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Trading Morals for Dollars in a Recession
In an economic downturn, there are deals of a lifetime everywhere. But as bargain-hunting “vulture consumers” scoop up everything from foreclosed homes to toys on eBay being sold by desperate parents, are we pawning our morals in the process?
When Lisa Parlee saw her dream house—a three-bedroom with a two-car garage in Tyngsboro, Massachusetts—listed as a foreclosure for sale for $199,900, she found herself in an ethical bind.
The 38-year-old and her husband had long been looking for a house in the area but couldn’t afford the $300,000 price tags. Despite the great find, Parlee says she had reservations about buying a foreclosed property. She imagined the former owner to be a family struggling to pay a fixed mortgage because of a job loss or a death in the family. “I was feeling guilty that we were making out on someone else’s hardship,” Parlee says.
Jaime was recently contacted by a man selling an original Xbox for $75 to help his mother pay her electric bill. Despite the rock-bottom price, he was able to negotiate the seller down to $50.
To assuage herself, she researched the property in local public records and discovered that the owner had taken out two adjustable-rate mortgages and three home-equity loans on the property in 10 years. That was all she needed to know. “I thought, you know what? The former owner made his own bed and he needs to lie in it,” she says. “I didn’t feel guilty anymore... I felt like God was giving us a break.”
These days, such breaks can be found everywhere. But as the saying goes: What price realty? The recession has divided the consumer public into two camps: people selling what they have in a quest to survive, and buyers taking advantage of the desperation. With these purchases, however, comes a less tangible price: the moral quandary of profiting from other people’s misery.
To deal with this dilemma, buyers are rationalizing their guilt, verifying that the previous owners acted irresponsibly, or simply embracing the hard-times, every-man-for-himself ethos.
Jaime Bacon, 23, an auto-glass installer in Grand Junction, Colorado, recently put an advertisement on Craigslist offering to buy videogames from those who could “use a little extra money in this economy.” Bacon, who then resells the games on eBay for a profit, was recently contacted by a man selling an original Xbox with 17 games for $75 to help his mother pay her electric bill and avoid having her lights shut off. Despite the already rock-bottom price (an Xbox alone retails for around $300), Mr. Bacon was able to negotiate the seller down to $50 before driving to the man’s home to pick up the items.
“It’s kind of like profiting off of a war, but at the same time, it’s business, and just like these people I’m buying from, I need to keep a roof over my head and I need to keep my electricity running, so I can’t really feel bad about it,” he says. “I look at it as, I’m kind of providing a service for these people. If I wasn’t doing this, then they wouldn’t be getting the money they are getting and they would just be stuck with videogames sitting around the house and no lights.”
Indeed, America’s sudden bargain fever makes the whole country look like one big going-out-of-business sale. According to the National Association of Realtors, sales of distressed homes accounted for nearly half of all of existing-home sale transactions in the year’s first quarter, up from single-digit percentages a year ago. And in a recent survey conducted by the National Association of Resale & Thrift shops, about two-thirds of the respondents said their sales increased in the fourth quarter of 2008 from a year earlier, with an average increase of about 30%.
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Jacob Bernstein is a senior reporter at The Daily Beast. Previously, he was a features writer at WWD and W Magazine. He has also written for New York magazine, Paper, and The Huffington Post.
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Jeff Madrick is a contributor to the New York Review of Books and a former economics columnist for the New York Times. He is editor of Challenge Magazine, visiting professor of humanities at Cooper Union, and senior fellow at the New School's Schwartz Center for Economic Policy Analysis. He is the author of Taking America, The End of Affluence (Random House) and The Case for Big Government.
Years ago, demand was out of control, and so prices were skyrocketing. Now that demand is low and supply is up, the prices are low. If you have the money to afford buying when prices are low, good for you. Not only that, but low prices increase the demand, shifting the price back to what the real "value" is. Let us not confuse price with value. I don't see an ethical quandary of buying when prices are low.
Subjective reality is made up of feast and famine, good times and bad times, gain and loss, buyers and sellers. All are transitory. All of us get to experience one or the other in our brief span on earth. IMHO the question of whether it is immoral or unethical to profit from other's misfortunes is jejeune. Who cares? C'est la vie.
