Real Estate is Still Free Market Economy… Right?

Or is it?

I posted a link to an article on my Facebook buisness page (go ahead! click the link and join me on Facebook!) that talked about Obama’s latest thoughts on regulating the mortgage industry.

Based on recent experience, I think Obama hardly need step in. The banks are getting so ridiculous about the loans they WON’T make it is freaky.

Where a great buyer can’t buy a great house

Case in point: a well educated buyer finally finds a home that delivers great value for the price. But, he can’t buy it because FHA will not lend on any home that has been held for less than 90 days by the homeowner. The idea is the seller is making a big profit for doing nothing.

This is not just for FHA. Most of the lenders are prone to episodes of knicker twist over this very situation.

Here’s the problem!!!

These investors buy large packages of foreclosed homes, often for pennies on the dollar. The reason the banks do this is they bundle the good homes with the true stinkers- homes they couldn’t unload for free- and the investor takes the gamble that they can make enough on the package to turn a profit. The profit turned on one of the “good” homes doesn’t tell the whole story.

The crazy making fact.

The banks KNOW why and how these investors are making huge profit on a few of these homes. They created the situation in the first place, and yet they turn around and penalize the same people who helped them unload their debts. Why? Because, like the prostitutes in “Pretty Woman”, they say when, they say where, and they say how much. And they don’t kiss on the mouth.

Who is really hurt?

Ultimately, the ones who are most hurt are the first time buyers. Excellent homes at excellent prices will go to investors because they are the ones with the cash. A lower pool of potential buyers might also mean lower sales prices and the vicious cycle continues.