San Juan Mountains

San Juan Mountains
San Juan Mountains: Grenadier Range

Friday, February 13, 2015

Let The Free Market Regulate Home Inspectors

I bought a home a couple of years ago.  I have mentioned that purchase several times in past blog posts because the home that I purchased is right in the middle of Yuppie-dom.  I had never lived among Yuppies previously and the experience has proven to be both enlightening and frightful.  But that is not the point of today's blog post.  Today I want to consider the fact that the only part of the process of buying a home that is not currently subject to some sort of government regulation is the job of the home inspector.  The home inspector is the person the buyer hires, usually on a recommendation from his realtor, to inspect the home for problems prior to closing the sale.  The State of Colorado wanted to regulate these immoral charlatans, for the public good of course, but the bill that "would have required licenses for Colorado home inspectors was narrowly defeated in a state Senate committee," according to the Denver Post today.
I have a pile of papers on my desk that measures over one inch in thickness.  The papers make up all of the documents that I was required to sign when I purchased the home I am living in today. I don't see why it should take an inch high pile of documents just to purchase a home.  It seems to me that a contract, a deed of trust and a mortgage note, if you are not paying cash, is all that should be required to purchase a home.  The contract would specify the terms and conditions of the sale, how much the respective realtors are to be paid and when the deal would be closed.  The deed of trust would convey the title and would include the title insurance policy.  Since I bought my home with a mortgage there would be a contract related to the loan as well.  Beyond that I can't see any reason for anyone else to be involved in the process.
The federal government has other ideas when it comes to the buying and selling of homes.  Government bureaucrats and career politicians begin with the assumptions that both parties to a real estate transaction are raving idiots who have no idea what they are doing and that both parties are desperately seeking to rip each other off in the transaction.  The government also assumes that it knows what is best for both parties and will make rules and regulations to ensure that its will gets done.  Because of those assumptions the government has created an elaborate bureaucratic process that greatly hinders the simple process of buying a home.  Consider the fact that my home purchase involved the following items:
  1. A Hud-1 Settlement Statement.
  2. A Borrower's Hud-1 Attachment.
  3. A Borrower's Affidavit.
  4. A Notice For Completion of Borrower's Title Affidavit.
  5. A Statement of Confidential Information for Your Protection (it made me feel so safe).
  6. Loan Escrow Instructions (12 pages).
  7. An Addition to the Loan Escrow Instructions (1 page).
  8. Loan Closing Instructions.
  9. Another Hud-1 Settlement Statement (who knows why?).
  10. An Itemization of the Amount Financed (I was too dumb to do this myself).
  11. The Note
  12. The Deed of Trust (9 pages).
  13. A Planned Unit Development Rider.
  14. An IRS Form W-9 (so the transaction could be reported to the IRS).
  15. A Notice of Right to Cancel.
  16. An IRS Form 4506-T (Request for Transcript of Tax Return).
  17. An Initial Escrow Account Disclosure Statement.
  18. A Name/Signature Certification form (signing a form to authorize signing the forms).
  19. An Affidavit of Occupancy (did the feds assume I would not move in?)
  20. A Borrower's Certification and Authorization form (to prove we obtained a mortgage).
  21. A Loan Closing Disclosure Acknowledgements form (to prove we bought a loan).
  22. A First Lien Letter (to prove we had a mortgage).
  23. A Hazard Insurance Authorization and Requirements form.
  24. A Hold Harmless for Well, Septic and Insulation (we don't have two out of three).
  25. A Homeowners Real Estate Tax Authorization (would they not tax us if we didn't sign?).
  26. A Flood Insurance Notification (we are nowhere near a flood plain).
  27. A Hazard Insurance Information for Refinance (we were not refinancing).
  28. A Compliance Agreement/Limited Power of Attorney (we complied with everything).
  29. A CAD Wiring Information Request (I have no idea what this is but it protects me from CADs).
  30. An Amortization Schedule (my computer could print one for free).
  31. An Acknowledgement of Receipt of Disclosures (of course).
  32. A warning from the FBI that "Mortgage Fraud is investigated by the FBI."  This warmed my heart.  I couldn't conceive of engaging in a private transaction without being threatened and intimidated by the FBI for doing so. 
  33. A Colorado Tangible Net Benefit Disclosure in which I acknowledged that getting a mortgage would help me buy a home.  
  34. A Hud-1 Addendum.
  35. A Certificate of Receipt of Appraisal (I had already received it). 
  36. A Federal Truth-In-Lending Disclosure Statement (two copies of that important form).
  37. An Undisclosed Debt Acknowledgement form in which I informed the mortgage company that I did not lie to them about my many debts.
  38. An Authorization for the Social Security Administration to Release Social Security Number Verification form.
  39. A Uniform Residential Loan Application form.
  40. A Notice Concerning Private Mortgage Insurance Lender Paid Mortgage Insurance.
Did you notice that the one thing not on that list of forty mandatory government forms was a form acknowledging that I hired a house inspector?  That fact drives bureaucrats and career politicians crazy.  So several elected rulers in Colorado proposed a bill to fix this problem that does not exist.  The rationale for the bill was, "They are the only party in a real estate transaction that is unregulated and given unfettered access to a person's home."   The career politician who said that then went on to tell the story of a home inspector who sexually assaulted a 14 year old girl in the home he was inspecting in Aurora.  If the new law only keeps one girl from being sexually assaulted in her home then it will be worth it.  The bill was voted down by a 5-4 vote so dangerous sexual predators posing as home inspectors continue to prowl the streets of metropolitan Denver.  I wonder if it ever occurred to the politician that jack-booted thugs called police officers obtain unfettered access to people's homes, via the battering ram, and kill innocent citizens living inside all the time.  Where are the regulations for these criminals?  The elitism evident in that politician's argument is nauseating.
Every one of the thirty seven extra forms found in the above list costs money to administer.  Behind each form is a government rule and a fully staffed bureaucracy paid to enforce that rule. Who knows how much the rules and regulations add to the price of a home?  I certainly don't.  But I would wager that it is at least several percentage points of the final price of the home.  And what did I get for all of this wonderful regulatory oversight?  A cramped signature hand and a higher priced home.  Nothing that the government required me to sign added to the efficiency and full disclosure of the sales process.  I knew exactly what I was buying without reading any of the government forms.  Indeed, the government forms generally don't require that anything be done.  They simply require that I acknowledge that nothing has been done.  That is government at its finest.
The government should get out of the mortgage business.  If some unscrupulous mortgage broker abuses some stupid home buyer then let the buyer resolve the issue in the courts.  The rest of us should not be forced to pay thousands of dollars for regulatory burdens designed to protect the few and the stupid.  It is not just home inspectors that should remain free.  Everything related to the purchase of a home should be as free as an E-bay transaction.  Let the buyer beware and let the purchaser get a lower price.

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