I was all ready to write an article this month describing the challenges of local mortgage lenders trying to keep up with the record sales of central Iowa homes. I had it in my head that appraisals were taking weeks to come in and when they did, they were below purchase price and full of conditional requirements.
I planned on reporting how mortgage underwriters were kicking loans back with rejections based on risk assessment. I was ready. Afterall, how could we only be in the month of April and already have surpassed last year’s record high number of Pending Sales from last July?
What I discovered and what I’m hearing from the mortgage lending side of the real estate business is that they are handling the volume. Yes, there is the occasional low appraisal or the rejected loan due to some Fannie Mae guideline, but those things happen even in a balanced market. There is no doubt that the market is as busy as anyone has likely seen it before, but if you look closely and listen carefully, the mortgage side is keeping up and delivering on time with commitments and closings.
According to the latest report by the Des Moines Area Association of Realtors®, there are currently 2,600 Realtors with MLS access working the Central Iowa real estate market. With around 1,700 homes currently for sale and each transaction typically utilizing the services of two Realtors—one representing the seller and the other representing the buyer—you can quickly see that the competitive Realtor pool is not too different from the home buyer pool.
It’s Not A Fun Time to Be Buying or Selling Real Estate
This statement could be construed as controversial or negative, but it holds true not only for the buyers and sellers of homes, but also for the Realtors out in the field racing to keep pace. Last month I talked about strategies used in marketing homes for sale and how buyers and their agents were doing whatever it took to get their clients under contract.
This race to list a home and snag the first buyer in the door will eventually end and homes will require true marketing to attract a buyer, but I have said this over the past two years: In this deep seller’s market, as a Realtor, the easier part is getting an offer accepted, the more difficult part—where we earn our pay—is taking that offer from acceptance to close by navigating the multitude of challenges along the way.
More Than 4,000 Sale Pending Homes
Sale Pending is the fancy term describing homes in the financing and closing process. I don’t know the actual number of people that “touch” a real estate transaction from offer acceptance to closing, but it has to be in the dozens when you consider there are loan originators, Realtors, processors, appraisers, underwriters, inspectors, etc. As a result, it truly takes a team effort to buy, sell and close a real estate sale.
With over 4,000 homes in the sale pending process, I reached out to my lender friends and asked some basic questions about their side of the business. I presented the following questions and got some interesting and unexpected answers.
- What is the typical number of days that Realtors are trying to close by from current accepted offers?
This question got two different answers. The majority of responses was that the closing date on a negotiated purchase agreement was somewhere between 30–45 days from the date of acceptance. About 40% of the mortgage lenders I spoke with said that they were seeing 45–60 days, but that they were actually ready to close closer to the 45 day mark.
- Are appraisals taking longer to complete from the time they are ordered and what is the turnaround time?
The answer was “Maybe”. The average turn time of an ordered appraisal was two weeks with three weeks happening occasionally. Many lenders were quick to compliment their appraisal pool saying many appraisers are careful not to accept more work than they can complete. (Due to lending guidelines, it’s rare that loan originators are able to pick and choose their appraisers since the housing crisis of 2008).
- Are you seeing an increase in appraisals coming back below the negotiated offer price?
Almost all respondents said that they were NOT seeing low appraisals on purchases, even though most offers are at or above the listed price. There are the few outliers which happen in every type of market, but overall, it appears that demand is driving pricing upward.
- Have you seen an increase in conditional notes about a home from the appraiser (homes with peeling paint, poor roofs, general wear notations that could/would affect the buyers’ mortgage)?
Every answer to this question from my pool was No. Almost every lender responding did go on to say that in the market environment, the most typical loan type of buyers is conventional financing. FHA and VA—both Government controlled mortgage types—are traditionally more restrictive when it comes to condition and with the oversized buyer pool, sellers are taking the path of least resistance in the majority of cases.
- Is loan underwriting taking longer and are there any consistent issues noted on files that you are seeing.
Again, every answer to this question was No. In fact, underwriting is an area where mortgage lenders are saying they have been able to make adjustments in staffing, learning from last year and have perfected their operations to keep the process moving smoothly.
- And lastly, are buyers and/or their Realtors reporting that they were in multiple offer situations and had to pay above list price to have their offer accepted?
Resoundingly, YES to both questions. In almost every purchase scenario, the final accepted offer price is at or above the listed price of the home. Whether there were extended showing periods or the seller simply reacted to buyers from the first few hours of marketing, it has become a super seller’s market with what I describe as Vapor Listings.