Why don’t we just go to banks to get loans, if it is that easy? There are several reasons for that.
1) We are paying for the industry’s lack of discipline in lending over the past several years. The subprime industry has nearly evaporated credit, and everyone is paying for it.
2) Banks are too slow to approve credit (or won't do it at all). We are in the business of bringing good “deals” to the table. Most times, that means you can get a significant concession from the seller if you can cash them out. Since it is your money, you can decide whether or not it is something that interests you. The process banks use to assess the investment, risk, credit, the property’s value, etc. is too time consuming for most people looking to buy and sell quickly. Therefore, we either pay more to the seller to compensate them for the delay, or lose the deal to a more liquid investment team that does not need to wait on a bank.
3) Banks are inflexible and disjointed. They work off predetermined standards of underwriting, and with so many people involved (often working independent of each other), it’s nearly impossible for them to adequately assess the real value of a deal.
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4) Many mortgage brokers, loan officers, underwriters, mortgage processors, etc.--are unmotivated, non-responsive, unprofessional, and/or unethical. I apologize in advance to those in the profession to whom this description does not apply. It has often been my experience, however, that this is true.
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5) Fifteen months ago, the Fed stated, "Residential mortgages were harder to get than at any time in the 17-year history of the Fed's survey of banks' senior loan officers" (MSN MarketWatch 12-3-07). And it has gotten worse!
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Take the following real-life example (from the Fall of 2007): A family member of mine is single with no dependents, has a 30 year job history with the same company (with a guaranteed pension and benefits for life after retirement), and makes a very good income. They have excellent credit (high 700's), no debt, and own their 2007 vehicle and a $200,000+ home free and clear. They also have substantial liquid assets as well as mutual funds, and provided a down payment. It still took a major lending institution 12 weeks to approve a $148,000 loan on a house that has been on the market for about 600 days. Not surprisingly, it was also one of the institutions that ended up being "absorbed" by another in 2008.
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Does anyone else see the obvious here? People still want homes. Good people are not getting approved for loans. The people that created the problem are now gone or too gun shy to do business. There is a way to capitalize on the situation with an ethical, common-sense approach without going to the extremes the industry has gone the last three or fours years. The beauty is in the deal itself, not in people "playing with numbers" to close loans.
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Are we really going to let this opportunity pass us by?