The housing crisis and the economic mess that followed have led to an interesting, but ethically suspect financial opportunity. Many homes are now on the market at deeply discounted prices, either because they have been foreclosed on or because their owners are simply trying to get out from under a massive mortgage payment. Either way, the opportunity is there for the savvy investor to purchase a valuable commodity priced well below its actual (or potential) value. Economically, this makes a lot of sense. Ethically, there is cause for concern.
What specifically is the worry? These homes are available because, at the risk of oversimplification, something bad has happened to their owners. Thus, investors have the opportunity to turn someone else’s misfortune into a benefit for themselves. In other contexts, we might question this action. For example, knowingly purchasing stolen property at a lower price than one would otherwise pay is a case of benefitting from someone else’s misfortune, and we generally disapprove of this action. In evaluating the ethical acceptability of purchasing foreclosed homes, we might examine this example and try to determine precisely what wrong is being committed.
In the case of buying stolen goods, there are two possible explanations for what wrong is being committed. First, one might argue that we are further victimizing the victim. The person whose property was taken has already been harmed by the theft, and purchasing this property further harms them, perhaps by making their property more difficult to recover. This is a likely reply that many people might give in explaining the harm of purchasing stolen property, and although it has potential, it requires further explanation in order to get to the heart of the matter.
When we buy property that we know is stolen, we are using people as a means to our end. In other words, we are failing to take their suffering into account. Buying stolen property fails to demonstrate appropriate respect for other persons. Though indirectly, it involves using the victim of theft as a means to our end. It is right to identify this as a further victimization of the victim, but we need to be clear about precisely what the harm is that we are committing when we do this. Buying stolen property is a lack of respect for persons.
If the harm of buying stolen property is a failure to show proper respect for persons, we are now in a better position to evaluate the question of whether purchasing foreclosure homes is ethically suspect. This is a tricky question. On the one hand, we are clearly using this business opportunity as a means to our end, and there isn’t a sense in which we are showing respect for those who have lost their homes. There is thus a plausible deontological argument against purchasing foreclosure homes on the grounds that it requires us to violate our duty to respect other persons.
On the other hand, there is a relevant disanalogy between purchasing stolen goods and purchasing foreclosure homes. Stolen goods involve the actions of a third party who directly victimizes another person. It is often through no fault of their own that people are robbed; they might simply be in the wrong place at the wrong time. Foreclosures are not like this. There is no third-party involvement, and in many cases the owner is directly responsible for having their home foreclosed upon. Buying stolen property is a victimizing of the victim, but buying a foreclosure home is simply taking advantage of someone else’s mistake.
It’s not clear from this early analysis whether buying a foreclosure home is the moral equivalent of buying stolen goods. If it is, we are guilty of using persons as a means to our end when we buy deeply discounted homes. But if it isn’t, we are merely shrewd businesspersons capitalizing on the mistakes of others. I will not attempt to provide an answer here, but rather close with a question. If someone else’s error makes them susceptible to being used as a means to our end, does their mistake negate or weaken the generally immoral nature of this action? Once we answer that question, the issue of whether it’s ethical to purchase foreclosure homes falls easily into place.
About the Author
Elijah Weber is a graduate student at Bowling Green State University. He holds a Master's degree in philosophy from Colorado State University, and Bachelor’s degrees in sociology and philosophy from Chapman University. He currently lives in Ann Arbor, Michigan with his wife Laura, his son Brandon, and two cats.
9 responses so far ↓
1 Nate Ridlehoover // May 19, 2009 at 5:59 pm
Well, I find this article particularly interesting since I just purchased a foreclosed home and I am also a graduate student of ethics. My particular interests are more in the relationship of religion and ethics, but that is inconsequential. As I understand this, you are proposing that there may be a correlation between buying foreclosures and stealing from others. I appreciate the thought and it definitely made me think. The only problem that I see with the analogy is that it asserts that if someone buys a foreclosure, they are “taking advantage of someone else’s mistake.” In some sense you are, but in a completely different sense, they are not. The buyer is under a contractual agreement in which he has to uphold a particular end of a bargain. By not fulfilling his part of the bargain, he forfeits any right he has over his possession. In fact, it is not his possession any longer. The buyer of the foreclosure is then simply making a purchase from the bank who has been stolen from. Now, I understand that there is the consideration of the one losing the home, but I just thought I would bring out one further perspective. This site is really nice. I look forward to reading more of the posts.
