5 ms·

Except, it never works that way for houses. Banks are reluctant to give mortgages when the roof is EOL, or the siding has dry rot or there is some black mold b

Except, it never works that way for houses. Banks are reluctant to give mortgages when the roof is EOL, or the siding has dry rot or there is some black mold basically anywhere, etc. Giant Corp may be able to buy quickly and efficiently but Joe Homeowner can't get his loan approved until A, B, and C are fixed. Good luck getting 3 different contractors lined up quickly and under budget while in escrow.

gruez 5y ago
> Banks are reluctant to give mortgages when the roof is EOL, or the siding has dry rot or there is some black mold basically anywhere, etc. but used cars seem to do fine, even though they can be similarly damaged?
- amerkhalid 5y ago
  Used cars loans tend to have higher interest rates though.
- pille 5y ago
  Maybe because used cars cost/risk about 1% as much as houses?
  - bena 5y ago
    Also, every car has scrap value. Houses don't have that.
    - gruez 5y ago
      The equivalent for houses is the land they sit on. In metros that could easily be worth more than the house, and in most cases it's worth more (in % terms) than the scrap value of a car.
  - gruez 5y ago
    Why? because the unit price is lower? Can't zillow just... buy less houses? I don't see anything different between zillow buying a $500k house and one hundred used cars worth $5000 each.
    - djbusby 5y ago
      Easier to sell 50 cars than 1/2 of a house tho.
      - gruez 5y ago
        While I don't doubt this effect exists, I seriously doubt it's a significant factor when you're dealing with 7000 houses. 7000 figure from: https://news.ycombinator.com/item?id=29081118 https://news.ycombinator.com/item?id=29081118
- saalweachter 5y ago
  Used cars are more fungible and have a higher volume of comparable sales constantly underway. Repair costs are also better known and less daunting.
sokoloff 5y ago
Do banks even look at these things; I mean, beyond the appraisal? I don't think my mortgage lender has ever inquired about the age of the roof on the purchase or during any refinances. For my first house, I bought it with a roof that needed work, had some small leaks, and was well beyond its design life. I got a mortgage without the bank bringing that issue up (albeit in 1996). Home inspectors look at these things and buyers might choose to walk away based on the inspection report (which the bank never saw on either of my purchases).
- cmckn 5y ago
  Like seemingly everything in the modern world, it depends on your credit worthiness. Some mortgages also come partnered with homeowners insurance, and those policies are what often lead to sales being blocked by even minor issues.
- anonAndOn 5y ago
  In my experience, the level of underwriting is a function of how levered the purchase is. The LTV and your Debt to Income are both major factors in how thoroughly the underwriter is going to review your mortgage and how much they will require to prevent a loss.
  - sokoloff 5y ago
    That makes sense. Both times I was near the 25% front-end ratio that I considered to be a sensible limit, but was putting 20% down on a conventional conforming loan the first time and a conventional jumbo the second time.
- DSMan195276 5y ago
  From what I've seen it depends a lot on the kind of loan. I bought a house with a conventional loan earlier this year and I don't think the appraisal even looked at any of the potential issues (Despite at least a few thousand in repairs identified by the inspection). But I also know someone who used an FHA loan to buy a house and they couldn't get the loan unless the house passed a pretty detailed inspection.
cortesoft 5y ago
I wonder if this is location dependent, because my bank barely cared about those things when they approved my refinance last year. The appraisal consisted of just driving by the house. They didn’t check for any condition of the house. It probably helps that the entire house could just disappear and the price for the lot would only change 10% or so.
- anonAndOn 5y ago
  That's probably due to a favorable LTV. If they have to foreclose, not only would the bank not lose money it might actually be profitable!

gruez 5y ago

> Banks are reluctant to give mortgages when the roof is EOL, or the siding has dry rot or there is some black mold basically anywhere, etc. but used cars seem to do fine, even though they can be similarly damaged?

amerkhalid 5y ago
Used cars loans tend to have higher interest rates though.
pille 5y ago
Maybe because used cars cost/risk about 1% as much as houses?
- bena 5y ago
  Also, every car has scrap value. Houses don't have that.
  - gruez 5y ago
    The equivalent for houses is the land they sit on. In metros that could easily be worth more than the house, and in most cases it's worth more (in % terms) than the scrap value of a car.
- gruez 5y ago
  Why? because the unit price is lower? Can't zillow just... buy less houses? I don't see anything different between zillow buying a $500k house and one hundred used cars worth $5000 each.
  - djbusby 5y ago
    Easier to sell 50 cars than 1/2 of a house tho.
    - gruez 5y ago
      While I don't doubt this effect exists, I seriously doubt it's a significant factor when you're dealing with 7000 houses. 7000 figure from: https://news.ycombinator.com/item?id=29081118 https://news.ycombinator.com/item?id=29081118
saalweachter 5y ago
Used cars are more fungible and have a higher volume of comparable sales constantly underway. Repair costs are also better known and less daunting.

sokoloff 5y ago

Do banks even look at these things; I mean, beyond the appraisal? I don't think my mortgage lender has ever inquired about the age of the roof on the purchase or during any refinances. For my first house, I bought it with a roof that needed work, had some small leaks, and was well beyond its design life. I got a mortgage without the bank bringing that issue up (albeit in 1996). Home inspectors look at these things and buyers might choose to walk away based on the inspection report (which the bank never saw on either of my purchases).

cmckn 5y ago
Like seemingly everything in the modern world, it depends on your credit worthiness. Some mortgages also come partnered with homeowners insurance, and those policies are what often lead to sales being blocked by even minor issues.
anonAndOn 5y ago
In my experience, the level of underwriting is a function of how levered the purchase is. The LTV and your Debt to Income are both major factors in how thoroughly the underwriter is going to review your mortgage and how much they will require to prevent a loss.
- sokoloff 5y ago
  That makes sense. Both times I was near the 25% front-end ratio that I considered to be a sensible limit, but was putting 20% down on a conventional conforming loan the first time and a conventional jumbo the second time.
DSMan195276 5y ago
From what I've seen it depends a lot on the kind of loan. I bought a house with a conventional loan earlier this year and I don't think the appraisal even looked at any of the potential issues (Despite at least a few thousand in repairs identified by the inspection). But I also know someone who used an FHA loan to buy a house and they couldn't get the loan unless the house passed a pretty detailed inspection.

cortesoft 5y ago

I wonder if this is location dependent, because my bank barely cared about those things when they approved my refinance last year. The appraisal consisted of just driving by the house. They didn’t check for any condition of the house. It probably helps that the entire house could just disappear and the price for the lot would only change 10% or so.

anonAndOn 5y ago
That's probably due to a favorable LTV. If they have to foreclose, not only would the bank not lose money it might actually be profitable!