60 Minutes and the Subprime Mortgage Crisis

Did you catch the subprime mortgage crisis segment that 60 minutes ran last night?  For me, the highlight of the segment was when they interviewed 3 or 4 couples who seemed to adamantly believe that the mountain of debt that they are sitting under is not their own doing, but the fault of those dastardly lenders who tricked them into buying their houses without telling them that they could lose value right about the time that their ARM loans adjust and double their monthly payments. 

Maybe I’m just a heartless snob, but I really don’t feel sorry for either the lenders who are stuck with an overwhelming number of bad loans or the people who signed up to buy homes that were clearly outside of their range of affordability. 

That being said, I’m wondering at this point what online real estate sites like realtytrac.com, realtor.com, zillow.com, redfin.com and others will do to ultimately cash in on the “crisis”. I suggest some online educational videos on how not to financially screw oneself. 

On a related note, while researching properties in Tampa, FL about a week ago I came across a townhouse near downtown Tampa that was listed for a ridiculously low price on Realtor.com.  In my excitement, I took a look at the online tax records for that property and discovered that it was owned by Deutsch Bank.  This was obviously a property in foreclosure, which prompted me to contact my r/e agent in Tampa to get the straight story on what people in the biz refer to as “short sales”.   What he shared with me, which further independent research supported, was that buying properties in foreclosure was good for people who have the patience to wait several months for a deal to be approved and people who have cash (no financing required) to purchase short sale property. 

In keeping with the “if it seems to good to be true it probably is” lesson that we should have all learned before graduating from kindergarten, what my agent shared with me was that many times listing agents will put ridiculously low prices on foreclosed properties in order to draw traffic to the property and develop leads for themselves.  The result for the prospective buyer who might even be willing to offer full asking price on a short sale property is that the bank never pre-approved the agents listing price which ultimately results in a rejected offer and much confusion on behalf of the buyer who thought offering full price was a guaranteed done deal.  The kicker is that because the buyer is now dealing with a large (sometimes foreign) lending institution as opposed to a local seller, the replies on these offers often take months or weeks to receive.  This is not a good situation to be in while floating between residences.  I suggest shopping short sales for second homes and vacation properties, but not for primary residences.  The good news is that with the market in its current state of disarray, there are plenty of good deals to be had through traditional channels.