The Need For Speed; 14-Day Closes; Appraisals Remain The Problem
14-DAY CLOSES ARE BACK!
We are bringing our 14 Day Closes back in full force now, but with certain caveats.
We cannot close the following transactions in 14 days: (1) Condos – because we have to wait for HOAs; (2) Jumbos – because underwriting and required appraisal reviews take longer; (3) Complex self-employed borrowers because of longer underwriting times and more conditions; (4) Deals in areas that have appraisal issues (reason for explanation below); and (5) Deals involving notoriously slow escrow officers (this has been a major problem in Texas, as we need everyone on board to close quickly).
We also can’t start the 14-day countdown until after the “option period” ends in Texas.
So, what deals can we close in 14 days?
Here are the criteria we must see: the transaction must go into contract on a Tuesday at 10 AM; the borrower must be 6 foot, 2 inches tall with a FICO of exactly 822; the borrower should be able to dunk (goes without saying); the borrower must prefer cheeseburgers over hamburgers; the property must be exactly 1,975 sq. ft. with nine closed “model match” comparable sales within 100 yards of the subject property; and the borrower must pay all cash….
OK… I jest but only little.
We can, however, close about 70% of our transactions in 14 days, but the borrowers just need to be relatively clean, pre-underwritten, and buying in areas where appraisals can be obtained in 4 business days or less.
Buyers and agents need to check with us every time before offering a 14-day close.
REFI BOOM IS OVER BUT APPRAISER SHORTAGE REMAINS
Interest rates remain about 3/8% to 1/2% higher than where they were at the end of last year.
So, while they remain amazingly low, they are still high enough to staunch the refi explosion that was clogging up every lender’s pipeline last year.
I personally looked forward to the refi slowdown because I mistakenly believed that it would result in a surplus of available appraisers, resulting in better service and lower fees.
I also mistakenly believed that COVID relief would increase the availability of appraisers, given that many of them are older and thus at more risk from COVID.
BUT, despite the drop-off in refis and COVID relief, appraisers remain in very short supply.
$900 TO $2,000 FEES
So much so that we are now paying $900 for standard appraisals with a rush fee that we absorb, and up to $2,000 for appraisals in some markets (like Austin, TX).
So, why is there an appraiser shortage still?
- Appraisal Waivers For Refis. One of the reasons the refi drop-off is not resulting in more appraiser availability is because so many refis did not require appraisals at all because of the increased prevalence of appraisal waivers.
- Appraisers Burned Out. Our Appraisal Manager is a licensed appraiser herself who personally knows most of the appraisers on our panel, and she reminds me often that most of them are simply burned out from the excess amount of work over the last year. As a result, many of them are just cutting back.
- Appraisers On Vacation. This is a major factor and also somewhat encouraging, as it implies that relief may be on the way. Many appraisers are simply on vacation now because they can finally travel safely with far less concern over COVID.
- Appraisers Are Old/Retiring. The average age of a licensed appraiser is 113, give or take (I am allowed to make that joke because I am old too 😊). In any case, appraisers have been retiring in droves because they are simply hitting retirement age and that urge to retire was exacerbated by both the burnout and the money earned over the last year.
TAKEAWAY: CONTINUED DELAYS AND MUCH HIGHER APPRAISAL FEES
Agents and borrowers should expect continued appraisal delays in many markets, and much higher appraisal fees.
I should add though that we eat the “rush fees” ($150 to $500) that we offer to entice appraisers to take our orders.
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167