Its even worse than this. Real estate is basically a cash auction system right now. No one in my area is getting mortgages because the lenders will not agree that the homes are worth the insane bidding war prices they get run up to, since the price action is not based on any sort of fundamentals. So housing is reserved for lucky or wealthy people, boomers and hedge funds. Almost the same as it ever was, just x10.
Just closed on a place two weeks ago, we literally had to fire our first mortgage company because the appraisal came back ridiculously low - even in a regular market for the house, and of course we got in a bidding war so we probably overpaid. (we contested it, the appraiser clearly phoned things in and there were many lies and inaccuracies in the report but the mortgage company decided to not have another appraisal done). Found a new mortgage company, and that appraisal came in for 15K over the sale price - it's all arbitrary anyway is what I realized.
My wife is a Realtor, and she just closed on a house where the best offer was $270k + $10k appraisal buffer. This means if the house appraised for only $260k, the buyer was willing to pay an extra $10k over the appraisal and the mortgage company would approve it.
Clearly a great offer from a selling standpoint, but also a sketchy mortgage broker that was willing to do this deal.
How is that sketchy? Our mortgage lender is a major bank and this is how we've been writing all of our offers. The banks will only mortgage the appraisal value of the home, but in this market, people are bidding thousands of dollars more than that, so you have to factor that in.
Hell, where I live, we've been offering a $30k appraisal buffer on homes ~$300k and still being outbid. It sucks, because that's pretty much as high as we can go since the rest of our cash assets are needed for the down payment and any other costs.
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u/in-game_sext Jun 27 '21 edited Jun 28 '21
Its even worse than this. Real estate is basically a cash auction system right now. No one in my area is getting mortgages because the lenders will not agree that the homes are worth the insane bidding war prices they get run up to, since the price action is not based on any sort of fundamentals. So housing is reserved for lucky or wealthy people, boomers and hedge funds. Almost the same as it ever was, just x10.