I have buyers in this market... and the banks are throwing up roadblocks every where we look.
We have a completely different real estate market from a year ago. Nationally we have seen the near collapse of major banks, like Bear Stearns, related to their real estate investing, the Fed reducing rates and changing the rules about which banks can borrow money from them, conforming loan limits have risen sharply. Locally, we have seen some of the same. Market times and inventory are increasing and sales prices are softening.
Yet, for the first time, just recently, I have seen the skittishness of the banks locally. I have clients due to close on the purchase of their home imminently. The appraisal came in on time and on value, the inspection was fine for a house of its age, the loan to value ratio is outstanding at about 65% (35% down payment), the loan documents were all in place or so we thought.
The day loan documents were due to the escrow office I started getting phone calls from the listing agent who, in turn, had gotten a phone call from the appraiser. The appraiser was asking about water in the crawl space (there was none), major electrical issues (a few minor ones), and in general throwing up red flags all over place.
Surely the underwriters started this whole chain of phone calls, but why? Just nervous? Cautiousness? Were there real problems with the loan? I don't think so. But, inventories are on the rise, prices are sagging, banks are hesitating to lend, the few buyers that are out there suddenly cant buy, which leads to increasing inventories and a vicious spiral down.
In a market ripe for buyers to come out of the woodworks and snatch up some great deals, the banks are making it harder for them to do exactly that. I understand their free lending ways contributed to the crunch we are in right now. But if we ever want to break out of this spiral it will have to start with the banks providing funding to the buyers.
Was it just coincidence that this all happened the day this article hit the news wires?
-Chris
