Will the Home Appraiser Shortage Wreck Your Home-Buying Dreams? Not If You Read This

Get ready to hurry up and wait, home buyers! Even if you’ve found your dream home, made an offer that’s been accepted, and passed that critical home inspection hurdle, there’s something major happening in the housing industry that, oh so quietly, could grind the last mile of your home-buying marathon to a screeching halt.

The culprit: a home appraiser shortage. A big one, in fact.

Odds are, you’ve never given home appraisers a second thought, assuming you even know what they do. But here’s the deal: When you go for a mortgage, this is the pro that your lender hires to check out the property, making sure it’s a good investment (because, of course, it’s their money on the line, too).

As it turns out these days, there just aren’t enough qualified home appraisers to go around, and it’s causing delays among home buyers eager to close their deals.

According to a new study by Campbell/Inside Mortgage Finance, the percentage of on-time closings has dropped over the past six months, from 77% in April to 64% today. Appraisal-related holdups jumped 50% in this time period, so it’s quite clear they’re the bottleneck.

Experts say this shortage dates to 2008. In the wake of the housing crisis, the Federal Housing Administration tightened regulations around home appraisals in an effort to protect banks and home buyers. It upgraded the talent pool, but significantly shrank it at the same time.

Before that point, licensed home appraisers could send an apprentice studying under them to head out and handle the on-site inspection of the house in question. But after 2008, the FHA said no mas—the licensed appraiser has to make the house call, too.

Home appraisers, seeing that their apprentices weren’t saving them much legwork, cut ’em loose. With fewer home appraisers-to-be in the pipeline, the number of professionals in this workforce has shrunk by 22% since 2007, according to the Appraisal Institute.

And the current  batch of practicing home appraisers is aging, with over 60% past the age of 50, and creeping closer to retirement every day.

Should home buyers panic?

For home buyers, this home appraiser shortage doesn’t just try their patience. It could stress their pocketbooks, too.

Since they typically “lock in” their mortgage interest rate for a certain time period, an appraisal holdup could push them past that expiration date, forcing them to renegotiate at a higher interest rate (because yes, they are rising now).

Even worse, in hot markets where a home’s market value can change in a matter of a couple of months, an appraisal delay could mean the appraised value of a home could come in much lower (or higher) than back when the offer was first made—which could cause the whole deal to fall through completely.

Given that the stakes are so high, what’s a home buyer frothing at the mouth to close sometime this decade supposed to do?

For one, there’s less of a chance of succumbing to the home-closing equivalent of road rage if you’re braced for gridlock ahead. So ask your real estate agent and loan officer if they anticipate delays and plan accordingly.

“The Realtors® and loan officers know if their market is one that is experiencing the severe appraisal delays; not all markets are,” says Tal Frank, president of PhysicianLoans.com. But if your market has an appraisal backlog, “you should expect the appraisal to be delayed and therefore the closing to take two to four weeks longer. If there is proper communication and expectations upfront, home buyers and home sellers should not end up in a panicked state.

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“Rather than closing in 30 days, it may take 60,” he adds. “Not awful if everyone knows this at the start of the transaction.”

Home buyers in affected markets should also lock in their interest rate for longer.

“Some companies offer a standard 30-day lock, but the 60-day lock is advisable in the affected markets,” Frank continues. “If the buyer is working with a lender that offers 30-day locks as standard, the buyer can either wait to lock or pay the lender a fee upfront to extend the lock period.”

But what if you’re already knee-deep in the process and can’t turn back time? Consider paying a “rush fee”—at least 20% on top of the usual cost, perhaps more depending on your market. You can also try appealing to a home appraiser directly.

“Most appraisers are self-employed, so they aren’t constrained by bureaucratic rules and procedures. This means they can bump your appraisal up their priority list if you can convince them to do so,” points out Brian Davis, a real estate investor and co-founder of SparkRental.com. “Often, a simple phone call explaining the urgency of the situation might suffice.”

