Home payment affordability is a big challenge for many other homebuyers. Fixed-rate mortgages have risen more than 2 percentage points since the start of the year, hitting 5.81% this week, according to data from Freddie Mac.
The bidding wars are largely over. Buyers have stopped begging to be the chosen ones. More and more homes stay on the market for several weeks, instead of selling in hours, minutes or seconds.
Associate broker Doug Ward of Regency Real Estate thought he had a deal for his Mission Viejo buyers at $1.25 million. Sellers countered at $1.265 million, trying to extract another $15,000 from buyers.
“We declined,” Ward said. A few days later, the sellers accepted the $1.25 million.
“There aren’t a lot of sellers ready to unplug. They’re afraid to come back into the market with higher rates,” said Tish Arciniega, broker-owner of San Jacinto-based Main Street Realty.
Full disclosure: I do business with Ward and Arciniega.
Jordan Levine, chief economist at the California Association of Realtors, sees a changing market.
“Homes statewide are on the market twice as long at 26 days as they were last month,” he said. “We expect prices to come down. We are leaning towards a modest recession in 2023.”
And good riddance to sellers’ nightmare demands for buyers, such as waiving their appraisal and mortgage contingencies as a condition of accepting the offer.
“Buyers have more choices. They don’t have to give up loan approval contingencies,” Ward said.
Something else. If the valuation is lower than the selling price, buyers should now consider renegotiating the price. Why overpay in a softening market? There’s more pressure on the seller now to say yes.
Last week I had a buyer offer to split the difference with the seller when the valuation fell. The seller accepted. Deal stayed together. It closes next week.
Unreasonably short timeframes for loan approval and appraisal had been another sometimes untenable obstacle. Get it in X days to avoid risking the horrible request fulfillment notice.
The Residential Purchase Agreement, or RPA, commonly used by California real estate professionals, does not contain boilerplate language for unforeseen issues such as late appraisals, late responses to association questionnaires from homeowners (known as seller’s HOAs) or even delays in getting loan approvals. (The highest rated lenders always have the longest processing times.)
The contract requires loan and appraisal contingencies to be removed within 17 days, shortened from 21 days in previous versions, according to Arciniega.
Sellers’ agents and their deal coordinators assail loan originators and their processors with phone calls, text messages and emails demanding that buyers clear their contingencies or otherwise. Either means release the contingencies or we will void the escrow.
But if the contingencies are released and the loan is not approved, the earnest money deposit is potentially at risk. A 3% down payment on a sale price of $1 million is $30,000.
According to Fullerton real estate attorney Jim Stearman, the seller is only entitled to the down payment if the following conditions are met:
- Buyers and sellers failed to resolve the issue through mediation.
- Sellers receive the deposit either by arbitration or by a civil court judge.
“It’s not uncommon to end up in a fight, (although) it’s rare to go to mediation,” Stearman said. “Giving up contingencies in advance is dangerous.”
If you’re a buyer, especially with a complicated loan history, or you’re buying in a rural area with hard-to-find appraisers, consider asking your agent to add “the seller will allow additional time as long as the buyer will do his best”. language to assessment and funding timelines.
Or remove the seller’s ability to retain the earnest money deposit based on deadlines.
The best thing any buyer can do is find an experienced and mature real estate professional who can properly negotiate terms and conditions up front that are in your best interest now that the shoe is on the other foot.
Freddie Mac rates the news: The 30-year fixed rate averaged 5.81%, 3 basis points higher than last week and the highest rate since November 2008. The 15-year fixed rate averaged 4.92%, 11 basis points more than last week.
The Mortgage Bankers Association reported a 4.2% increase in mortgage application volume from the previous week.
At the end of the line : Assuming a borrower gets the average 30-year fixed rate on a conforming loan of $647,200, last year’s payment was $1,066 less than this week’s payment of $3,802.
What I see: Locally, well-qualified borrowers can obtain the following fixed rate mortgages without points: A 30-year FHA at 4.875%, a 15-year conventional at 4.625%, a 30-year conventional at 5.375%, an -balance (647 $201 to $970,800) at 5.25%, a 30-year conventional high balance at 5.625%, and a 30-year jumbo purchase loan at 5.375%.
Eye-Catching Loan of the Week: A 30-year jumbo purchase mortgage, locked in for the first 10 years at 4.375%, with a cost of 0.75 points.