Sub prime loan. Three words which really should have such positive connotations are now resounding in the minds of millions of Americans trying to get out from under the rental trap. As mortgage companies scramble to sell off their debt to avoid bankruptcy, the crunch is hitting average americans like a sledgehammer. The biggest scandal to hit the real estate market since the S L; crisis in the 1980’s, this situation has brought many young Americans as well as minorities and immigrants to bankruptcy, forcing them to give up their homes, assets, and their livlihood. For those who fell into the trap, the crescendo of the situation has been the foreclosure of their homes and the upheaval of their lives. At this early stage, blame is being passed back and forth while the government staunchly lays blame not on potentially fraudulent credit companies, but on consumers who don’t understand the legal language of credit documentation.
Caught in the middle are consumers who have budgeted themselves into a smaller price bracket, and who know what they can afford, as well as companies who are genuinely in the business to help people from all walks of life own a home. In the few months in which my wife and I have been searching for our first home in north Georgia, we have heard all the hype about what are called “McMansions” here in the south, and according to the hype, we are more than qualified to immediately take possession of one of these fine homes. We opted to err on the side of caution, however, and avoided talking to the builders. We went old-fashioned, and asked some people we knew about agents. That was the best decision we made. She cut through the hype for us, and let us know exactly where we stood, no holds barred. She also put us in contact with a mortgage originator with whom she had done business for years, and had a long list of inspectors, consultants, and builders with whom she had had relationships for just as long.
We learned to find out what we could afford without strapping ourselves, and within a few trips out to visit properties, she was honed in on exactly what we wanted. It was then that we realized what was happening around us. The housing market was drying up- quickly! Our price range was the most highly sought after in the three counties we were searching in, and we suddenly found that we weren’t only competing with other couples, but also with bank expectations, builders, investors, and amateur flippers. We were outnumbered, and outgunned. At every step, other buyers would outbid us on the homes we were interested in right out of our price range. It soon became apparent that we might be better off with one of the new homes which were languishing on half-developed lots. Question was, would the builders deal? As it happens, they do. One subdivision’s builder we looked at dropped prices by ten thousand. Then we found another. Turns out the builders don’t want to be stuck with excess inventory, and are trying to compete with older home sales while legislators are whispering about the bottom falling out of the market. Although that may not happen at all, what is likely is the market correction that is just around the corner, and the dip in home prices that will ensue before the cycle begins again.
For those of us out there who have done our homework, and found a good agent, this is a good time to buy, but carefully. My advice to you is to read through all your contractual paperwork, and work with someone who knows more than you do whom you can trust. Then, be sure you understand it all before you sign. Whatever you do, don’t be in a hurry. You’ll regret it if you rush, particularly when the market is so close to being in serious trouble.