5 nasty surprises that can stop your home purchase cold

ALWAYS check the flood maps!!!! found out the house we were selling was in a flood zone ( after living there for 10 years) and had to have flood insurance (
never had it while living there) !!!

found out that the maps were wrong and fought for 10 months and some many $$$$ later to get it changed. lost the deal that was on the table because of this. and then lost more $$$$ because of the time delay.

all the industry shills and professional message board trolls/AM radio content parrots seem to vanish when confronted with the TRUTH

and the rest of you idiots who have faith in these clowns DESERVE to get ripped off

...for all your preaching, you are totally clueless... the whole melt down was caused by government mandated risky loans...

Did the government actually "mandate" risky loans??  And the government was responsible for the "whole" meltdown? Where is the evidence?  

• CRA regulations only affected national banks, many of the worst loans were from mortgage firms not under CRA regulation. 
• When most state attorneys got together in 2003 to crack down on predatory lending (risky loans) the national banks went to the Bush administration and an obscure federal agency (OCC) invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative.  So in this case it seems as though the banks used the government to continue the pushing of risky loans rather than the government mandating the banks make these loans.  
• These loans were sold as Mortgage Backed Securities (MBS) and even though many were entirely made up of subprime loans they were given AAA ratings by Moody's and S&P thus investors thought they were secure investments.  This AAA rating also was a reason that demand for these products (and subprime) was so high.
• All groups had financial incentives to push these risky loans they generated more fees than regular loans.
• Also, if you remember, construction and housing were the main drivers of the economy this past decade.  Builders, mortgage companies, banks and many others had great interest in keeping this boom going.  Prices were appreciating 10% and more per year and the only way that consumers could afford a house was with these new risky loans.  Greenspan gave his OK for these loans in a 2004 speech.
• Self regulation was the mantra of the Bush administration, Greenspan and the Republican controlled congress so again, was government actually forcing banks to make these loans or was government turning a blind eye to these loans since finance companies were making money hand over fist with the creation, packaging and selling of these products.

For those of you not in the industry, you should be aware that a few years ago congress passed a law, with good intentions, that attempted to create a partition between appraisers and lenders in order to preserve appraiser independence.  The unintended consequence is that this law resulted in a significant rise in demand for a middleman partition and appraisal management companies (AMC's) filled that void.  It is estimated that today AMC's service 80% of all mortgage transactions.  Not all AMC's are created equal.  However, like most businesses, they are in it to make a profit.  A common AMC practice is to email broadcast an assignment to a pool of appraisers in an area and then assign the appraisal request to the appraiser who is the cheapest and fastest instead of the appraiser who has the most training and experience.  This is not the way to hire a professional.  As you can imagine, this has had a significant downward pressure on the fee received by the appraiser while the AMC is actually charging the consumer more than the former standard rate for their "management" of the process.  Many of the more experienced appraisers will not work for the AMC's at these discounted rates and instead are marketing their services to the few lenders who do not utilize AMC's and other users of appraisal services.  So, the realtors and buyers are is left to deal with lower tier appraisers.  Congress is aware of this issue and recently passed a law that stated the AMC's must pay appraisers a customary and reasonable fee excluding from the discussion the fees that appraisers have been getting from AMC's.  However, the AMC's have become very powerful during the past few years and were able to delay implementation until their lawyers were able to expose a loop hole in the law.  The government department that is to enforce this law is still in the development stages.  So, the AMC's are doing what they please.  Ultimately, the consumer and the american tax payer will pick up the tab for the greedy AMC's and their poor appraisals.  Just last month the FDIC filed a complaint against LSI, Corelogic, eAppraiselIT, and other outfits for negligence resulting in the bank failures. 

Most bad things that happen to this country is attributed to laws passed by Congress. Such is the case on all the foreclosures.  Congress forced the banks to loan money to the poor people who couldn't meet the payments and then turned around and filed bankruptcy, thus forcing the foreclosure situations.  States have passed laws that protect the buyers of these homes, who file bankruptcy and then get to keep the home.  Many  of these buyers in my opinion constitute fraud and thievery in this situation. 

As a Real Estate Broker I am confronted with these issues daily. The congress did their knee jerk reaction to the financial crisis by making a stupid law. I have known some outstanding appraisers over the years and they have always shown an even hand when performing the difficult task of appraising a property. Now, when you have a willing buyer and seller they (the parties to the contract) no longer dictate value, some outside appraiser does.

My real issue is the use of derelict properties (foreclosed & short sale) as viable comparables. Most are in serious need of repair which costs thousands. These outside appraisers pull up a comp out of the system telling them square footage, how many bedrooms and bathrooms and use the sales price as comparables. If we don't stop this practice home values have no chance of rebounding till ALL foreclosures and short sales are gone.

Banks don't want to lend unless the price at foreclosure exceeds their loan exposure. They will do everything they can to turn down any buyer that is suspect.

I agree with the article above...find a qualified agent and stick with them.

I will leave you with one other thought. As a buyer of property, you get the services of your agent for free since commissions are paid by the seller. You can chose to have the very best in representation without spending more. I know it sometimes feels like you should use your friend, neighbor, family member or someone else who just got their license or dabbles in the business. There is a difference, check credentials and education. This may be the biggest transaction in your life, do you really want to trust it to someone who doesn't do this for a living?