Wealthy buyer cannot buy Peoria AZ home with 10% down

November 26, 2008

Recently, there has been loud complaints of the accelerated price decline of Phoenix AZ real estate. Although opinion differ what is the problem, no one can deny that there are several problems contributing.

Experts point towards mounting inventory of Phoenix AZ homes for sale, rising unemployment, the large number of foreclosures, poor management of loss mitigation at banks and tightened credit or lack of mortgage lending from banks.  Wealthy buyer cannot buy Peoria AZ home with 10% down

My personal, and humble, opinion is that there is an obvious unwillingness by banks to lend money. They banks now have the money. However, due to poor language and instructions when our Congressional leaders drafted the American Homeowner Rescue act which is better known as the $700 Billion Bailout! The language or lack thereof, allows banks to borrow the money from the Government which means the good paying U.S. taxpayer. Though, it does NOT mandate that they need to actually lend the money to qualified borrowers.

As a result we have (virtually) no money for buyers to use to do what this was supposed to do; Buy Homes!

The banks claim otherwise. However, I strongly believe that the reason being that if home prices continue to drop, homeowners are less willing to pay their mortgage if financial problems arise as the home is worth less then they paid. The can simply , and often do, just walk away from the home. Thus, the banks foreclose on the homes and lose money.

So until  prices stabilize there will be now money. Here is an example of a personal story that paints a picture of the problem.

A hard working couple was pre-approved to buy a home priced at approximately $500K.

  • Both husband and wife are pharmacists
  • combined income of nearly $200K.
  • Credit score over 680.
  • No other debt.
  • $50K savings
  • $10K in checking
  • 401K assets over $100K
  • Made and offer for the home which was accepted.
  • However, the bank/lender told the borrowers that they needed more than 10% down.
  • Borrowers have the money.
  • Due to a child in College, they do not want to use more than the $50K in savings.
  • The lenders declined the loan!

What a shame for the buyer who wants to buy a home to realize the American Dream, raise a family and build a nest egg for their future. The ripple effect does not stop there. A seller cannot sell. Parties facilitating the transaction including, but not limited to, real estate agents, mortgage brokers, title and escrow companies, appraisers, banks (who make money lending), inspectors, movers, etc….. do not earn money which they can and do spend in the economy.

The problem is cash. Buyers don’t have it or do not want to part with it until the economy strengthens. Interest rate cuts help. However, that is not the problem. Banks are simply too fearful of lending to even the best borrowers without large down payments.

Bottom line, until we can get these banks to lend we will not see any recovery in the economy.

I am optimistic that a new draft with language that either mandates lending or insures loans by banks will have the intended effect of the original legislation, stimulate housing and the foundation for an economic recovery.

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Copyright © James Wexler *Wealthy buyer cannot buy Peoria AZ home with 10% down  *

If you are listing your home as a short sale in Phoenix Arizona or Scottsdale Arizona make sure you hire an agent who knows how to do short sales and has the experience to get the job done.

Call 480.221.8080 to find out more about Phoenix AZ Short Sales and Scottsdale bank owned homes

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Written by James Wexler · Filed Under Articles, Buyers, Lending / mortgages 

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