August 2017

Written by Robert H. Ruth 

Yes you read that correctly; no appraisal required on some purchase transactions.  Obviously this is not going to be the case on every loan, but this is a possible game changer in the lending industry.  Let’s examine this development in greater detail in this post.

Appraisals are one of the key components of a mortgage loan

• When a homebuyer goes to a lender for a mortgage the lender wants to make certain that the house is sufficient collateral for the mortgage loan and for this reason an appraisal is done on behalf of the lender.

• Historically, the lender has relied upon the services of a licensed, professional Real Estate appraiser to perform the appraisal. The appraiser would visit the house to

Written by Robert H. Ruth 

 A buyer has 3 options in this situation: re-negotiate the price with seller, fight the appraisal, or walk away from the transaction. That’s about it. Let’s look at each option in a bit more detail. 

Re-Negotiate

If the appraisal done by the bank giving you the mortgage comes in below the selling price, you can try to negotiate the price down to the appraised value. That is easier if the value is only off by a few thousand dollars, but very difficult if the price is off by $10,000 or more. You have to remember that the seller has lived in the property and they have a deep connection with the house. Selling it is not always just a business decision for a seller; often it is an emotional one. And when it is emotional

Written by Robert H. Ruth 

I’m going to share a scenario that happens frequently on purchase loans, and the impact of the wrong decision can be painful, particularly for first time home buyers.

Frequently a house goes under contract, and in the course of the buyer’s inspections, deficiencies are found with the property. In many instances these deficiencies turn out to be small issues, cosmetic in nature, like replacing some roof shingles that are missing, or replacing a switch plate in the hallway, or fixing the bannister on a stairway. These issues are generally taken care of without much hesitation, and the sale is consummated in a routine fashion.

Sometimes the property has issues that are more serious in nature that should to be addressed

Written by Robert H. Ruth

“OK, Mr. Peabody…but what happened in 2007, and why is it important that we go back there now?”

“Well Sherman, 2007 was a pivotal year for the United States Housing Economy, a year in which all hell broke loose due to the impact of grossly overvalued Real Estate which had been driven to unsustainable levels by Subprime Mortgage Loans.”

“What are Subprime Mortgage Loans Mr. Peabody?”

“Not so fast Sherman…first let’s talk about how values in Real Estate have changed on a historical basis.

You see, historically, US home values have increased by an average of 2 ½-3 % yearly, but during the period from 2003-2006 values went up by 20-30% per year.”

“That sounds like a lot of appreciation, Mr. Peabody.”

“You