• Mon. Nov 28th, 2022

Late bank valuation sent buyer scrambling after flat’s value plummeted

ByWillie M. Evans

Aug 7, 2022

It’s a cautionary tale as buyers and lenders struggle and adapt to rising rates and falling values.

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First-time home buyer Jacqueline Schaffer bought an apartment in Cloverdale in May with a closing date of early August. But by the time her bank completed an appraisal 10 weeks later, her property was worth less than she had agreed to pay, and she had only a week to find the difference needed to close the deal.

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It’s a cautionary tale as buyers and lenders struggle and adapt to rising rates and falling values.

Other realtors and brokers not involved in the Schaffer purchase agree that it is unusual for a lender to take so long to order an appraisal after an offer has been accepted.

“An appraisal should have been ordered at the time of purchase, especially in an environment where it was evident that prices were starting to fall and interest rates were rising,” said Vancouver realtor Steve Saretsky.

But another said that in a down market, banks and other lenders are reluctant to act too quickly.

“It is certainly not normal for a bank to take 10 weeks,” said Surrey estate agent Mayur Arora. “However, I am noticing a delay and slow response rate for banks to do assessments and provide approvals.”

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He thinks lenders want to make sure values ​​don’t drop double-digit percentage points because it puts their loans at risk.

Schaffer, 25, bought the apartment on May 9 for just over $326,000, putting $65,000, or 20%, down and looking at a three-month close on August 4.

She said her agent at Prospera Credit Union in Coquitlam did not order a full appraisal until July 19. In an email he replied that he thought it was ordered a long time ago. He then went on vacation between July 12 and 19.

On July 28, he informed Schaffer that the full appraisal had returned a value of $310,000, which meant that her property was worth 5%, or $13,000, less than what she had agreed to pay the seller. in May, and had to find the difference with less than a week to the closing date.

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In the end, to close the deal this week, she hastily accepted the credit union’s offer of a line of credit for the $13,000 at an interest rate of 4.75%, which is higher than its initial 3.78%. This initially gave him a much higher rate of 6.7% for that amount.

The credit union also allowed him to keep a promotional cash bonus of $2,000 even though his mortgage is now technically below the eligible amount, and launched four random gift cards to Canadian Tire, Starbucks, Home Depot and a card. gasoline, worth $175 in total.

Michelle Gagné, communications manager at Prospera, said, without disclosing specific details, that the circumstances of the case are unusual.

She said Schaffer made the offer without any subject matter, including financing, “which was inconsistent with his prior approval and put the purchase at risk.”

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“The process took longer than usual, but with the market down in recent months, there would always have been a difference between the price she was offering (well above the asking price) and the expertise (whether it was done in June or July.)”

Schaffer said she was pre-approved for a $375,000 mortgage and offered $326,000 for the apartment, which was asking for $280,000.

“Everything in the market was going above the asking prices at that time,” Schaffer said.

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Schaffer’s mother agrees that no one can control the market, but asks what responsibility lenders have to homebuyers in this type of market.

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Content of the article

In early July, the MLS benchmark price for all Greater Vancouver properties was still higher than it was in 2021, but many median prices, which give more of a real-time snapshot, have been falling since the spring as as interest rates rise and the market responds with fewer sales.

“They say they have no obligation as to when this is ordered, but we have emails acknowledging that they were aware of the (market) drop and it still hasn’t been ordered until ’10 and a half weeks after his offer was accepted,” Vanessa Schaffer said.

She is proud that her daughter was able to make a purchase in this expensive region, working and saving $65,000 on her own, “without a penny from anyone else”, while living at home and paying a small rent.

“I hope to draw attention to this scenario so that other buyers are fully aware and their dreams do not fly away, and that banks are more responsible for the procedures they are supposed to follow.”

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