely discussed dilemma that people who buy foreclosed or short-sold homes face: Are they capitalizing on another's misfortune? And is that the right thing to do?

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Viewpoint: Feeling Guilty About Buying a Foreclosure?

A few years ago, foreclosures were exceedingly rare, and the idea of buying a foreclosed property was mostly "for experts only." But with foreclosure signs becoming common in even the nicest neighborhoods, more and more buyers are considering short sales and foreclosures. Banks are looking to unload their assets, including these million-dollar properties.

This property in Hilton Head Island, S.C., is listed at $1.4 million, with seven bedrooms and seven bathrooms.

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Buyers of foreclosed homes almost always find the debris of the previous owner's life left behind, because no matter how long and drawn out the foreclosure process is, eviction is always a hurry-up deal. New homeowners get the key and stumble over abandoned kids' toys, holiday decorations, memorabilia that underscores the life that existed here before the recession.

While some new owners can easily slap up a coat of paint and move past the back story of how they got there, others are made uncomfortable by the tangible reminders that their joy in scoring the real estate deal of the decade comes on the back of another family's misfortune. And for some, that's more than they can bear.

It's the housing market's version of survivor's guilt.

On a very practical level, and to borrow a line from "The Godfather," it's just business -- and there really is no alternative. Even if every righteous person stood firm and refused to buy a foreclosed home, would the banks learn a lesson? No--but some investor would come along and make a killing in the rental market.

Tara-Nicholle Nelson, a real estate broker/attorney with a master's degree in psychology, founder of REThinkRealEstate.com, has this advice for foreclosure buyers with a case of the queasies: It's important to understand that "everything in life has its season – everything ends and everything begins, so it's natural and necessary that one family's ending in the home is a beginning for yours."

She adds that if you feel bad as a buyer, just be as generous and flexible as you can. If it's a short sale, allow the seller extra time to move out, or of the mail comes, etc., do your best to forward it. Treat them with civility and dignity.

And also understand that moving always leaves depressing detritus behind, even in the best case scenario, and "don't read more into it than necessary," says Nelson.

Nelson also throws out this possibility: The decision of the homeowner to leave/foreclose/walk away may also have been a business decision, calculated as the one with the best possible outcome for their financial situation.

Readers, your thoughts? How would you feel about buying a foreclosed home?

(The photograph at top shows an eviction team moving furniture out of a foreclosed home this month in Longmont, Colo.)

Also see:
Foreclosure Victims Plan Protests Across U.S.
Viewpoint: What's Behind Banks' Big Foreclosure Push?
101-Year-Old Foreclosure Victim to Get Home Back

Million-Dollar Foreclosures, Just Bring Your Checkbook



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