2 Eli Weber // May 19, 2009 at 9:41 pm
First of all, congratulations on your new home. It’s certainly something I’ve thought about myself.
You raise a good point, which I try to draw out somewhat in the initial post. There does seem to be something vaguely sinister about the whole process, and the comparison to theft is an effort to see if I can get clearer on what that intuition is rooted in.
The contractual agreement is a worry, though
I’m not sure the contractual point resolves the ethical question. Even if we assume the contract was fair, consent was freely given, and all the rest, there’s still a question of how that applies to the new buyer.
Let me get to the point here. Even if the initial buyer has no right to the property, aren’t they still being used solely as a means to an end? If they are, why would their violation of a contract nullify the ethical significance of that? My worry is that this seems to qualify as a kind of exploitation, yet it’s not really viewed or treated as such. Maybe theft isn’t the best analogy, and I think you’re right that there is an important difference that seems relevant. I just wonder about how the violation of the contract changes things from an ethical viewpoint. I’d be curious what work you think that is doing in this type of case. I get where you’re trying to go, but I’d like to hear more before I climb aboard.
That said, I think you should be really excited about your new home. My goal isn’t ever to judge people, just to get them thinking about how important ethics is to our everyday lives, and how damn tough some of these questions are. Sounds like you are doing both. Kudos, and thanks for stopping by.
3 Nate Ridlehoover // May 20, 2009 at 1:42 pm
Well, I can definitely see the correlation between the initial buyer being a means to an end, but it seems that it would only be ethically questionable if the buyer’s intentions were for the exploitation of the one who has been foreclosed upon. With any ethical situation, there seems to be at least three ethical aspects that must be given credence (I would love to see if you agree with this). There is the outward act, the internal motive, and the proposed end. I would probably give weight to them in that order also with a strong correlation between the act and virtue/intention and a subsequent consideration for the ends. Under my proposed solution, the act does not seem to be problematic given the contractual agreements. From the buyer’s perspective, he must then consider his motive in making his purchase. Just for the record, how do you like your program?
4 Sara // May 21, 2009 at 2:36 pm
My husband and I want to purchase a small 2nd home near the beach, and he brought up the idea of looking at foreclosures. I’m wrestling with that idea because it seems to me that we would be gaining something in the wake of someone else’s misfortune. Now that Mr. Riddlehoover has brought up the contractual aspect, I see that as a possible vindication, or entry to our consideration of foreclosed properties. Yet, I still wrestle with the idea that it wasn’t the original owner’s intent to breach that mortgage contract; only because of an economic misfortune did the owner lose the home, and so I’m back to square one with the proposition that our gain of a beach house would be in the wake of someone else’s misfortune.
5 Eli Weber // May 21, 2009 at 3:36 pm
Nice to see this is such a popular topic. First, I have a couple concerns with the idea that an act would only be ethically questionable if exploitation was intended, which seems to be the implication of a previous comment. If I own a company, and I pay my employees a lower wage than they deserve, and my intention is merely to maximize profit, I’m clearly guilty of exploiting my employees, but my intention was entirely acceptable. So I don’t think appealing to a lack of malicious intentions gets us off the hook, at least not as a general rule.
Also, I still don’t see what the contract has to do with it. If I violate a contract, it’s okay to benefit from my misfortune? Why would that be true? Maybe it is, but it’s not obvious that it is. This question is for both commenters. Since you both seem to find this reply appealing, I think it’s worth pressing you both on it just a bit.
Let’s try an example to make the point further. Say I sign an agreement to build you a sailboat, and the terms include the stipulation that I will not be paid until the boat is completed. Something happens, and I am unable to finish the boat, so you sell the half-finished boat and make a profit. Would that be okay? It seems like it wouldn’t, because the violation of the contract doesn’t change the fact that selling the boat is using me as a means to some end, without any consideration for my interests. So what’s different about the foreclosed home scenario? Does the involvement of the third party, the bank, make a difference? If we added a third party to the sailboat example, would it change anything?
To briefly reply to the act, motive, end approach to moral decision-making that is discussed above, I’d say that all those things are sometimes relevant, none are always relevant, sometimes all are relevant, and what’s relevant and how important it is depends entirely on the context in which a moral decision arises. I tend to think that morality is far more complicated than most normative theories allow for, and at this point I tend to shy away from any theory claiming “morality is always/only X.”
