Why are we getting involved in the Russia-Georgia war when Russia asked us not to get involved? Why are there U.S. planes flying over Georgia right now?
Have we learned nothing yet? Can we please sit this one out?
Jane
Freedom isn't free........someone has to pay! For that reason, remember it is important to look past the horse & pony show the political candidates are putting on for us, and get very serious about our country's future! Don't let any candidate blind you with cheap tricks to divert your attention!
"This is not a popularity contest! It is Our Own Children's Blood at Stake!!!"
Jane
Your house as you see it......
As your Buyer sees it.......
As your Appraiser sees it.....
As your Tax Assessor sees it......
Although I don’t usually believe in wasting too much time on pointing the blame finger, as it’s much smarter to take the same time and energy to try to fix the problem, I wanted to review some every-day scenarios which led us to the real estate bubble.
SCENARIO #1
A home valued at $350k sells for $380k. But the realtor knows that no mortgage company would lend $380k on a $350-valued house---even with money down. The realtor and mortgage rep both have a large commission riding on it, so they find an appraiser willing to get creative so the appraisal can be stretched to 380k. With the 380k appraisal, the home can sell for 380k with no problem, and everyone is happy, including the entire neighborhood. When this home sold 30k higher, it set a new precedence on public record for all homes within half a mile. Now the comparable homes in the neighborhood, just went up 30k in market value.
In this scenario who caused the artificially inflated home prices? The realtor, the mortgage rep, the appraiser, the seller, or the buyer?
SCENARIO #2
A month later, a similar home a block away sells for 390k-----and so the bubble grows.
The Smiths’ down the street are thrilled, as this is causing their home to go up in value very fast. They decide to use their new-found equity to take 40k cash out of their home with a refinance. They use the money to pay off their credit cards, go shopping, and take that dream vacation. Home values continue to escalate because home flippers are buying and immediately selling higher like mad! The Smiths’ need money again, and take another 40k cash out of their home. After the money is spent, and their adjustable rate mortgage payment rises, and they are struggling each month to make the payment to keep their home. Some months they just can’t make the payment. Their credit scores drastically drop, and now they are 3-months late and must refinance just to get enough cash to bring the mortgage current and out of foreclosure. Unless they win the lottery, they can only prolong the inevitable foreclosure for so long. The Smiths’ become a homeless statistic, along with millions of others that also fell into the “My home works like an ATM” trap.
SCENARIO #3
Behind the scenes, the wholesale banks put pressure on their outside sales reps to go out and solicit every mortgage broker's office for loans. “We need loans to convert on Wall Street to cash premiums!” Go out there and bring us their ugliest train-wreck deals! If they had a bankruptcy last week, no problem! An unemployed borrower? No Problem!” The investors in Korea are anxious to invest their money in higher rate sub-prime U.S. mortgages. $1000 bonus for the rep that brings in 10 new loans today------offer the brokers a higher premium------go get em’!”
So who caused artificially inflated home prices leading to the bursting of the proverbial bubble? Was it the real estate agents, mortgage brokers, mortgage lenders, house flippers, real estate investors, appraisers, foreign mortgage investors, frivolous refinancers, buyers or sellers? Or are all of the above contributors to the end result?
After the correction is complete, will the cycle start all over again? I think the answer is; only if there are lots of third-party investors investing billions into our mortgage notes again. (There are hardly any foreign investors now due to the super-high number of foreclosure in 2006.) If not, lenders will only lend to individuals with perfect credit and income, because it is their own money being invested, not some foreigner’s money.
I am willing to accept my share of the blame for working in the industry, although it is like going with the flow on a highway where everyone is speeding. But the imploding of the bubble was caused by a large spectrum of reasons, not just by the people working in the industry. We are just the pawns in a big game of real estate chess.
Jane
