Traditionally buyers that own their current home would hold off until they sold their home before they close on their new home. Today's market is completely different. People need to buy new homes due to regular life events and they cannot sell their current homes. I'll bring up a few real life examples that I deal with every day. A homeowner may have to move because they lost their job and the only other job for them is in another city. Another homeowner may be approaching their senior years in a home that they can't physically maintain anymore so they need a smaller maintenance free home. Families expand and need more room for additional children. Single professionals marry and decide to move into a home more suitable for couples. Couples that divorce, need to sell their marital property. Today's real estate market is severely impacting the normal life events of current homeowners. These life events oftentimes do not allow a homeowner to hold off on buying a new home. Because they cannot sell their homes, or they can only sell their homes at severely deflated values they turn to other options that, in my opinion, are further detrimental to the market.
Some of their other options are foreclosure, short sale or becoming what I call an "accidental landlord". When faced with a life decision that requires relocation, if the necessity to move outweighs the perceived negative impact of foreclosure or short sale, a homeowner will "let their current property go". Many opportunists market their fee based services to these people and present these options in a very misleading way. A strange mob mentally helps people believe many of the misconceptions being espoused. Many people think that since so many other people have foreclosures or short sales on their credit record, it's not so bad anymore. When a homeowner makes the choice to keep their home and pay their mortgage as agreed despite the life event(s) that necessitate a move, they become what I call an "accidental landlord". They decide to rent out their home while they make their move but current mortgage underwriting guidelines and regulations work against them.
In the past, it was readily feasible to get a mortgage on property while owning another property. People buy vacation homes and investment properties with a mortgage. Investors and occasional occupants are not what strengthen communities and increase values. The new departure residence guidelines are targeted to the owner occupied homeowner and the struggling families all across our country. These are not the "flippers" and property managers. These are regular people with normal life events that fuel the middle movement in the real estate market place. In the past, they were able to overcome the obstacle of a slow market by renting out existing homes to move on to their next home. The rental income helped offset the mortgage until the market improved so the property could be sold. The new guidelines do not let the homeowner use the rental income to qualify and requires proof of large liquid reserves and proof of an unrealistic equity position in the departure residence.
These policies are severely flawed. They encourage the wrong kind of action in the marketplace. Moreover, they serve to keep the numbers of distressed properties on the increase.
Please let me know what other topics in today's real estate market I can share with you.
Thank you for your time.
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