2/1/24 – What happens if the appraisal is low?

The market has gotten hot over the past month, and we expect things to continue to be strong as we push through the first quarter of the year! We will see some appraisal challenges as the market was slow leading up to now, and we still don’t have a lot of inventory, which means we will be a little light on comps in many areas. We are also dealing with multiple offers on properties and overbids, which will continue until we get more inventory.

In looking at offers, remember that your buyers who are buying with 20% down or more can generally make up the difference in a low appraisal, but the buyers with 3-5% down usually will struggle with that. The 20% down buyer can do 15%-19.99% down and pay PMI, or buy a Lender Paid PMI Policy for a small amount (around $2400 on an $800,000.00 Loan Amount), and the payment will stay the same.

Example: Seller is selling for $1,100,000.00, and the appraisal comes in at $1,050,000.00. The buyer was getting an $880,000.00 Loan Amount, with 20% down. The seller likely does not want to reduce the price, and why should they in this market? Instead of dropping the price, we could pay (The Lender, two agents, seller, and buyer could all pitch in), and the total cost would be about $2900 with good credit! This keeps the buyer’s payment exactly the same and gets the seller exactly what they negotiated, and it costs a few of us a few bucks, but we get happy clients out of it. I am not saying that this will happen on the majority of deals, and I am hopeful that it won’t happen, but with the bidding wars that are going on now, we may run into this issue, and I wanted you to have this in your bag of tricks!

One more appraisal note! We can get an appraisal waiver on our DU with 20% down and a Purchase price under $1,000,000.00.

I am listing one of my properties this week at 22024 Parvin in Saugus (2700 SQ Ft Single story home behind the gates in Circle J Ranch with a pool and a view). I have never done this before, but I work with so many great agents that I couldn’t choose one to list and offend the rest of you. To make up for it, I put 3% in the computer for the buyer’s side commission, and I will do my best to make this an easy process. As a lender, we are stuck between a rock and a hard place when it comes to buying and selling, and I prefer to be open and honest rather than try to hide something. I love you all and appreciate the business you have sent to me and my Loan Officers at Augusta!

Condo / Townhome issues we know of now. Properties can be financed with 10% down and are considered NON-WARRANTABLE:

1. Scenic Hills – Insurance
2. Bouquet Canyon Village – Insurance
3. Madison at Town Center: FHA financing is available with 3.5% down. Non-warrantable loans can be done with a minimum of 10% down until the litigation is turned over to the insurance company.
4. Cornerstone – Insurance
5. Canyon Oaks – Insurance
6. Brookside Walk – Insurance –
7. Shadow Ridge – Oak Park – Insurance
8. Sierra Glen Condos – Insurance
9. American Beauty Condos – The brown ones – Insurance – 50 Mil in coverage for 748 units is not nearly enough!
10. Rainbow Sierra Terrace – Underinsured and voting on Insurance in March! NEW!!!

As of today, the list of condos that are having more severe issues:

1. Mariposa: No Loans until further notice. Yes, people are saying they can do them, and the HOA is pushing people to lenders, and we have all been using the same bank that says no more!
2. West Creek Condos and Townhomes: No Loans until further notice. Yes, people are saying they can do them, and the HOA is pushing people to lenders, and we have all been using the same bank that says no more!
3. American Beauty Village West: It looks like the issue is not Insurance, but they have a reserve issue now! We can do non-warrantable loans there with 20% down! YAY! It’s a start, and we hope things clear up and regular financing will be available in the future.
4. Bridgewater, Emeryville  - Insurance issues
5. Cabrini Villas, Burbank  - Maybe able to do 10% down, case by case! Please provide a specific address & LTV & occupancy.
6. Morada, San Diego  - Insurance issues.
7. Parkwoods, Oakland  - Insurance issues.
8. The Summit, San Diego  - Insurance issues
9. The Met at Warner Center, Woodland Hills  - Due to the project size, we can lend with 10% down on the project side that is on Burbank and Owensmouth. They are no longer lending for the project section on Canoga.

Please let me know if you hear anything new on condos or townhouses.

Interest rates have been better most of the week, but they are flat for the day now. Let’s carry some momentum into February and see if we can’t get most rates with a 5 in front soon!

• 12-day escrows if your buyer is pre-approved - Conventional / FHA / Jumbo / Bridge
• We do loans in all states, so call me with anything you need.  
• Government Loans (FHA / VA) are in the high 5’s and low 6’s
• Conventional Loans up to $765,550.00 are in the low to mid 6’s
• High Balance Loans $765,550.00-$ 1,148,325.00 are in the mid to high 6’s
• Jumbo loans above $1,148,325 are in 6’s
• Bank statement loans - They are available with 10% down again! 8’s and 9’s depending on down and credit score.
• No income qualifier – 40% down with reserves! In the 8’s!
• 0 down loans are in the high 7’s – 660 credit score min right now, up to $740,000.00.
• Private Money lenders - hard Money Loans – 35% down!
• No Ratio Loans 30% down
• Debt Service Coverage loans with as little as 25% down
• Bridge Loans - typically 7.500% with limited fees – and they get you where you need to go!
• 0 down California Dream for all Equity Share – Postponed until February 2024???
• 3/2/1 Buydowns 2/1 Buydowns and 1/0 Buydowns are available at great start rates!

Interest rates are subject to change without notice! Above are LA County Loan Limits.

I am available all weekend if you need anything. Let me know if you have any questions or if someone is interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. Please text (661-714-6258) or email me at Mike@AugustaFinancial.com.

Have a great day and an even better tomorrow! Please call me when you have a client who needs to borrow!