Charles Dickens famously wrote: “It was hottest of markets, it was the coldest of markets…” Or something like that.
And – that is precisely what we are seeing across the 9 states in which we do business. Some markets are still seeing bidding wars no matter how high rates go, and some are seeing price reductions and stale inventory.
The areas where there was a lot of new building (in Texas and Florida for example) are the colder markets, while the areas where building restrictions and tight inventory reign supreme (parts of the SF Bay Area) remain very hot – especially on the lower end.
So, today’s blog has a “hot market solution” and a “cooler market solution.”
Waiving Appraisal Contingencies in Hot Markets
We have helped at least half a dozen buyers get their offers accepted in recent weeks by encouraging them to waive their appraisal contingencies – IF they had already planned to make large down payments.
We, of course, explain the implications and review comparable sales with the buyers and agents so we can estimate “worst-case scenario” appraised values.
But, if the borrowers are comfortable with the implications (usually a higher loan-to-value ratio and sometimes even PMI), they waive their appraisal contingency – and that has been the deciding factor in getting their offers accepted.
We recently had a $1 million dollar offer on a home, for example, with a down payment of $250,000 – and a worst-case appraised value of $950,000. This down payment was more than large enough for the borrowers to make up the $50,000 appraisal shortfall – while also avoiding PMI by keeping their loan-to-value ratio under 80%. The appraisal shortfall of $50,000 + the down payment of $190,000 (20% of $950,000) = $240,000. Borrowers understood all of this and waived their appraisal contingency.
We have had similar situations where borrowers intended to put down 20% – but agreed to a higher loan-to-value with PMI in the event of a low appraisal.
Property Tax Appeals
After the 2008 meltdown, we devoted thousands of cumulative hours helping our past clients appeal their property tax assessment after home values dropped anywhere from 20% to 50%. We did this as a courtesy, but the time it ended up taking almost put us out of business – and it was hardly our specialty. Hence, I wish we had a reputable firm we could have referred people to.
And fortunately, now we do. The company is called Incenter Tax Solutions, and their sole specialty and focus is property tax appeals.
We refer people to them solely because they are so reputable. We get nothing from them and want nothing from them; we simply want to help our clients.
They only charge homeowners IF they are successful with their appeals, and there is zero cost for having them analyze a homeowner’s potential for a successful appeal.
Agents with clients who are concerned about their property tax bills might refer those clients to this firm, as both the agents and the clients have nothing to lose.
Stagflation Rears Its Ugly Head! (Rates Hit 5-Month High!)
I woke up this morning and saw that the Gross Domestic Product (GDP) number for Q1 came in way under expectations and yelled “woohoo!” This is because a low GDP reading means that the economy is weaker than expected and that usually means lower rates.
BUT, I clearly “woohoo-ed” too soon.
The reason? Inflation numbers came in hotter than expected. And in bond market poker, hot inflation readings beat weak economic reports. So…rates shot higher – hitting a 5-month high.
Hence, the word “stagflation” is now all over the internet. Stagflation is what we saw in the 1970s with very slow growth and high inflation at the same time – which is somewhat oxymoronic, given that slow growth usually means lower rates (but remember, hot inflation trumps slow growth).
