Saw this little tidbit in the Wall Street Journal:
Some Buy a New Home to Bail on the OldLinda Caoili is an agent with Re/Max Gold in Natomas. She is also a "certified loss mitigator" (whatever that is) and "counsels struggling homeowners facing foreclosure and offers seminars at local bookstores with titles such as 'Foreclosure is Not a Dirty Word' and 'Foreclosure is Not the End of the World.'" She is also a member of NAR, who's code of ethics includes "Be honest with all parties in the transaction – not just with you, as his or her client, but also with the other real estate practitioner and his or her clients. For example, if REALTORS® represent a buyer with a spotty credit history, they can’t be dishonest with sellers about this fact."
By NICK TIMIRAOS, June 11, 2008
Next month, Michelle Augustine plans to walk away from her four-bedroom house in a Sacramento, Calif., subdivision and let the property fall into foreclosure. But before doing so, she hopes to lock in the purchase of another home nearby.
"I can find the same exact house as what I live in right now for half the price," says Ms. Augustine, 44 years old, who runs a child-care service out of her home. She says she soon will be unable to afford her monthly payments, which will jump to $4,000 from $3,300 in August, and she doesn't want to continue to own a home that is now worth $200,000 less than what she paid for it two years ago...
In some cases, homeowners are coached through the buy-and-bail process by real-estate agents and brokers who see nothing wrong with it. Some blame the phenomenon in part on lenders' unwillingness to cut deals or restructure loans made when home prices were inflated. "It's just a business decision," says Linda Caoili, a Sacramento real-estate agent who is working with Ms. Augustine and others who are considering walking away from their mortgages. "If you're upside-down $250,000, why would you keep it? It just doesn't make sense."
One would assume that "being honest with all parties" includes the lender as well. I'm sure she advises her clients to disclose the walk-away plan to the lender on the new property. Because, to suggest otherwise would violate her code of ethics, as well as expose her clients to possible federal Fraud For Property charges. She wouldn't want that, I'm sure.