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May 24, 2012

Mastermind for May 23rd. Communicating The Appraisals and Financing Function

by mark mclean

If this is Wednesday, it must be Mastermind. One of my favourite days of the week. What I like most is when everyone talks at once. While it is a bit chaotic it is great to see that everyone wants to add their two cents into the conversation. It’s a clear indication that everyone is interested and paying attention .

 Today, we were happy to have Joe Sammut from Mortgage Architects come in to talk a little about the mortgage market. Some agents had expressed some concern that buyers were getting into financial jams before closings because properties were not appraising out. Joe was quick to point out that he was not seeing this trend however he focused the discussion on a couple af main points;

  • Yes, bank appraisers are being more conservative and some secondary lenders ( non big five banks ) are using “fire sale appraisers”.
  • Whether you are buying or simply refinancing, it is important to remember that appraisers don’t appraise over value. That is, don’t ever expect that $500k appraise at $550k.
  • Paying over the asking price will pretty much guarantee more than a quick drive by appraisal
  • For the most part, the lender looks at three key lending criteria; occupation, down payment and credit.
  • There is some tightening for self-employed people, offshore investors and new immigrants.

So the question of the day was; how do we ease the stress of financing? Not surprisingly the work starts with us on the front lines. It is important to have an honest conversation with your buyer from the beginning. Don’t be afraid to ask the big questions;

  •  If there is a shortfall between the appraised value and purchase price, do you have the means to make up the difference? 
  • If the interest rate goes up, will the mortgage payment still be manageable?
  • Are you aware of the closing costs involved with this purchase?
  • Do you have enough money available to do minor repairs or improvements?

 The take away here is that communication is the key to a successful real estate transaction. You are working with a buyer to find them a home that they can afford. If the client is unwilling to provide you their mortgage details at least stay in contact with their mortgage broker to make sure you don’t sell them something they can’t afford. It is important to either have a strong understanding of the mortgage market or have a good broker who is an available member of your team. Perhaps that’s why they say that behind every great real estate agent is a great mortgage broker.

Naturally I hope  to hear from you if you have anything to add to this post. Have a great week!

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