Eighteen months ago I called my mortgage holder to inquire about a refinance. At that time the mortgage consultant gave me the estimated value of my home. How they did this, I’m not exactly certain. However, at that time, I was excited about the number. So was the mortgage consultant who went to great lengths to try to encourage me to pull some cash out when I refinanced. I passed, not changing a thing.
My mortgage holder is Countrywide Mortgage, by the way. At that time, Countrywide was one of the largest mortgage lenders in the country. Not so much any more. Countrywide fell apart in the midst of the housing woes and mortgage backed securities crisis. Amid rumors of bankruptcy, they were finally acquired by Bank of America.
Judging from how easy it was to get an inflated home value, and how eager their mortgage consultants were to loan you up at 100% of the value of your home, it’s not hard to see why things went bad, and by extension, why the country has a significant problem today.
We met with a realtor over the weekend. Based on homes currently on the market, and the sale prices of homes that have sold within the last 12 months, the realtor recommended a selling price at almost 20% lower than Countrywide valued the home eighteen months ago. The amount she recommended selling the home for was equal to an official appraisal we had done back in 2002 when we added a garage on to the home.
Countrywide clearly overvalued the home to a figure that had no basis in common sense. The market conditions today mean that any appreciation in value since 2002 has been summarily wiped out. Somewhere between the two numbers lies the truth.
It’s tough out there. Really, really tough.
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