Another Christmas miracle. I just received word that an appraisal is not needed on my listing that we have under contract. It seems the lender is going to go ahead and forgo the appraisal and write the check anyway.
This is the third time this year that one of my listings has been sold, without an appraisal, yet with a buyer who still secures a loan. Are mortgage companies suddenly and finally feeling the Christmas spirit? Perhaps a number of lenders were visited by the ghosts of mortgages past, present and future and decided it was time to gift the seven shillings for the proverbial goose.
Much more likely, however, is that appraisals cost extra time, money and potential problems; and with the shortage of appraisers in the market, but no shortage of lenders, a quick turnaround could be a leg up on the competition for a lender. It’s possible this isn’t Santa Claus knocking at the door after all.
Recently, our mutual acquaintance, Fannie Mae (short for Federal National Mortgage Association, a government-sponsored enterprise that purchases and guarantees mortgages in the secondary market — one of two of the largest purchasers), made a decision to waive traditional appraisal requirements for eligible purchases. These would include those with larger down payments, some refinances with lower loan-to-value ratios and those homes that have had recent appraisals done on the property.
Although this may seem like cause for celebration — after all, saving $500 and at least one week of wait time could certainly be considered a gift — I’m hesitant to bring out the confetti and fringed horns just yet. Don’t get me wrong, I am all for saving money and time, but what are the unintended and long-term consequences here? Are we asking these questions?
If not, perhaps we should be. After all, I was around in 2007, when anyone with a pair of pants could get a home mortgage. In fact, you could get a loan for $300,000 on a $250,000 home and get the rest back in cash to “invest” in your new home purchase. That could include a trip to Fiji, a new yacht or a new Ferrari F-60 to dress up your driveway. Then came the crash.
It concerns me that we are forgetting to study the past. If we are in this for the long haul, it’s important to practice a level of public virtue that seems to be in low supply in our society. We need to plant a proverbial tree for the grandkids. We live in a society of immediate gratification. I get it. If the popcorn is on the table, I’m probably going to grab a handful. The consequences? An extra 20 minutes on that horrible stair stepper machine at the gym. I’ll take that any day over the risk of creating another housing bubble.
For all intents and purposes, where we are right now, with this minimal number of loans that qualify for appraisal waivers (currently hovering around 1 percent of all loans), we aren’t even close to being in trouble. However, legitimate appraisers and the guidelines that have been put in place for them to abide by, play a critical role in lowering risk, keeping us fiscally safe, and keeping the housing market strong. Five hundred bucks and an extra five days is well worth knowing I am making a wise investment.
Now, let’s plant a tree.