Tuesday, October 14, 2014

Is this much paperwork really necessary?

If there’s one complaint that I hear the most from both buyers and sellers it is about the amount of paper work that’s involved with most real estate transactions. It seems like a daunting task at times for everyone involved and like most business transactions today there are always the legalities to be considered. Many clients have been told by others that there was a lot less paperwork years before when they bought their home.

The truth is that although times have changed the majority of paperwork that is created is and always was associated with the loan process for buyers and not the actual purchase of a given property. It is also true that as regulations and banking requirements have changed over the years that there has been an increase in the documentation that is required to obtain a home mortgage loan.

As you probably recall, it wasn’t that long ago that many home buyers were approved for loans that in retrospect they would never have been able to pay. As a result, millions of homeowners lost their homes and many of those loans had been “guaranteed” by various government agencies including FHA (Federal Housing Authority) backed loans. Understandably the government wants to prevent this type of housing crisis in the future, thus, more requirements and more paperwork.

It’s also important to keep in mind that lenders can and do lose a lot of money when homes are foreclosed upon or sold as a short sale. Banks and other lenders must protect themselves from loss the same as any other business and unpaid home loans are a serious problem for lenders nationwide. In an effort to avoid this situation the banks have tightened their requirements. Again, the end result is more paperwork.

While many people find all of these requirements to be a “hassle” and unnecessary from their point of view, the truth is that most of us need a way to purchase a home without the need to pay cash. Imagine if you will a world in which there was no such thing as a bank financed home purchase. Could you afford a home if you needed 100% cash up front? What if the only alternative was for the homeowner to finance an interested buyer? Is that a risk that you as the seller would want to undertake?

Although there is substantial paperwork to deal with in the world of real estate (especially for financing buyers), we should remember that it is this very paperwork that makes it all possible! When all is said and done we are able to purchase a home for our family and loved ones that we can enjoy for many years to come. After all, we aren’t really buying a house, we are buying a home and I for one think that the end justifies the means!


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