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Wasting Rent Payments? Another Appraisal Horror Story

Wasting Rent Payments Appraisal Horror StoryAPPRAISAL HORROR STORY PART 297

Because we want to always do what is best for our borrowers, we recently switched a borrower from our internal banking channel to the “broker channel” to take advantage of a specific loan product that a wholesale lender was offering.

Even though we already had an appraisal in at $512,000, the wholesale lender made us order a new appraisal through its internal appraisal management company.

Their appraisal came in at $475,000 two weeks after our appraisal came in at $512,000. Same property. Same market. $37,000 lower.

The low appraisal of course killed the deal at the wholesale lender, but thankfully this is a refi, so we are able to still close the transaction through our mortgage bank.

But – this is exactly why we left the broker channel. Lenders absolutely need an internal appraisal management company, especially for purchases.

INTERESTING RENTAL STATS

I borrowed these from the Compass Real Estate Newsletter:

• The average millennial waits 12 years before buying their first house, paying around $200,000 in rent in the process.

• Gen Z, those born between 1998 and 2016, will wait about 11 years before buying into the housing market – they’re expected to become homeowners at a faster pace than their millennial predecessors, but their average rent expenses will come to an estimated total of nearly $230,000.

• The average Baby Boomer paid $148,900 in rent before buying a home after about a decade. (Business Insider)

These stats are great reminders of just how much money young people throw away in rent. In CA, rents have been sky-rocketing and can easily exceed $2,000 to $3,000 along the coast. If a couple paying $2,500 in rent waits 12 years to buy (per the stats above) that is $360,000 that could have gone into building equity.

Zillow has a great Rent vs. Buy Calculator that takes into account tax rates, maintenance costs, the money that could be earned if buyers invested money not spent on a house, and many other variables.

I used conservative assumptions and came up with a breakeven point of 3 years and 11 months for a couple that buys a $600,000 home with 10% down instead of paying $3,000 in rent.

With a larger down payment, smaller purchase price, or more aggressive appreciation assumptions, the advantages of buying are much greater.

And – after twelve years, there is simply no need for comparison. Buying crushes renting in every way.

Jay Voorhees at (925) 855-4491
Real Estate Broker, CA Bureau of Real Estate, BRE# 01524255, NMLS# 335646