Several decades ago, the home buying and selling procedures
seemed far less complicated. Nearly everyone bought and so homes through
Realtors, who generally all charged the same six percent commission.
There was predominantly one type of mortgage (fixed rate), most people
put at least twenty percent down, and almost all mortgages charged the
same rate (for many years, in many parts of the country, this was 8
1/2%). Houses, in most cases increased in value based on the inflation
rate, and whatever improvements were made to the house, as well as its
condition and location. Houses were sold with "For Sale" signs, and
newspaper ads, as well as through "Open Houses." It seemed like, in most
parts of the country, almost all agents were Seller's Agents (meaning
they represented the seller in the transaction), even if they were
selling the house to their customer. Obviously, houses were far less
expensive, but average incomes were also substantially lower in most
cases. Home ownership certainly appeared to be part of the "American
Dream.
Today the procedure is far different. Houses are predominantly promoted via the internet, with Realtors involved in most sales, but with a far larger number of "For Sale By Owner" (FSBO) transactions taking place. While there are still Open Houses, in many areas even those are by appointment only, because of the increased concern with security in today's world. Before the mortgage fiasco that occurred a few years ago, there were many different types of mortgages, including fixed rate, and a variety of variable rate loans. Until the mortgage and banking crisis, there was far too much leniency in deciding who to give loans to, and it was not at all uncommon for someone to get a little down payment, or nothing down mortgage. Many home appraisers were appraising homes for far more than they ended up being worth. Which, obviously, when the economy suffered, and the real estate market reacted dramatically negatively, caused many homes to have mortgages larger than their values. This ended up with cash crunches, which led to many people losing their homes to foreclosures or short sales (selling a house for less than the amount remaining on the market). This then led to banks trying to eventually resell many of these properties, which then further exacerbated the drop in prices in those areas.
Since the banking crisis, and the government bailout, it has become far more challenging to get a mortgage. Banks have dramatically reviewed their home appraisal systems, which has led to individuals only qualifying for far less mortgage monies. In addition, banks began nearly arbitrarily reducing credit card credit lines, which because of the way credit scores are calculated, lowered many individuals credit scores, through no action of their own. Then, of course, banks began requiring higher and higher credit scores to qualify for a mortgage, so it is obvious how that further complicated manners.
In addition, many sellers still expected to receive the same price people received at the height of the market, while at the same time, many buyers had somewhat unrealistic expectations as to how low they could buy a house for.
My advice is that the first thing is that both buyers and sellers must become more realistic, so that they can come to some fair meeting of the minds. Next, banks should be far more careful than they were, but far more reasonable than they are now. America needs a robust housing market, because the worst possible scenario would be if large numbers of Americans begin to feel that home ownership is no longer part of their version of the American dream.
Today the procedure is far different. Houses are predominantly promoted via the internet, with Realtors involved in most sales, but with a far larger number of "For Sale By Owner" (FSBO) transactions taking place. While there are still Open Houses, in many areas even those are by appointment only, because of the increased concern with security in today's world. Before the mortgage fiasco that occurred a few years ago, there were many different types of mortgages, including fixed rate, and a variety of variable rate loans. Until the mortgage and banking crisis, there was far too much leniency in deciding who to give loans to, and it was not at all uncommon for someone to get a little down payment, or nothing down mortgage. Many home appraisers were appraising homes for far more than they ended up being worth. Which, obviously, when the economy suffered, and the real estate market reacted dramatically negatively, caused many homes to have mortgages larger than their values. This ended up with cash crunches, which led to many people losing their homes to foreclosures or short sales (selling a house for less than the amount remaining on the market). This then led to banks trying to eventually resell many of these properties, which then further exacerbated the drop in prices in those areas.
Since the banking crisis, and the government bailout, it has become far more challenging to get a mortgage. Banks have dramatically reviewed their home appraisal systems, which has led to individuals only qualifying for far less mortgage monies. In addition, banks began nearly arbitrarily reducing credit card credit lines, which because of the way credit scores are calculated, lowered many individuals credit scores, through no action of their own. Then, of course, banks began requiring higher and higher credit scores to qualify for a mortgage, so it is obvious how that further complicated manners.
In addition, many sellers still expected to receive the same price people received at the height of the market, while at the same time, many buyers had somewhat unrealistic expectations as to how low they could buy a house for.
My advice is that the first thing is that both buyers and sellers must become more realistic, so that they can come to some fair meeting of the minds. Next, banks should be far more careful than they were, but far more reasonable than they are now. America needs a robust housing market, because the worst possible scenario would be if large numbers of Americans begin to feel that home ownership is no longer part of their version of the American dream.
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