Wasting Rent Payments? Another Appraisal Horror Story
APPRAISAL 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