Because after all, Davis points out, while they may be in short supply, “Appraisers are people, and many are willing to work an extra couple hours one evening in order to help you settle on your new home.”

Selling a Condo…must read!

As always, should you have any questions regarding any of thQuestion: I am buying a condominium and have heard there is mandatory seller disclosure. Can you explain?

Answer: Florida’s legislature apparently believes condominium buyers require special attention. The legislature confirms that position through Section 718.503, Florida Statutes. That statute addresses developer disclosure, non-developer disclosure and even creates a right of voidability for condominium buyers.

Mandatory developer disclosure is far more extensive than the disclosure required by a non-developer seller. A buyer from a developer is granted 15 days from the date the developer supplies all of the mandated documents to review and determine if the buyer wants to cancel the contract. A buyer from a developer can even extend the closing until end of the 15-day period. The buyer can cancel the contract within the 15-day review period and obtain refund of any deposit.

Most developers are familiar with and follow the statutory notice requirements. Because they want to know if the buyer will proceed as soon as possible, they go to great length to comply with mandatory disclosure. That means, the real disclosure problems involve sale or resale of condominiums by non-developer owners.

Unlike developer disclosure, the statute does not require automatic provision of documents from non-developer seller to buyer. It provides all prospective purchasers under contract for purchase of a condominium unit are entitled to specific documents at the seller’s expense. That means, a buyer should ask the seller for the documents rather than assume they will be provided.

The statute mandates non-developer sale contracts include disclosure language. That language advises the buyer that after the contract is signed, the buyer has a right to cancel within 3 days, excluding Saturdays, Sundays and legal holidays, after receipt of disclosure documents.The statute lists the disclosure documents as the following:

a. Current copy of Declaration of Condominium;

b. Articles of Incorporation for the condominium association;

c. By-Laws and Rules of the condominium association;

d. Copy of the most recent year-end financial information for the condominium association;

e. Frequently Asked Questions and Answers document (this form is established by statute and summarizes certain important aspects of condominium ownership including explanation of voting rights, unit use restrictions, leasing restrictions, whether the unit or association is obligated to pay rent or land use fees for recreational or other commonly used facilities, a statement identifying the amount of assessments levied against each unit type, explanation of the basis upon which assessments are levied, and list any court cases in which the association may face liability of more than $100,000.00); and;

f. Copy of a Governance Form (this form is 5 pages long and published by the Department of Business and Professional Regulation Division of Florida Condominiums, Timeshares and Mobile Homes. It summarizes condominium operations including board meetings, finances and unit owner rights and responsibilities).

The buyer’s right to terminate under either developer or non-developer contract cannot be waived, except that the buyer can close before end of the review period and closing ends the buyer’s right to terminate the contract. If the contract does not have the mandated disclosure language explaining the buyer’s right to documents, the buyer’s right to terminate extends to closing, no matter how far into the future the closing date is set.

Because the non-developer buyer has a 3-day right of rescission from date the buyer receives all of the disclosure documents, it is in a seller’s best interest to be sure those documents are delivered quickly. But, there can be many slips between good intention to collect and deliver those documents and actual result.

Sometimes, the seller will ask a title company to get condominium documents. The title company may then obtain copies of all documents recorded in the Public Records but, those documents will generally be limited to the Declaration, Articles of Incorporation, By-Laws and possibly Rules of the association. The financial information, Frequently Asked Questions and Answers, Governance Form and most Rules will not often be found in the Public Records. If the seller relies on an incomplete set of documents, the buyer’s right to terminate continues to closing.

More experienced sellers may realize they have to go to the condominium association to get a complete package. Even then, mistakes are made. It is not unusual for an association to include a budget rather than a financial statement in the document package it provides. And, only a minority includes a copy of the Governance Form. Either of these omissions stops the 3-day rescission clock from running.

 

What Buyers like to know!

6 Common Buyer Questions for Sellers

Home buyers want to know specifics about the homes that pique their interest. So be proactive and address their questions upfront by finding the answers to some of the following questions from your sellers before you list.

