Real Estate Market On Track For Another Crash

If insanity is doing something over and over again expecting different results then the real estate industry is totally insane because obviously they haven’t learned anything from the crash of 2008 because it’s heading down that same path.  I’ve been seeing little signs of heading down that road again. I mean at first, nobody would do anything. Banks didn’t want to loan money to anyone and the real estate industry was sort of on a lock down so-to-speak. Think of Goodfellas after all the “wiseguys” got pinched and everyone was on their best behavior for a while. I heard many Realtors® whining because they couldn’t use “their” appraisers anymore. Whaaaaaa!  If I can’t get my appraiser to appraise the house the deal will fall apart and then who’s going to pay for my Mercedes or my 150th investment property and that house down the shore…. whaaaa!  Their” appraisers! No Realtor® should ever say the words “their” appraiser!  One of the biggest reasons things got out of hand were because of the appraisals. Everything and anything appraised back then. It was sickening really and everyone knew it which made it that much more disgusting but I digress.

After the dust settled, buyers had to have some teeth in the game if they wanted to buy. They had to have a job, great credit scores and money in the bank. Makes sense right? I mean people who have no money, no job and bad credit shouldn’t be buying a home and shouldn’t even qualify to buy a home more importantly. But now, things are starting to loosen up. I see Realtors® taking buyers to see homes above what they can afford who have no money saved in the bank for closing costs and banks are issuing approvals for these buyers. Hello! If a buyer doesn’t have money to pay for their own closing costs, how are they going to pay their monthly mortgage bills?  Why are banks suddenly approving these buyers for loans?

Do you know what happens when buyers do not have money for closing costs? When a buyer has no money for closing costs they put in an offer for a home and they push up the offering price. So if the home is listed for $250k, the buyer will write an offer for say $257,500 or higher so there is more money to pay for closing costs. When a buyer does this, the seller is now taking an unnecessary risk because now the home has to appraise for the higher price and the risk is that the home doesn’t appraise and the home doesn’t sell, the deal falls apart and the seller loses valuable marketing time.  But, if the home isn’t worth the higher price to begin with and the appraiser appraised the home just so the buyer gets money for closing costs now you are creating artificial home values and headed to the dark side AGAIN!

I recently had an agent scold me because they submitted an offer on a listing of mine and instead of pushing the price up, they wrote the offer for what the home was listed for (nice) but then proceeded to ask for over 6% in seller assist and when I explained that my seller rejected the offer, they couldn’t understand why.  They went on and on about how the home won’t appraise if they pushed the price up and because of that, the seller should accept the offer. It was a lot of drama. I’m sorry but when did the fact that your buyers have no money become my seller’s problem?  This agent should not be showing their buyers homes in this price range to begin with because they can’t afford it, plain and simple. Well, the bank approved them they said. Well, you work for your client not the bank and if you see that they can’t afford homes in this price range, despite what the bank approved them for on paper, you have a fiduciary duty to your client to do the right thing and explain that they do not have enough money to purchase homes in that price range.

But its starting again. First, banks approve buyers for more home than they can actually afford, agents show buyers homes out of their price range, write offers for more than the listing price, appraisers appraise homes for more than what they are really worth,create artificial home values, buyers buy homes they can’t afford, stop paying their mortgage and go into foreclosure.  Am I the only one who sees this starting again?

Stay tuned!

Renée Porsia, is an Associate Broker with Prudential Fox and Roach and published Author. Renée Porsia assists home buyers and sellers in Philadelphia, Bucks, Montgomery Counties and on the Main Line.  If you would like to read more articles by Renée Porsia, visit her website at http://www.reneeporsia.com. To contact Renée Porsia directly call her at  (215) 669-0589 or email her at reneeporsia@mac.com

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