Sharks in the water, Are you the bait

By Michael Mapes, The Responsible Mortgage Lender.Com

During the recent housing boom buyers had to be wary of predatory lenders selling sub prime loans with high cost mortgages and terms that were in reality not affordable.  It appears today that buyers still need to worry about not only predatory lenders but also predatory sellers.

Sellers are wanting to sell a home, especially builders.  With all the standing inventory and the need to bleed off that inventory builders, especially builder who control the financing vehicle are coming up with unheard of terms and conditions for the sale.  Recently, some builder have been offering closing cost assistance of up to 10,000.00 and price reductions of up to 30-40,000 of new homes.   On the surface this seems like a good deal, to the buyer.  However, these builder bail outs are starting to cause some real problems.

As builders continue to offer steep discounts what is emerging is that neighborhoods that they are building in are being to lose their value.  Sometimes even before the house is completed for sale the house has devalued some 10,000.00, the net result is that a home buyer has to put up more money.  Secondly, the builders are turning to sub standard material and labor as a way to off set the reductions.  This has a long term net effect of depreciating a home and causing the home owner to incur expensive repairs two to three years after the purchase.  This also can put a strain on the household budget to the point that puts the ability to repay the obligation in jeopardy.  Thirdly, the controlling of the financing in a down market like this has led to even poorer underwriting decisions and more predatory lending practices.

While not all builders are conducting this type of business practice there are some that are and as a buyer you need to be aware of the costs versus reward.  In some cases if is sounds to good to be true it typically is.  A good reputable builder will offer a quality product at a reasonable price.  A cautious approach is warranted none the less.

Michael Mapes can be reached at 757.599.1810 ext 225 or on the web at www.suntrustmortgage.com/mmapes or http://www.theresponsiblemortgagelender.com/