Working with lenders more difficult today
Interest rates are at near-record lows, but actually getting those loans is more of a chore than I can remember. This is so because, after years of granting mortgages to anyone who could fog a mirror (and a few who could not), many banks have become incredibly more restrictive.
Due to well-intentioned legislation intended to protect consumers, the appraisal process is now unnecessarily cumbersome. Instead of being able to call a known, competent and professional appraiser directly, the lender must now use a third party company. This company will then contact yet another company which chooses from a rotating list of approved appraisers. No one seems to know how this list is assembled and used to insure fairness. Some lenders have a chief appraiser who oversees the process.
Regardless, the new system increases the likelihood of the use of appraisers who may not be the most qualified or knowledgeable about a particular locale. I recently heard of a case where the appraiser, despite valid data from agents, refused to modify a clearly low appraisal.
In addition, appraisers are now being paid substantially less for each job, with a fee of approximately $150 going to the firm that acts as the clearinghouse. Unfortunately, this new, multi-layered approach is coming out of the buyer’s pocket. One of my clients just paid $485.00 for an appraisal that, not long ago, would have cost $300.00 to $350.00.
Lenders are more selective and they are providing lower loan-to-value loans. This means many buyers need to make a larger down payment, which they may not have. In particular, condos mortgages are much harder to obtain and include numerous hurdles regarding the number of owner-occupied units and those that are delinquent in their monthly homeowner’s association dues.
Considering the high volume of refinancing and the effect of the new “rules of the road,” Realtors must allow for longer appraisal and loan contingency time frames. Any changes to the transaction after the appraisal has been submitted, such as a price adjustment due to issues encountered during physical inspections, may cause major difficulties for buyers and their agents. This issue can quickly scuttle a sale.