We get asked this question quite often. And, from the outside, it might seem like very little, however a mortgage transaction has almost as many moving parts as a Swiss watch. This is why it’s so important to have a good team on your side. Here’s a quick story where the clients did everything RIGHT and we still faced an almost insurmountable event. The two clients were well off financially, both had good careers with steady pay. They both had high credit scores, both were over 750. Reserves? Yes. They had money to put down and a safety cushion reservoir built up.
Frankly, they were about as good as clients get, totally “vanilla,” as we say in the business. So, the process begins. Application gets done, paperwork compiled. The underwriting and vetting process is underway, or the “cash wash,” as I like to call it. So far, so good. Appraisal gets ordered. Rut Roh. The appraisal comes in slightly OVER asking price. Slightly over? And don’t forget kiddies, thanks to big dog Cuomo we can no longer order our own appraisals (topic for a later discussion) therefore we have nothing to do with the value the appraiser comes up with. Click on the title for recent related article about Appraisal in WSJ
Now how can coming in slightly higher be BAD? Well, this is a subjective business, it is not a science. So, the underwriter, for whatever reason, did not like the appraisal. She felt the value was incorrect. And unfortunately there was no reasoning with her. Here we had an independent 3rd party Appraisal Management Company (AMC) complete an appraisal from their list and she still said NO DICE. Two great clients, almost ready to close and Suzy Underwriter DENIES the file.
Luckily, as a brokerage we managed to resubmit the file at another of our investors who had 0 problems with the file. It just took a little longer than normal. And a lot more stress thanks to blown time frames. The clients had to order and pay for a 2nd appraisal, which came in just around where the other appraisal came in. This investor’s underwriter had no issues with the value and we closed the file shortly thereafter. So, here is an example where the clients were PRIME, VANILLA and the property was what caused the issue. I never lost my cool because I knew the underwriter was wrong. She was either inexperienced or unfamiliar with the area and I knew we’d get it done but that it would just be a little more annoying.
Oh, and by the way we managed to re-lock the file at the SAME rate the client had at the first investor, sub 4%–gotta love that 🙂 !