Uh, no, when you starve to death, become homeless, or kill yourself in despair, or can't afford to send your kids to good enough schools to set them up for their own lives, that's not transitory. That's a PERMANENT stain. And, who cares? Obviously not a jaded "deep" thinker like yourself.
You should take the "H" out of your "IMHO," unless you're just being sarcastic about humility.
Trading morals for dollars? It's called *capitalism*. It's just that more people are now in a position to take advantage of others. Economic leverage has come within the grasp of those with smaller-scale advantages. It's always been unjust, but now it's within the grasp of a bigger slice of the population.
You wouldn't *believe* the kind of deals those with a wad of cash get, and it's often at the taxpayer's expense. For instance, when we were building the railroads, to help open up this country, railroad companies got huge tracts of land deeded to them -- railroad right-of-ways. Back in the nineties, I worked a while for Burlington Northern... and they were taking these big tracts of land (basically GIVEN to them by you and me) and using them as the basis for real estate deals. They would take an abandoned line, use the land in a deal with another company where in this case they put up the land and another company would put up the money, then turn around and do another deal where they put up the money and their partner put up the land. Leveraging what essentially was your and my property to further build their empire. (And the division was called "Glacier Park", talk about oxymoronic and totally deceptive naming!)
( "To deal with this dilemma, buyers are rationalizing
their guilt,
verifying that the previous owners acted irresponsibly" )
Many innocent people lost their jobs due to the
chain of events created by the irresponsible.
The real crisis belongs to all the people who were responsible,
and now have to bail out the irresponsible.
The irresponsible were the ones who traded their morals.
Do you trade your morals IF you purchase
something inexpensively,
that quite possibly was made by
low wage sweatshop workers overseas?
How would you rationalize your guilt?
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Number one...until your little 30 year mortgage is paid off you're not actually the owner any way...the bank is. For any one to bid on a foreclosed home is not only good shopping its intelligent...matter fact at what other time or what other instance would a home of substantive worth..say 300k sell for anything less than 300k other than a foreclosure? Problem with us (USA) we substitute or economics with our culture. Capitalism has no feelings or buyers remorse.
And value is perpetual, the high and low of that particular value is what fluctuates per the owner or buyer. That same train you wanted to sell cant pay your bills, as you stated you're doing OK financially, but a person who's father shared model trains with them for 20 years until he was senselessly murdered may find incredible value in what your selling.
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Profiteering is profiteering. Main Street or Wall Street, it is all the same.
Best example so far?
Goldman-Sachs, AIG, and congressmen who ladled pet projects into the stimulus bill to the tune of billions of dollars, buying votes back home with voters who in turn profit form these projects.
Profiteering?
Naawwww.....
Here in the South, we have a name for these people: carpetbaggers. Like cockroaches, they always turn up to profit off other people's misery--and ask to get credit for it too.
Wow. "Trading Morals..." is a simplistic piece I'd expect from an idealistic child who hasn't developed critical thinking skills. The (former) homeowner has given up rights to the property by failing to pay (for whatever reason). The former owner is out of the picture. The property will sit idle until a new buyer can be found. The bank (or lending institution) has control of the property. What purpose does a vacant property serve? It will have a negative impact on the neighborhood and the community. A new owner will pay much needed property, school (and probably wage) taxes to the community AND maintain the property!
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As several people have pointed out. It doesn't matter what happened to the former owner. The bank is now the owner. I do not see any ethical question about or feel any guilt about buying these properties. I bought properties before when they were priced where I could make money. I'm an investor, if I couldn't make money at it, I wouldn't do it. I 'm not responsible for other people's bad judgement or luck. But I do thank you for giving me the idea of buying other things and reselling them.
Wendell Berry writes, "So far as I can see, the idea of a local economy rests upon only two principles: neighborhood and subsistence. In a viable neighborhood, neighbors ask themselves what they can do or provide for one another, and they find answers that they and their place can afford. This, and nothing else, is the practice of neighborhood. This practice must be, in part, charitable, but it must also be economic, and the economic part must be equitable; there is a significant charity in just prices." That last line is the one that gets me.
Thank you.
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