If You’ve either bought a home or sold a home in the past and you start to enter the real estate market again and you expect this time to be no different. Unfortunately, in today’s real estate market, that will only set you up for disappointment.
You see, today appraisers are being tougher and underwriters are saying no alot more often. So what is the outcome in today’s market economy? Sellers are getting far less than they expected, heck, even less than their agent told them to expect. Buyers, are finding homes, putting in offers and when the appraisal comes back low, the sellers back out and decide not to sell. Even if they decide to sell, then the buyer has to pray that every thing is perfect so the underwriter doesn’t kick it back saying they won’t fund it.
Let’s look at two examples of a home that is put on the market at $265,000, the 3rd lowest price home in the neighborhood for the square footage, out of 12 homes. The other two are short sales and this one is not, so the sellers and their agent are confident that it will sell quickly and for top dollar because it is in far better condition than those short sales,and the seller needs to move out of state quickly to their new job.
The agent and the seller are very happy when 3 days later they get a full price offer and no contingencies. The pre-approval letter even says they qualify for $280,000. This is looking like a slam dunk! It’s a great deal for everyone involved. BUT WAIT! Here comes the appraiser that prior to May 1st, couldn’t get a job because the banks didn’t like to use him. But because of the new law of appraisal clearing houses, he gets to work for that bank again but now he holds a grudge! Let’s appraise this house at $240,000 and because you can’t question the appraisals anymore, it gets to stand, and you can’t change banks without paying for another over priced appraisal.
The seller says, “For that, I can’t sell my home. That would be a short sale and I know I have equity.” This home is worth far more than that, the buyer,the listing agent and the selling agent all agree and individually send letters to the bank saying this appraisal is way off and they may want to check why they banned this guy from doing appraisals in the first place. (Because he didn’t know what he was doing.)
Now, the buyer with an 800 credit score, 10% down, and has been at the same jobfor 7 years, is back looking for a home. Well, we find another one, this time we don’t take anything for granted with the appraiser and boy were we smart not to. Yet another bad appraisal, not as bad, but bad. These sellers decide to sell anyway, but won’t sell it for appraised value, they want more. The buyer actually agrees and says they will bring the funds in to close and sign the letter saying they realize they are paying more than appraised value for the home.
Everything is going well and the underwriter clears all conditions and docs or ordered. The seller moves out and 48 hours later docs arrive at title. But while printing them out the underwriter calls and decides she is having second thoughts. She decides that because they are paying more than appraised value that the funds they are using can’t be from the 10% down. She wants the 10% plus the additional amount over the appraised value as a down payment. WHAT? You couldn’t have told us this two weeks ago? Now we have a homeless buyer, a seller that can’t afford to stay where they are staying because they were using the funds from the sale to stay where they were going to stay.
This topsy turvy real estate world is not going good and I’m worried that the report from last month that pending sales were up is only good if they actually close. But being I’ve seen 2 sale fails in less that 3 weeks because of our government trying to step in and “HELP” we could be in real big trouble. House prices are going to continue to fall and those who thought they had equity won’t sell because they suddenly don’t and those that thought they could buy, can’t because of underwriters won’t buy, and those pending sales won’t mean a thing to the housing market.
I hope I am wrong and both these are isolated cases, but from talking to other agents, this could become the norm for awhile. So even if you have bought or sold ahome in the past, this isn’t the same market it used to be, so don’t go in expecting it will be the same. I’m betting your agent may even be in for a few surprises along the way.
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Respect Realty LLC (Expect More)
At Respect Realty, LLC our agents believe in 100% dedication to client satisfaction. We specialize in property and land acquisition around the Portland Metro and Vancouver, WA area. We delight in working with first time home buyers and sellers to guide them from start to finish. Our doors are always open and we are always happy to assist you with your real estate questions.
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Todd Clark and Seraina Aguayo (Owners of Respect Realty)
Respect Realty LLC (Expect More)
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