"My House Lost Value"

By
Mortgage and Lending with RealMortgageTraining.com

OK, time for you to get your thinking caps on.  I'll present a question that may seem like a simple answer at first, but there is a LOT deeper meaning in the long run.  Will it help you with your business?  Only you can decided, but it will give you a better understanding of the mindset of different people and then maybe you can have a better understanding as to how to deal with it.

What is the ONE thing that EVERY car has in common after it's driven off the lot?  Chances are that car lost value.  People accept it because they didn't buy the car to be an investment.  {Yes, some people do, but we're talking generalities}

Now let's look at the Real Estate market.   Why do most people buy a house?  To live in, right?  These folks also wants their house value to go up every year (who doesn't) and if it doesn't, they get upset....but they still live in the house!  The point, if the person plans on living in the house, they shouldn't get upset if it goes down in value.  If they aren't selling it, they haven't "lost" anything.  If they continue to live in that house, is it safe to assume their "loss" is less and less as time goes on?  Unlike a car, a house always has the potential of going back up in value.  

{note: we are NOT talking about investors, we are talking about the average home buyer}

That same person who has no problem buying a new car every 3 years and KNOWS it loses value as soon as they drive it off the lot could be the same person that loses sleep because their house hasn't gained value, even though they have no intention of selling it.

My point: Loan Officers need to understand the mindset of "my house lost money", because they can then relate more to the mindset and therefore look more like the expert when talking to the borrower. Relay to your borrower that their house is for enjoyment and living at the present moment so focus on that.  Make them feel good about buying or refinancing, if you can master this, you're WAY ahead of the competition

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Rainer
14,328
Bob Chiodo
Equity Home Mortgage - Portland, OR

Andrew- I agree with you. It's interesting how Americans have built up this persona that if you buy a house you will automatically make money. It's like we have built up this bubble of expectation. When we have a new client walk in the door, trying to "wait for the right time" to buy a house, the first question I ask them is if they are planning on living in the house for at least five years. If they say yes (which most of them do) I tell them that now is the best time to buy. Home values go up and down, they always will, but if you are planning on living in the house for many years, then now is the time to buy.

Good discussion!

May 22, 2008 04:37 AM #1
Rainer
6,627
Juan Boldizsar
Belleville, IL

When I started out doing mortgages in the beginning of the decade, interest rates were in the 8-9% range and people often asked, "Should I buy now or should I wait to see if rates might go down?"  My answer was usually the same as yours.  The people who followed this advice ended up being very happy because when rates ended up going down, their property values started to soar and many were able to either lower their payments or keep the same payment while utilizing equity for other things.  Those who decided to wait found that despite lower rates, the corresponding price increases kept them out of neighborhoods they could have afforded had they bought "now." 

Thanks for reminding us all of this forgotten piece of wisdom!

May 22, 2008 06:44 PM #2
Anonymous
poopy man

I like to poop in houses

Jul 10, 2011 06:29 PM #3
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Rainer
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Andrew Poletto

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