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Pricing Problems

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Posted On: 09/10/2008

Q: How can houses here in Houma, La., cost close to the same as houses in Houston when the average salary in Houma is far lower than in Houston? It confuses me even more with the economy struggling right now! I try to give myself answers and that only makes me wonder if doctors, lawyers and construction workers in the area are taking advantage of the situation. By that I mean, are they buying properties in bulk and turning around and selling them for more than they are worth? In my opinion, I think something needs to be said in the paper.

A: Here’s what’s being said in more than 100 newspapers nationwide: A comparison based on local housing costs is incomplete. Instead you have to look at local supply and demand and the numbers behind them.

For instance, a July study from the New York Federal Reserve Bank entitled “Human Capital and Economic Activity in Urban America” points out that “a one-percentage-point increase in the proportion of residents with a college degree is associated with a 2.3 percent increase in metropolitan-area GDP per capita.” If this assertion is true, it means you should want as many doctors and lawyers as possible in your town, as well as other individuals with college degrees. Why? Because wages throughout the community will go up and thus there will be more dollars available for everyone to buy and rent homes.

In terms of population, Houston is vastly larger than the Houma metropolitan statistical area. However, according to the latest numbers from the Census Bureau, personal income in Houma is growing three times faster than in Houston.

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While interest rates are national and international (because capital can move across borders with electronic speed), real-estate values are determined locally by supply and demand.

No one controls the real-estate marketplace – not doctors, not lawyers, not anyone. No one can force you to buy or rent a given property at a given price – this is why some real-estate projects fail and why home values can fall. You have the right as a buyer and as a tenant to say “no.” In every market there’s a point at which buyers and sellers, landlords and tenants, find a price where they both believe it makes sense to do business. In an open market with informed buyers and informed sellers rents and prices reflect nothing more than generally-accepted values.

Q: Four months have passed since I made the last and final payment on my mortgage. I have called the company that services the loan and they assured me that when they received the recorded information, my deed would be sent. Well, four months have passed and I still have no title. Is this normal procedure for paying off a mortgage?

A: Here’s what’s normal procedure: If you failed to make your monthly payment you would instantly hear from the lender or servicer. In the same way that you have an obligation to promptly and fully repay your loan, lenders have an equal obligation to confirm your payoff as quickly as possible.

Imagine if you tried to sell your home or refinance: With an apparently unpaid debt on the records you would have huge title problems.

A few months ago my wife and I refinanced a property. We sought conventional financing and used a fully documented loan application. The application flew through the system until we got a call from the lender explaining that an earlier loan on the property had not been repaid.

In this case we had the payoff information from a prior refinancing. We sent the lender copies of the old closing documents, which specifically showed our funds had been used to repay the earlier loan. The lender then contacted the settlement attorney to find out what happened. The answer was that the loan had been fully repaid, but the change had not been filed in local records. Within hours the local property records were updated.

You want to obtain a written satisfaction of the debt showing that it has been paid in full and canceled. You want the note returned because it’s a negotiable instrument that can be sold and re-sold.

Check your state laws. They may require lenders to provide written satisfaction showing repayment within a given period, say 60 days after receipt of your final payment.

Speak with a real-estate attorney in your jurisdiction. Most likely he or she will explain your state rules, contact the lender, and demand return of the note plus a written satisfaction.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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