Houses are in foreclosure and more are heading that way it seems. At this point most writers begin providing a history of events leading to home owner woes – but they generally fail to get the story right. The woes are due to three things – people buying too much house and engaging in speculation, too many people taking variable rate mortgages with teaser rates and the sudden increase in the price of oil. The last item probably had the largest impact because this is what caused our economy to crash – but that would take a series of writings to explain and I digress.
Houses are in foreclosure and more are heading that way it seems. At this point most writers begin providing a history of events leading to home owner woes – but they generally fail to get the story right. The woes are due to three things – people buying too much house and engaging in speculation, too many people taking variable rate mortgages with teaser rates and the sudden increase in the price of oil. The last item probably had the largest impact because this is what caused our economy to crash – but that would take a series of writings to explain and I digress.
One thing that can be done to help our economy and home owners both is to make it more affordable for people to refinance their homes. The cost of an appraisal is now about $400 - $450. Why? New banking rules (thanks Congress and President Obama) increased the complexity of banks getting appraisals. But here is the rub. An appraisal shouldn’t be this expensive unless there has been a major change to the property. Besides, if you get two appraisals they are likely to differ by several percent points. A common five percent difference is $10,000 on a $200,000 property.
Next is the mortgage tax (think of this as a “sales” tax). If you take out a new mortgage in Brevard County, the taxes are CONTINUES HERE http://homilysansdeception.blogspot.com/2010/09/mortgages-and-economics.html
Arrgh! Can't get the link to work right... sigh.
ReplyDeleteClarification - I am not advocating eliminating appraisals (in most cases). My point is that appraisals are too expensive and new rules just increased their cost by $50 - $100 with no real benefit from the change.
ReplyDeleteGotcha..
ReplyDeleteInsurance Companies can come pretty close with a combination telephone & internet appraisal. By asking their potential customer the age of the house, construction materials (frame vs. concrete, etc.) square footage as well as looking up the property on various websites. They can come up with a replacement cost on a per square foot basis that is very close to a $450 appraisal.
ReplyDeleteDuring real estate booms, appraisers put unrealistic numbers on everything. This practice helped to bring about the Savings & Loan Crisis of the late 80's. I have accused appraisers of doing "windshield appraisals @ 40 m.p.h.), i.e. doing a "drive-by" at 40 and never getting out of their car to look at the property.