I’ll add one further point, because it’s also worth stating. I think one could make the argument that whether or not to purchase a foreclosed home is a matter of deciding between better and worse options, and that it’s largely a trade-off in values. Buying a foreclosed home is great for the new buyer, but lousy for the old one, and there’s clearly a debate to be had about the ethics of doing this. On the other hand, buying a home that isn’t a foreclosure is great for the old buyer, but lousier for the new one, and we haven’t really explored the ethics of that approach. So what’s more important, taking care of yourself, or treating others a certain way? Probably both, so which one matters more in this case? Depends on what we’re talking about, I think.
That’s really my concern with approaching this question by looking only at the act, the intention, and the proposed end. I don’t see where in that process we consider the interests of others. My own view is that ethics is largely about how we ought to treat other people, and about what sort of person we want to be, and that figuring those two things out is really complicated and not easily captured by theory.
As a final reply, I’m enjoying my program a great deal. I just finished my MA at CSU, and will be beginning the PhD program in philosophy at Bowling Green State University in the fall. I’m also expecting a new baby, so it’s going to be a busy summer.
6 What’s A Contract Got To Do With It? Ethics and Purchasing Foreclosed Homes - Everyday Ethics // May 28, 2009 at 4:11 pm
[...] week, I wrote an article discussing the ethics of purchasing foreclosed homes. I suggested that there is something ethically suspect about doing so, and that when we do this, [...]
7 David // Jun 17, 2009 at 5:43 am
I know it is over a month old, but I just stumbled across it…
When a foreclosure takes place, there is actually more than one victim - the foreclosed on homeowner, the bank, the bank’s employees, and the banks investors. When things are going good, it is hard to consider anyone except the foreclosed on homeowner as a victim. However, when so many foreclosures take place at once, as we see today, it brings the other victims to light.
People can no longer make house payments. Banks bring in less revenue than expected, and as a result, employees are terminated and investors are let down. Some of these investors have reinvested these expected earnings in other things (derivatives).
Yes, it is terrible when one person/family loses a house due to foreclosure. However, they are not losing the house to the new homebuyer. They are losing the house to the lending intuition. Most institutions would rather never deal with foreclosures, but the family not making payments is creating more “victims” than just his/her family. Try making a victim of the entire world.
Buying a foreclosed home is no more unethical than donating to cancer research. I know when I donate or volunteer for something it brings a good feeling to my heart, but I would not have that opportunity if someone did not have any misfortune. So, am I unethical in donating and receiving those good feelings because I am doing it at the cost of someone’s misfortune? Or, am I donating to find a cure and prevent future victims?
8 Elijah Weber // Jun 17, 2009 at 5:04 pm
Great point, one nobody has made yet. In some sense, the bank is as much a victim as the original homeowner. However, banks have the option to not pursue foreclosure. No one makes them do this, they can make other arrangements anytime they choose to. That’s my concern with your analogy to donating to cancer research. I think what we’ve actually got there is a disanalogy.
Cancer patients don’t do anything to get cancer, so they are largely innocent victims of biological circumstance. Banks are the victims of foreclosures that they initiate. We would only have an analogy if cancer patients knowingly caused their cancer. In some instances, they do, but usually it’s just bad luck.
I also don’t think it’s quite right to suggest that donating to cancer could be unethical because it is at the cost of cancer patients. It doesn’t cost them anything. Your donation is all benefit for them. Further, I’m skeptical that people buying foreclosed homes see it as an act of altruism that bring about the same kinds of good feelings we might get from donating to cancer research.
My original analogy was with buying stolen property, and I think this demonstrates the problem with the cancer patient analogy. There’s no sense in which donating to cancer research, even if you feel good about it, is revictimizing the victim.
Thanks for reading, and I look forward to more great comments.
9 Rethinking the Ethics of Purchasing Foreclosed Homes: Moral Psychology Takes a Practical Turn - Everyday Ethics // Apr 27, 2012 at 7:10 am
[...] time ago, I wrote on the topic of whether there might be something ethically problematic about purchasing a home that has been foreclo… The basic thought behind the argument is that when someone does this, they are benefiting from the [...]
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