by Peter Matthews

Created on: March 10, 2009

Why is it that everyone (well, nearly everyone) has an instinctive feeling that buying a foreclosed house is somehow morally repugnant? Do we have the same feeling going to an auction and buying a second hand car really cheap? Do we agonize over going in to Circuit City or some other store that is having a closing down sale and picking up something at under half price?

No, we don't. So what is it about foreclosures that make us feel so uneasy?

Part of it is that, in the case of a Circuit City or other business we don't have the same feeling of someone suffering on the other side. The business owners may be bankrupt, thousands may be losing their jobs, there may be any number of cases of real hardship- but we don't know about them. In some amorphous way all of those people are part of an anonymous "they" that are affected. They are part of a big company and are, themselves, nameless. It's another version of the feelings that make it OK for us to cheat an insurance company, because that doesn't really count as fraud and besides "they" can afford it.

The other factor with a foreclosure is that we are aware that this was someone's home. We get security from our homes. To have that security ripped away is frightening on a deep down, instinctive level for us. To feel that we are part of the process inflicting that horror on somebody else is what disturbs us.

However, although this sounds heartless, it shouldn't.

We are not the people who foreclosed on the seller and, in truth; we know nothing about them or the circumstances that brought them to this situation. If we heard their story we might be heartbroken, or it might be a tale that made us feel they were stupid or immoral and deserved everything they got. We'll almost certainly never know.

We should not personalise the situation and take the guilt for it upon ourselves. In truth, the banks that are doing the actual foreclosing are not evil monsters either. Although there are occasionally questionable practises, most of the large lenders are responsible and try very hard to help people who are in genuine hardship before they take the final step of foreclosing.

The number of foreclosures we are currently seeing is the product of the worst economic conditions seen since the Great Depression. This came at the end of one of the longest periods of sustained economic prosperity most people can remember. The slow down, when it came, caught almost everybody unprepared. Sharp rises in unemployment; foreclosures and other indicators of economic recession are the consequences.

You and I did not cause this. It is a horrible situation for the seller, but avoiding foreclosure sales will not improve that situation. Indeed, if all buyers felt this way, the foreclosure sales would not go through, the overhang of unsold properties would get even larger, selling prices would get even lower and more people might be forced into foreclosure.

The number of homes being repossessed by lenders is a tragedy, but not a moral issue for buyers. It is not taking advantage of other people's grief it is, in fact, helping the system to work and things to return (eventually) to normality. Don't gloat- but don't feel guilty either.

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