One-sided economics

As readers may have noticed, I look at economics from an accountant's point of view, for any transaction there are income and expenses; assets and liablities; credit bubbles and property-price bubbles; costs and benefits; risks and rewards; advantages and disadvantages and so on. With most truly free-market transactions, there is usually a small net gain to both parties, but that is a different topic.

On Planet Times, however, it is apparently sufficient to look at one half of the equation and not the other:

This drive to acquire homes at chunky discounts has been filling auction rooms since last autumn. Many bidders are looking for an affordable first home but others want repossessed properties going for a song that they can rent out, places such as the Manchester flat, bought for £195,950 in 2006, which went under the hammer at £75,000 at one sale...

For bargain hunters, this may sound great news, but they should ponder the human cost of [the auctioneer's] policy of accepting any price for a property, no matter how low**. This risks adding to the debts of these homes’ former owners, for which they continue to be liable after the repossession.

Sorry, nope. If the former owner of the repossessed home had a mortgage of £150,000 and the property is now worth £100,000, a bidder would be daft to pay more than £100,000. Of course, the bidder is perfectly entitled to overpay by £1,000, in which case the former owner's outstanding debts fall by £1,000**, but the new owner's mortgage increases by £1,000. Whatever price the successful bidder pays, the total outstanding mortgage/debts owed by the former owner and the new owner come to exactly the same figure (assuming that the bidder has a fixed amount he can use as a deposit).

Why is the "human cost" to the former owner worth more than the corresponding "human cost" to the new owner? Beats me.

* That statement is bollocks anyway, as the seller (usually the bank) is perfectly entitled to set a reserve price.

** Remembering always that the former owner can rid himself of these debts at a stroke by declaring himself bankrupt or entering an IVA etc.