Industry News
Rough Times For Residential Real Estate Practices
(connecticut law tribune) - A healthy residential real estate practice requires that new clients and fees come from a variety of different feeder sources, but many of those sources are shrinking or drying up completely. As such, 2009 will be a year in which there are many challenges for a residential real estate practitioner.
• There will undoubtedly continue to be a consolidation of big lenders and the possible closing of small regional and local banks. Countrywide, GMAC, Merrill Lynch, IndyMac—all already gone. This will not only make it harder for real estate clients to find mortgage lending sources but also for attorneys to get work representing banks and clients in transactions.
• Many of the sorts of mortgage loans available to first-time homebuyers in the past 10 years are simply not there anymore. One hundred percent financing, 95 percent financing, 80/20 financing—all pretty much gone right now. Subprime mortgages are gone. Nonprofits providing downpayment assistance—gone. With this leading to a much smaller pool of first-time buyers entering the market, the move-up buyers who are ready to go cannot move.
• Lenders have significantly tightened their appraisal process and scrutiny, making it harder to get mortgages approved. For example, at Bank of America, the loan officers writing the loan are no longer allowed to have any contact at all with the appraiser doing the appraisal, presumably out of fear that the loan officer would push to for a too-high appraisal just to close the loan. But this also means that legitimate errors in appraisals cannot be addressed in as quick a manner. In addition, the rumor is that many lenders are receiving appraisals and then cutting the value even more depending upon whether the property is in a town with “declining market values.” This means deals between buyers and sellers have to be renegotiated—sometimes more than once—and that puts increased stress on all parties in the transaction.
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