A Home Inspector’s Weblog by Frank Schulte-Ladbeck

exploring homes and the lives in them around Houston

Here Today, Gone Tomorrow: a story of a loan

Many real estate professionals are bemoaning how current events are being portrayed in the media, when it comes to their industry. I know that I have done my share of this. We appear to be in a buyer’s market in much of the country, but there are no buyers for homes. In one post, I saw the term that buyers were living in a “2006 fantasy world”, since many buyers have not really listened to the news or real estate professionals thoroughly.

First, a little definition is called for. A buyer’s market is a reference to a situation at the negotiating table for a home. It means that the circumstances for this negotiation favor the buyer. Here are some problems buyers have created for themselves, because they believe that all of the conditions to purchase a home are in their favor. We hear reports in the news that home prices are falling, so buyers are waiting to see if they will drop further. The national price for a home is falling, but this is not true in all areas. In fact, some areas, like my home Houston, have seen an increase in home prices. The fall in the national average is due to dramatic declines in certain locales. This has led to buyers going after homes that are out of their price range, thinking that they can bring the price way down. Most sellers are ignoring these offers. In one instance that I am familiar with, the buyer was looking at homes that were $100,000 above his price range. He seriously believed that he could receive such a steep discount. You have to ask yourself, would you want to loose that money on your home? If you would not, then the seller will not either.

I have witnessed situations where a buyer has taken my inspection report to the seller to ask for all of the repairs to be done. On a home that I re-inspected yesterday, many of these repairs had been completed, which came as a bit of a surprise to me. Generally, sellers are concerned with the big ticket items, and finding a way to have them dealt with. In the current market, there are some sellers who are willing to make every single little repair. However, this is not always the case. Most minor repairs are left undone.

My favorite stories are coming out of the mortgage industry, where the
term “2006 fantasy world” came into play.
You see that year was a great year for a buyer to obtain a mortgage. Zero down loans at good interest rates were available. Many of the subprime loans that we are hearing about in the press were made during this time period. Some buyers feel that since conditions are in their favor, that they could obtain their dream loan. Reports of how lenders are pulling back from these offerings are not being heeded. One broker I know had clients who seemed to be serious about the loan, so he went through all of the paperwork. At the end, his clients told him that they were going to shop for a better rate. He attempted to explain to them that rates are in flux, but he was delivering the best rate that he could produce, and that to lock it in, they had to complete the loan. The buyers were convinced that they could do better, so they left his office. Some time later, they come back to his office, stating they were ready to sign for that
loan at that specific rate. He informed them that he could no longer provide what they wanted, because the rates had gone up. They were naturally upset that they were no longer getting the best deal; however, they blamed the broker, when he did try to explain to them that he could not lock it in without completing the forms. The buyers only had themselves to blame, but this they could not see.

If you are planning to purchase a home, you should have some money tucked away to pay for a down payment on the loan and for closing costs. Even if there are zero down loans out there, which some lenders still claim are available in certain circumstances, your priority should be to find the best deal. In the loan industry, this has always meant coming to the lender with some cash in the bank. The larger you down payment is, the lower your interest rate can be. To determine your down payment amount, ask about what the closing costs might be (just an estimate; they cannot give you all of the specifics); plan to have some money to deal with the costs of moving
in (for example, if you are new to paying for utilities, they will ask for some money to hold to see that you will pay- this money will be given back to you over time). Then see how much you have left over to use towards the loan.

Good luck in finding your home.

Your Houston home inspector,

Frank Schulte-Ladbeck



  Peter Quinn wrote @

Hi. I am a long time reader. I wanted to say that I like your blog and the layout.

Peter Quinn

  frankschulteladbeck wrote @

Thank you Peter. It is nice to hear from you.

  parlakawong wrote @

Hello ,I liked your blog.Besides,the arrangement of contents are easy to look up and good information.Nice to meet you.

  frankschulteladbeck wrote @

Well Mr Wong, it is nice to meet you too. I see that you have quite a bit about mortgages on your blog. I can only take credit for picking the theme, not the design, but it does work fairly well.

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