Have you ever considered the conflicting messaging we espouse in our society around the prospect of quitting? American culture has adage after adage about persistence — i.e., not quitting — even in the face of dire adversity. Quitters never win, right?
Well, on the other hand, there’s just as much ado supporting strategic quitting as the counterintuitively smart thing to do. Quit while you’re ahead, and all that. Smart investors, entrepreneurs and even gamblers understand that risk and loss are part of the game, but they "know when to fold ’em" too — drawing a line after which they refuse to "throw good money after bad."
Similarly, many praised Oprah’s decision to "quit" her TV show last year while she’s still on top. Although I’d probably argue that (a) after 25 years, that’s not quitting, it’s retiring, and (b) given the launch of her new cable network, it’s not even really retiring, but evolving.
Marketing mastermind Seth Godin has spent several years and written multiple books around the concept of strategic quitting — largely advocating that winners do indeed actually quit, and often. But quitting to win, in Godin’s opinion, takes place only under the right circumstances.
I bring this up because I’m detecting a major quitting energy in the real estate market lately. Many of my reader questions of late have to do with quitting a transaction. Buyers want to know what it would take to be able to quit and still recoup their deposit money under a stunning array of circumstances ranging from the expiration of the tax credit (now a moot issue, as it has been extended for those who signed their contracts in time), to a seller’s seemingly innocuous request to offer a repair credit instead of completing the repairs.
I’ve also been asked by short-sale sellers whether they can kill their deal — days before closing — simply because they’ve heard a rumor that they may be able to get $1,500 from the bank as cash for keys if they let the house go to foreclosure.
Short sales are perceived as of dubious benefit to sellers, apparently, because I’ve also been asked whether a seller can simply cancel a contract they signed with a buyer, months into the deal, because they got a higher offer.
However, the most popular quitting inquiry I’ve been getting lately from real estate consumers — both online and in real life — has been about walking away from a home that the asker can afford, if barely, but is severely upside down. The legal and financial considerations are many and vary significantly from state to state.
Frankly, there’s no such thing as a one-size-fits-all answer to the question of whether it’s a wise, ethical or advantageous decision to walk away from your home and mortgage. I mention the issue only to document the "I quit," hands in the air, white-flag-waving spirit that is increasingly pervasive among the "underwater homeowner" set.
To echo a recent question I received that laid out the facts and then posed the question: WWTD (What would Tara do?), let me turn it around and ask WWGD (What would Godin do?).
A few books back, in "The Dip," the prolific Godin specifies two factual scenarios in which quitting immediately is well-advised. The first, the cul-de-sac, is simply a dead-end situation in which no amount of work, effort or feasible investment will actually change the situation.
The second, the cliff, describes a situation in which you can’t or won’t quit until the entire endeavor either fails or succeeds, explosively and dramatically.
This is how many folks with hundreds of thousands in negative equity feel about their homes: that they must quit and cut their losses, stat, because the alternative is to stick with the property until an inevitable further drop in value or a mortgage adjustment that leads them down the path to a foreclosure or bankruptcy.
So, how do you know when to quit, in a real estate context? There’s something to be said for getting input and advice from local professionals, like a real estate broker or agent, a mortgage pro, an accountant and/or an attorney, depending on the situation.
And in the course of a transaction, it makes sense to be principled as well as practical; consider the impacts of your decisions on the other parties to your transaction, and don’t be petty about such a major transaction.
(Quitting a deal at the last minute and incurring a foreclosure to try to squeeze $1,500 out of the lender? Seriously bad form, folks.)
Godin says those considering quitting should first eliminate panic as a factor, then make sure they aren’t quitting because of something one person said or did.
But ultimately, all matters real estate are endeavors in lifestyle design. You owe a duty to yourself, your family and your future to make decisions that further your vision, your comprehensive financial well-being and your life goals. Godin’s final pre-quitting recommendation is to analyze progress: If the endeavor is not furthering or progressing your aims, it might be something you should quit.
So, once you’ve been briefed by your professional advisers on all the financial, legal, tax and other impacts of quitting whatever real estate endeavor you’re involved in, get real with yourself about how either quitting or moving forward will influence the rest of your life.