WHO'S AT FAULT?
The negative media regarding our industry is on the hunt. They are looking for a scapegoat and they seem to be willing to point the finger at anybody. There is no question that the market is currently suffering but that's true of all market's and business cycles. From time to time, each of them experiences a slowdown. Now come's the blame game.
In some ways, the media is right; there is plenty of blame to go around. The strong economy and low interest rates helped spark a real estate boom, lenders loosened their guidelines so more people could achieve the American Dream, Wall Street was happy, everything was great.
Is the subprime market the reason all of this is happening? I don't believe that subprime is the major culprit. Negative media caused a knee jerk reaction that made some of the financial district decide to move their money elsewhere and that led to a great deal of trouble for subprime lenders and a ripple effect began. It wasn't necessarily that foreclosures in subprime had spiked significantly over previous years, they were up but only marginally so. The largest spike in foreclosures occurred in the investor market and 100% financing for those properties. Instead of being able to flip these properties, investors needed to hold them and as the market took a technical correction, they were holding properties that did not have the same value as when purchased. Beyond that, many of these investors bought several properties multiplying the problem. These investors were not subprime borrowers and they're not all to blame either.
A lot of new and inexperienced mortgage brokers and realtors helped. Not understanding the tried and true practices of success, many deals were put together and run through the system that never should have even gone to contract for the pure and simple reason that there was no advice to be given. Real estate has always sounded like a good deal but if it's not structured with the guidance and experience of career professionals then deals get done that probably weren't good deals to begin with.
What's the bottom line? It is always a better idea to use and sometimes pay extra to get sound advice from career professionals in the industry. Realtors and mortgage brokers that have formed strong relationships built on the foundations of trust and responsibility are always worth extra. You can't buy a Cadillac with VW money.....
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