Comments on closing costs and the recent real-estate meltdown

I bought an investment property this week... a house in South Philadelphia.  Cost = $167,000.  My closing costs were $11,000, the sellers were $13,000... $24,000 on a $167,000 transaction!  Nearly 15 percent!!!

To me, it seems there is something wrong with this picture.  I am sure that the realtors, the title company, the insurance companies and the lenders will say that this amounts to legitimate expenses to make sure that the transaction is a sound one.  Thus, insurance on the house, insurance on the title and insurance on the mortgage.  Origination fees, title company fees, house inspection fees, appraisal fees... fees, fees, fees.

I wouldn't be so concerned, if I believed that all this expense did what it was supposed to do... make sure that each house sale is a sound transaction.  But if that's the case, how did America get into the real-estate debacle of the past four years?  How did all those sub-prime mortgages get written?  How did all those weird financial instruments get bundled, sold, reinsured and ultimately wind up being essentially worthless?

Don't ask poor ignorant me, the humble buyer.  But does it suggest to you that all those fees are part of a system that soaks homeowners for the benefit of the providers?  Just a thought...

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