Ah, but if that second home buyer needs to first take out a mortgage. . .
As long as the bank is using its own money and taking its own risk then there is no problem. If the "speculative" buyer is fixing up the home there is absolutely no way to value his contribution to the property outside of the market you apparently intend to forbid. The problem is that there is no way to actually distinguish your two classes or mortgage buyer. The idea that there is some magic criteria or that the distinction is obvious is an economic superstition. The lender bases his estimatition of risk upon how much he stands to lose and how likely the proposed project is to produce a profitable return. When the government prints more money it distorts all of the markets' means of indicating how much capital is truly available for the successful completion of projects. It makes riskier investments appear much less risky.
In a free market the money in these transactions isn't yours; it is the property of the person taking out the loan and the property of the people extending the loan. It is only when the bank is allowed to commit fraud and the government is allowed to back the bankers' risky investments, courtesy of the citizen's money, then there is a real problem. Keep the focus on who is being cheated, not upon consequences that nobody can guess upon or eliminate with rules that are ultimately completely arbitrary. Follow the money. In a real free market people cannot use government to externalize the costs of their decisions. That means bankers, homebuyers, or depositors. Everyone uses their own money and they take whatever voluntary risks they think are acceptable, and if they guess wrong they are responsible for their own losses. It is the fact that some people are entitled by law and regulation to have their risks underwritten by unwilling participants that is the problem.
no subject
As long as the bank is using its own money and taking its own risk then there is no problem. If the "speculative" buyer is fixing up the home there is absolutely no way to value his contribution to the property outside of the market you apparently intend to forbid. The problem is that there is no way to actually distinguish your two classes or mortgage buyer. The idea that there is some magic criteria or that the distinction is obvious is an economic superstition. The lender bases his estimatition of risk upon how much he stands to lose and how likely the proposed project is to produce a profitable return. When the government prints more money it distorts all of the markets' means of indicating how much capital is truly available for the successful completion of projects. It makes riskier investments appear much less risky.
In a free market the money in these transactions isn't yours; it is the property of the person taking out the loan and the property of the people extending the loan. It is only when the bank is allowed to commit fraud and the government is allowed to back the bankers' risky investments, courtesy of the citizen's money, then there is a real problem. Keep the focus on who is being cheated, not upon consequences that nobody can guess upon or eliminate with rules that are ultimately completely arbitrary. Follow the money. In a real free market people cannot use government to externalize the costs of their decisions. That means bankers, homebuyers, or depositors. Everyone uses their own money and they take whatever voluntary risks they think are acceptable, and if they guess wrong they are responsible for their own losses. It is the fact that some people are entitled by law and regulation to have their risks underwritten by unwilling participants that is the problem.