As I write this the Prez is announcing the recent $26 billion bank deal to try and compenstate homebuyers for bad mortgages. Ok.. maybe I’ve been out of the mortgage market for way too long (I’ve purchased homes three times in my past.. the last was back in the 1980’s) but in all this real estate collapse and people loosing their homes I’m finding it a little tough to accept that the home buyer is not without a fair share of responsibility for the mess.
In my past home purchases, from the 1970’s through the 80’s, the process was the same. You made an offer to purchase through the realtor and the money is held in a trust account. About this time the buyers would find a real estate attorney to watch over the process in their behalf. Once the offer and terms were accepted by the seller then the buyer went to their mortgage company and applied for the loan. The process was always a pain-in-the-ass bureaucratic nightmare; credit reports, proof of income, where did your deposit money come from… yada, yada. Then the required home inspections, surveys, title searches. The buyers, typically a husband and wife, are left hanging in total anticipation (and borderline desparation) hoping everything went through witout a hitch. Along this process the buyer’s lawyer would be a facilitator; making sure the buyer’s interests were maintained. Then one day everything comes together and you get a date for the closing.
Closing was a pretty formal event. It would be held at the title company. Around the table were the sellers (and maybe their attorney), their realtor, maybe a rep from the mortgage company, the buyer’s attorney, and the title company rep. By this time all the closing costs have been established, the buyer’s attorney has had a chance to review them and the terms of the loan before the closing and counseled the buyer’s accordingly. For the most part, all documents to sign have been explained prior so that just signatures are required. Checks are swapped across the table, then the keys handed over.
If you notice, the words in italics represent reference to an attorney being on the job to protect the interests of the buyers. I am left to wonder, with all these “bad” mortgages, where were all the attorneys? Back when I was dabbling in real estate it was generally an accepted fact that it was a fool who refused to get some legal representation in a real estate deal. So what has happened over the years to change that?
I mean, if a mortgage contract’s legal-eze and fine print was so fine to be missed, where was the lawyer to advise the buyers what they were getting? While I might agree that having an attorney doesn’t make the process totally fool-proof I have to assume that someone signing a mortgage contract would be doing so with proper legal guidance to make a sound financial decision. Were all these buyers of bad loans just ignoring the advice of their own counsels.. or was all the advice bad as well… or, are people just thinking financing a home is like financing a car and who needs an expensive lawyer?
It’s a long established tradition in America that a big piece of the so-called American dream is owning your own home. It’s likely a carry-down from the European idea of land ownership being a measure of power and social stature. Of course, it also helps that America is large and the wide open spaces suggest unlmited possibilities for land ownership. While home ownership takes out of the picture the idea of having to answer to a landlord’s whims in some fashion, the single most important incentive for land ownership in America today is what we have built into our economic system that encourages home ownership… it’s a big tax break. The idea there is that buying a new home creates jobs in the construction industries and other industries serving home markets with goods and services. Of course, up until recently, purchasing a home, or real estate in general, has been a wise investment from the standpoint of the rate of appreciation in value for resale.
I dunno about all that. Seems we’ve reached a point in our society where maybe we need to take a second look on just what the American dream means regarding home ownership versus renting. Regardless, seems to me home buyers are like anyone else in life looking to buy anything… buyer beware. There are no guarantees.
If you aren’t capable of understanding what buying a home is all about, and you can’t afford paying someone to do that for you (a lawyer), and understanding the financial responsibilities involved in the process, then maybe you shouldn’t be buying a home.