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Does the FHA REALLY Think They Will Get the Equity?
The foreclosure rescue bill was signed to be effective October 1, 2008. Read the details on this on my updated previous post.
When selling, the homeowner has to pay the FHA a 3% exit fee. Also, any equity has to be paid to the lender at this scale. Within the first year, 100% of any equity will be paid. After that, it goes down by 10% a year, until year 5. It is 50% then, and stays there.
Looking at this scenario, I am questioning why someone would sell for a higher price. If a house was refinanced under this program for $200,000, the exit fee would be 3% or $6,000. Why wouldn't the homeowner sell the property for $206,000, plus expenses of selling? What would motivate a seller to do repairs, or updates when they will not get any benefit from it?
If the home prices go up, this will give another opportunity for investors, and owner occupants to get a good deal.
If the home prices fall more, it will sit on the market causing more blight for a community. The only way it will sell is by getting another reduction of the loan. Will they even consider this, probably not. So since there is no monetary gain for the homeowner, here comes another round of bank owned houses for sale.
Am I missing something?
Please comment below.
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Stumble It!
When selling, the homeowner has to pay the FHA a 3% exit fee. Also, any equity has to be paid to the lender at this scale. Within the first year, 100% of any equity will be paid. After that, it goes down by 10% a year, until year 5. It is 50% then, and stays there.
Looking at this scenario, I am questioning why someone would sell for a higher price. If a house was refinanced under this program for $200,000, the exit fee would be 3% or $6,000. Why wouldn't the homeowner sell the property for $206,000, plus expenses of selling? What would motivate a seller to do repairs, or updates when they will not get any benefit from it?
If the home prices go up, this will give another opportunity for investors, and owner occupants to get a good deal.
If the home prices fall more, it will sit on the market causing more blight for a community. The only way it will sell is by getting another reduction of the loan. Will they even consider this, probably not. So since there is no monetary gain for the homeowner, here comes another round of bank owned houses for sale.
Am I missing something?
Please comment below.
Get lots of investing information. SUBSCRIBE to Real Estate Investor Girl!
Stumble It!
"Real Estate Investor Girl" has been reviewed and added to the Blogging Women blog directory. A big congratulations to you and thank you for submitting this blog. It's my pleasure to add another quality women's blog to our directory. I wish you continued success!
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Fay,
Thank you so much! I am glad I found your directory. I am honored to be a part of it. See: http://bloggingwomen.blogspot.com/
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Kathleen, I have to say that this housing bill has a lot of holes in it. One of the things that I would see as beneficial to the homeowner is after five years refinance out of the FHA into a conventional loan before you sell so that you do not lose that equity. Of course I have yet to read it deep enough to even see if that is an option.
By the way, I linked my Real Estate blog to my name here as opposed to my eHow one. I wanted to thank you for commenting over there.
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Hi,
That's really an interesting blog. I have come across such blog for the first time. I agree that if the home prices go up, this will give another opportunity for investors, and owner occupants to get a good deal.
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You are correct that no one would sell their home for the higher price and pay all of the fee's. Only time will tell if this bill helps at all. There was a house faqs put out at Trulia It was a news letter if you want Kathleen DM me on twitter and I will forward it to you.
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