1. How old is the home? When was it last renovated?

2. How old is the roof?

3. What structures or fixtures are included in the list price? For example, is the seller OK with the appliances, ceiling fans, swing set, window treatments, and shed being included in the sale?

Read more: 6 Common Questions From Sellers

4. What are the home’s annual costs for upkeep? Provide estimates for electric, water, gas, trash, pool maintenance, lawn care, homeowners’ association, and any other regular fees associated with the home.

5. How is the home heated or cooled? How old are the units?

6. Are there any outstanding permits or liens on the property?

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SERVICE ANIMALS:

The do’s and don’ts of service animals

By Margy Grant

July 4, 2016 — When a buyer turns out to be a cash buyer, that’s usually a plus in a transaction. At least, that’s what one Realtor thought when she started working with a buyer who had just completed a tour in the Army. The buyer had been injured in the line of duty and planned to live in the condo with Sam, his German Shepherd service animal.

The buyer’s offer, accepted by the seller, included a condominium rider that made the agreement contingent on the buyer receiving approval from the condominium association before closing. The buyer submitted an application and included the disclosure that Sam would live with him. The condominium association denied Sam’s application in writing, saying the association did not allow pets larger than 25 pounds. Both the seller and the buyer were upset and asked the Realtor if this was allowable.

The Realtor reminded both the seller and buyer that her real estate training did not extend to legal matters. However, she had recently attended a class in which the instructor stated that denying housing to someone as a result of the presence of a service animal is a violation of the federal Fair Housing laws.

According to federal law, it is discrimination for a landlord or an entity such as a condominium association to refuse “to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling.”

The buyer retained an attorney, who asked the condominium association to reconsider its decision based on the Fair Housing laws. The association agreed, but only if the buyer agreed to pay a large pet deposit to cover any impact the large dog might have on the premises. The attorney reminded the condominium association that under Fair Housing laws, a housing provider cannot require service animals to have any specific training, apply a blanket weight or breed restriction, require pet insurance or charge a pet deposit. The condominium association reconsidered and the buyer purchased the unit.

If you are ever involved in a situation like this, remember that while you are not a housing provider, if you represent one and intentionally participate in unlawful discrimination, you are also liable under the Fair Housing laws. If landlords ask you about exceptions to this law, refer them to an attorney.

For more information on service animals and the specific statute reference, please visit “Accommodations for Service Animals in Housing” on NAR’s website.

 

 

Blog Post 2

Rental properties and foreclosure

By Meredith Caruso

July 4, 2016 — Has one of the tenants you helped place in a rental received a notice of foreclosure? Do the tenants have to vacate the home they rented?

Assuming there was an actual judgment of foreclosure entered against the original homeowner, the tenants may have to leave — and sooner than was the case under prior law.

Previously, a federal law had granted tenants up to 90 days to move after a rental home was foreclosed. However, that temporary provision expired at the end of 2014. Under the current state law, the purchaser named in the certificate of title following foreclosure can provide a 30-day notice of termination. Assuming the notice complies with statutory requirements, the tenants then have to vacate the property by the termination date and pay any rent due for the time they remain in occupancy.

To protect yourself and your clients from being caught in a foreclosed rental, you should always ask the listing agent about the status of the owner’s property. Is the owner current on his mortgage? If not, have foreclosure proceedings started? The answers to these questions can help your tenant decide if he or she wants to rent the property.

If you work with landlords to place tenants, you should also ask these questions of the landlord before considering taking the listing. If an owner is either hesitant to answer these questions or claims not to know, you may want to contemplate not taking the listing.

The Florida Real Estate Commission has punished agents in the past for failing to disclose that a property offered for rental was in foreclosure or distress. It is legal for the owner of a distressed property to rent the property, and for a tenant enter into a rental agreement. However, real estate agents or property managers involved in the transaction should make sure that each side is fully informed of the status of the property before entering into a lease.