I still shake my head when I read and hear Real Estate Agents and Auctioneers spruiking their fabulous clearance rates and climbing median prices. As I’ve said many times, you have to take all of this spin, and that’s all it is, with a grain of salt. Do your research, find out what really went on behind the scenes of every single sale, but I digress…
Even with very low interest rates, levels of mortgage stress are slowly rising and there is one big reason for a few hundred thousand of these distressed folk – LIES!
This is not a Mortgage Broker bashing exercise – remember why I write this blog please. It’s to open your eyes to the many and varied sharp practices out there and urge you to be constantly on your guard. It doesn’t mean everyone is out to get you, but it pays to put your big girl panties on when you start the process of buying (or selling) property. This bit is about buying and again, for the umpteenth time, why would you unless it’s the bargain of the century.
Back to (some) brokers then who are so hungry for a deal that they’ve been and continue to prostitute themselves and commit gross acts of fraud upon their clients and the Bank to get their commission. Noticed I said ‘get’ and not ‘earn’.
In the normally pretty swanky Broker’s Office applicants put down that they are a factory worker and administration assistant. Earnings are $30,000 and $26,000 a year respectively. They sign and shake hands with their friendly, smiling Broker, and leave. The greedy Broker then ‘doctors’ the documents and the applicants magically become a teacher and professor on many times the income formerly stated and the application is (naturally) approved by the Bank (that pays the Broker maximum up front omission and trail). This would be dangerous enough in and of itself but it gets worse. Because the income and expenses have been fudged so much, the hapless couple are told, when they return to the Broker’s lair, that they’ve qualified for an additional $100,000.00 and can afford to go upmarket and buy the home of their dreams.
Of course the couple are not financially savvy and rely on the Broker to tell the truth – sorry that went through the shredder along with their original application. The broker has also arranged for the Loan to be low start and interest only for the first 2 years. The couple don’t have a clue what he’s talking about and only look at the LOW weekly payment they have to come up with to buy the House of Their Dreams.
Many people who bought like this have been “rescued” so-to-speak if they bought pre 2001 and their property values have skyrocketed and interest rates have fallen significantly – in many cases a ‘rescue” refinance kept them afloat. Exploding rents also helped.
However, since about 2003 – 2004 this has been and will continue to be an unmitigated disaster for those trapped by dodgy Brokers.
Estimates as to the number of LIE LOANS, as I call them, vary wildly because the brokers aren’t saying and the Banks… well they’d be stupid to say, anything, unless forced to by a Royal Commission or the like. We are seeing some action against Brokers and Banks in Court but that is expensive, time consuming and from my checking around, is producing varied results.
Moral? As always, do your homework. educate yourself. And do NOT listen to workmates, family or friends unless they have bought and sold a dozen or more properties and have great accountancy and tax skills. Advice from them is akin to talking to your chickens.
Still determined to buy – talk to me first – my fees are reasonable and I will tell you the truth.