Because of the numerous changes in laws, regulations and underwriting requirements, some of the things that I am forced to say on a weekly basis are almost incredulous. I will make a statements in this article that seems to be 100% truth but in fact are not and see if we can have some fun with them.
A person putting 20% down has a better chance of getting a loan than one who only puts 15% down. Usually but not always true. Under current specialty programs for borrowers who have had a significant credit event and extenuating circumstances, they can obtain a loan with 15% down but not with 20% down. The reason is the 15% down loan requires mortgage insurance and the 20% down does not. This extra level of protection for the lender allows them to approve the first loan but not the second because the lender is theoretically taking less risk.
The appraiser is getting paid $450-500 dollars for doing the appraisal so they needs to be here by Friday and you (the agent) need to lobby for the appraisal amount. A lie on two different points. First of all, despite the fact the appraisal costs around $500, the actual appraiser is only receiving about half of that amount. The rest goes to the appraisal management company who fairly and randomly assigns the appraiser. (Sarcastic). In reality, the appraisal management company is likely to be owned by the lender despite a significant corporate veil disseminating the ownership. (they have the same phone number).
The second false point is that, we as agents are not allowed legally to order, arrange, or contact the appraiser unless they ask us for supplemental information or supporting evidence. This is a response to the false allegation that the appraisers and agents conspired to artificially inflate home values which caused the market crash. When 5 homes sold on the block for $300, 000 or so the next home should be in that range. The lenders simply did not account for the extra risk they were taking on sub-prime and less than A paper loans combined with the possibility of the market going down. We did those loans for 30 years but housing prices never dropped more than 4-5% so the subprime borrower could always simply sell the home if they got in trouble.
Turning in my tax returns to the lender will assist them in verifying my loan information and expedite the closing of the loan. While this one is still a requirement, almost every part of it is not true. Lenders now require audited verification of tax returns directly from the IRS. I have no idea what the cost of this provision is in terms of lender costs or the cost of the IRS employees to provide this
service but I am sure that it is not insignificant. Rather than prosecuting the infinitely small proportion of potential borrowers who falsify tax returns, EVERY borrower’s tax returns must be received directly from the IRS. To be fair, they do a pretty good job of turning these things around and it usually does not delay the transaction. It is, however, one more bureaucratic check mark and it virtually shut down the lending industry during the government shut down last year.
New government regulations require all of my loan and real estate documents to be written in plain language. I am having trouble typing this one with a straight face. The plain language solution that is reality seems to be that if the borrower signs the same redundant form 4 or 5 times then they must have understood the form. You will sign a form that says that you have the right to receive the appraisal (unless you actually are the seller or the sellers agent) by email, you waive the right to receive a copy, a receipt for the electronic copy and finally a form acknowledging that you received it by email again. All of which must be received before documents are issued and then signed again as part of the loan documents.
Believe it or not, in a real estate transaction, you have to sign a form that in very non-plain language states that the real estate market is cyclical and can go up and down. I am sure that if everyone who bought homes in 2000-2005 had read and known that fact the crisis would have been averted.
The buyers signed a contract to close on the 15th so I will close and have my money that day.
As illustrated above there are many potential snags involved in closing a home, any one of which can cause a delay. In addition, Arizona purchase contracts are weighted heavily in favor of the buyer. There are escape clauses for inspection, appraisal, not qualifying for the loan and others. We work very hard to get through all of those hurdles but occasionally even the best of us kick a hurdle. NEVER make irreversible decision based on the anticipated closing of a home. Lastly, the way closings work in Arizona, while the signing may occur days before, the closing is recording and often it is the next day before funds are disbursed to all of the parties.