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A co-worker is in the process of buying a home. He's now past the deadline and being charged extended fees even though the reason he hasn't closed is entirely the seller's fault - they did things to mess up the house that he then had to fix in order to get closed, and he's still working on it this coming week.
He's of the opinion that banks are buying up homes, holding onto them to inflate values, and then selling them, in collusion with the appraiser to charge more money.
I'd like to know people's experiences on this issue. Buying a house is in my forthcoming plans, and I'd like to know what I'm up against. I was on the verge of buying a home up in Oceanside about two years ago but backed off due to a horrible broker. This time around I'll be empowered with better credit and a bank pre-approval going in.
He's of the opinion that banks are buying up homes, holding onto them to inflate values, and then selling them, in collusion with the appraiser to charge more money.
I think your friend is overly paranoid. I'm not sure I'd call a foreclosure buying a home, but I guess that is a matter of perspective. It is true that the bank doesn't have to write off the loss of the asset until the time of sale so I do believe that some banks are staggering their losses into different quarters by holding and selling them at a steadier pace. I think this has less to do with inflating values than accounting purposes for them though.
The bank that owns the property has nothing to do with the appraisal. The lender that is going to lend on the property orders the appraisal through an AMC. So your friend honestly thinks that the 8,000+ banks in the US are colluding with the 100,000 or so appraisers out there? And who exactly is coordinating that?
Don't know. It stems from the fact that the bank apparently add their own points to the deal, which he questioned. It's been so long since I was in the hunt that I don't remember if the bank I was dealing with did the same thing or not.
Don't know. It stems from the fact that the bank apparently add their own points to the deal, which he questioned. It's been so long since I was in the hunt that I don't remember if the bank I was dealing with did the same thing or not.
Add their own points?
You mean the insanely long 12 page addendum that you have to sign?
You mean the insanely long 12 page addendum that you have to sign?
This was after the fact. Somehow the extra points were added into the final deal when he was close to closing, but they were not accounted for during the initial document signing.
I don't have all of the facts on it. At this point I'm just curious of people's experiences with different sellers and trying to close on bank owned homes, to see if anyone's observed any strange price-related actions.
Since the foreclosure process Deflates values rather than Inflating them, the whole premise is off to a bad start. The longer they hold them, the lower the values generally go and the more it cost the bank in holding expenses. I am personally aware of a bank that loaned 80K on a property and foreclosed on it a year later. While the bank held it, the interest rates were 17-19% (yes this was in the 78-80 downturn) and had to do extensive repairs when vandals flooded the house with a waterhose in the AC ductwork. They spent over 30K in repairs and finally sold the properly for 69K. They sure made out on that deal! NOT!
The appraisers are independent and licensed by the state. I agree there is some influence, but nothing that cannot be justified by the comparables and objective data. There are a number of factors that can raise or lower a value and are completely subjective and are left to the judgment of the appraiser. If an appraiser knows the desired contract price, he can surely nudge the appraisal value toward that number, but only to a certain degree.
This was after the fact. Somehow the extra points were added into the final deal when he was close to closing, but they were not accounted for during the initial document signing.
I don't have all of the facts on it. At this point I'm just curious of people's experiences with different sellers and trying to close on bank owned homes, to see if anyone's observed any strange price-related actions.
I've written up and closed numerous contracts for buyers in the past two years and there were no funny goings on. Points can't just be added at close and if he closed after Jan 1 this year then he got the new HUD form. Your friend needs to have his agent, his mortgage broker, or an attorney better explain what transpired because he sounds like he is missing a piece of information.
Since the foreclosure process Deflates values rather than Inflating them, the whole premise is off to a bad start. The longer they hold them, the lower the values generally go and the more it cost the bank in holding expenses. I am personally aware of a bank that loaned 80K on a property and foreclosed on it a year later. While the bank held it, the interest rates were 17-19% (yes this was in the 78-80 downturn) and had to do extensive repairs when vandals flooded the house with a waterhose in the AC ductwork. They spent over 30K in repairs and finally sold the properly for 69K. They sure made out on that deal! NOT!
The appraisers are independent and licensed by the state. I agree there is some influence, but nothing that cannot be justified by the comparables and objective data. There are a number of factors that can raise or lower a value and are completely subjective and are left to the judgment of the appraiser. If an appraiser knows the desired contract price, he can surely nudge the appraisal value toward that number, but only to a certain degree.
If they would just auction them off and get it over with............it would be a lot better, and there would be less community blight. Property taxes, asset management, and hoa could easily run over a 1000 per month, and that's if there is no vandalism.
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