11/16/2009 05:12 am ET Updated Nov 17, 2011

Even the Losers Get Lucky Sometimes

A former client's sorrowful tone came through before I even opened her e-mail. Her subject line read: My Big Loss--Help! The correspondence itself was filled with variations on when I thought the real estate market would stop its downward spiral and head upwards again, along with a plea for assistance. Sensing her anguish, but having no details on her dilemma, I asked her to call me.

She did, and the conversation quickly veered from pleasantries to the source of her despair. Although she's not yet ready to sell, she was troubled by how the current market has "destroyed her future." Her home, bought for about $250,000 in the 1980s, appraised as high as $950,000 when she last refinanced in 2006. Now, she sadly related, it is "worth less than $600,000 and we owe close to $800,000. I can't sleep. I can't eat. I can't believe what I've lost."

Slipping from my attorney mode into counselor style, I recommended that she refrain from speculating on the present value of her home, as she had no plans to sell and said she didn't need to refinance. I recalled that she had just conveyed how much she loved her backyard pool and the furniture she bought with the money she borrowed. After some discussion, she agreed that no one had forced her to take out such a high mortgage in 2006.

I then gently rebuked her: Why label yourself a loser? Using her numbers, I did a quick calculation and figured she had already gained upwards of $300,000 in the 20+ years she'd owned the house (cashing out even more than that to enjoy luxuries she could not otherwise afford). Reluctantly, she acknowledged that if she'd sold her house at just under one million dollars in 2006, she'd have bought a higher priced home in that inflated market, and would be even deeper in debt today.

Now more relaxed and thinking semi-reasonably, my caller recognized that she'd knowingly mortgaged her home to fuel her happiness, gaining many material things in the process. Realistically, she hadn't really lost anything but her own expectations, based on a market manipulated by forces she couldn't control. Recently, she'd become unhappy at the enormity of her debt and the decline in her home's value, and found herself in a state of near hysteria by the time she sought real estate therapy. But I reiterated that the predicament she finds herself in is of her own choosing; no mysterious and evil hand reached into her savings account and yanked out hundreds of thousands of dollars with nothing to show for it.

I don't know if I merely provided a temporary respite from her melancholy, or actually presented a preferable long-term perspective. But before we hung up the phone, I reminded this homeowner that while she was floating in her cool pool and fretting, or sitting on her love seat agonizing over lost sleep, thousands and thousands of former homeowners now find themselves homeless. I'm guessing not a single one of them would dub her a "loser."