What’s Going On With Lenders?

I had a call several days ago from someone who wants to sell a home. After asking several questions I set up an appointment to go out and do my thing. In preparing the comparative market analysis I found that we could list their home for approximately $350,000, but in January 2008 they did a refinance for $401,000. After giving them that news, the seller became upset because his house was "so much better" than the other comparable homes in the area. This is the second time in four weeks that a scenario like this has come up. In the second situation, the seller refinanced in 2007 for $825,000 and today’s realistic price is $650,000. Since 2005 we have all been aware of the downward trend in real estate. Why are lenders still refinancing homes for more than their current market value and setting these people up for a short sale?

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11 Responses to What’s Going On With Lenders?

  1. Avatar Dave says:

    Clearly the lender’s appraisal is correct and the seller should demand that you list it for the $401,000. 🙂 Bad lender=unrealistic seller= a lot of time, money and effort to sell a home that won’t sell. Unless you can get the seller to be realistic, run don’t walk from that listing. Good luck!

  2. Avatar Gina says:

    Well, I hope this isn’t happening today. The poor seller is in for a very rude awakening. Were these refi’s over 100% of assessed value at the time?

  3. Avatar CommercialLender says:

    JoAnn,
    I’m amazed, no shocked, that this is only the ‘second time in four weeks’ that an upside down seller has come to you. You must have taken 3 weeks of the month off on vacation?

    In sincerity, if you are only now seeing these late-model-loans on homes hitting the resale market, then there will be an even more massive waive of homes flooding the market and for much longer than we all thought.

  4. Avatar smarten says:

    First of all, thanks for continuing to contribute and keeping Diane’s blog alive.

    Now onto your post: why would anyone have pulled the equity out of his/her home in January and realistically expect that in a market like we’ve been going through for more than a year [you state that “since 2005 we have ALL been aware of the downward trend in real estate”], he’d/she’d be able to find a buyer willing to bail him/her out of his/her indebtedness?

    Sellers like these aren’t being up front and honest with you JoAnn [and therefore aren’t the “poor” little innocents unwittingly set up for a short sale you describe]. In fact for future use, why don’t you ASSUME all perspective sellers aren’t being up front and honest with you [that way you won’t be surprised]?

    Just out of curiosity, let’s take your January refi perspective seller as an example.

    1. When did he/she purchase his/her property, and for how much?

    2. How much was his/her original purchase money mortgage?

    3. Why did he/she refi in January of this year [and did he/she realize cash out]?

    4. Why has he/she chosen to sell now?

  5. Avatar Fallonrangerider says:

    Commissions…

  6. Avatar smarten says:

    As a follow up to Fallonrangerider’s comments, I just learned something today [I met with a mortgage broker who clued me in] concerning negative amortizing liar loans of the past [pardon me if the rest of you already know about this but I haven’t seen the subject come up in past posts].

    The way internal rebates were priced into these mortgage products, an agent could realize a commission of 3%-4% [as opposed to 1%+/-] pushing this type of loan versus others. The excess commissions were buried in the negative amortization aspects of the loan so the borrower never knew the premium he/she was paying. And according to the agent, even she didn’t know how it was factored into the loan because of complicated proprietary computer models.

    So yes depending upon the type of loan product, commissions could have indeed played a role in the loans JoAnn describes.

  7. Avatar Faust says:

    I’ve decided, from here on out, any offers I make will be wild junk with the seller paying for my bank appraisal and a mutually agreed upon appraiser. That way the seller (and seller’s agent) becomes responsible for the jibbah-jabbah about 12 month old appraisals and the “but this house/neighborhood/roof/tree/etc is soopre special” crap we’ve been running into.

  8. Avatar DERRICK says:

    I’m assuming we no longer post the monthly sales data ??

  9. Avatar Diane Cohn says:

    Derrick, nope, that will continue… just posted it!

  10. Smarten, the client is relocating for a new job. With all due respect, I’d love to give you all the details but really can’t say much more to protect the privacy of the client.

  11. Avatar johnny cat says:

    Down about 4% mikeZ .. OH NO!! what will I ever do! .. how that equity doing on your house mikez?

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