Being a Realtor in Austin, or anywhere, is an interesting and rewarding profession. And often frustrating. It’s a profession where the two most visible components of the job – the screwups and the easy deals – are what the public sees the most. On the back-end though, there is a lot going on that is not visible and sometimes remains unknown to the parties because the agents just take care of it. Still, a lot of deals crater because of problems. Some for good reasons, others that could have been saved with better efforts and more tenacity, but were not because the seller, buyer or the agents involved were not able to find resolution and solve the issues (or emotions).
Thus, real estate transactions in Austin are often much more difficult to complete than most people realize. I’ll use two of my recent buyer closings as examples.
Example 1 - Underwriter Wants a Paystub
Buyer moving to Austin for new job. Solid credit, income, etc. Years of industry experience in the same profession as the new job. We go through pre-approval, get the lender letter, find a house, get it under contract, then find out the lender actually can’t do the loan until the underwriter has the first paystub. A signed employment contract is not good enough, it turns out. It use to be, so now I know.
I argued this with the lender from every angle I could think of, tried different lenders, but that’s just how tight things have become, even for good, quality buyers. Since the new job wasn’t going to start for several months, and the old job income couldn’t be used because he was leaving, this catch-22 meant buyer had to drop that deal.
So, end result, instead of finding a home to move into prior to the relocation, buyer would have to come to Austin and bunk up with family, start the job, then find a house.
Fast forward 3 months. Buyer starts new job and is bunking with family. We find new house and get it under contract. First paystub is short, because, well, it’s the first paycheck and is for less hours. The lender’s underwriter doesn’t like this. Wants to see a “full” paycheck. Logic and common sense is irrelevant. The deal seems like it could actually crater or have to be postponed. We never like to add time to a deal. Time is our enemy. We want things to close on time, as agreed. Ultimately additional documentation made it pan out but not without a lot of effort.
Underwriters are really, really picky lately. This is hurting the market as underwriting has over-corrected from the boom days when anyone who could fog a mirror and tell a lie could get a loan. Today, well qualified buyers are being thwarted, or run through the ringer. It’s really unfortunate.
Example 2 – Appraisal Comes up Short
You’ve probably heard about “short” appraisals. This is happening more and more in the Austin real estate market as some areas are experiencing steady price increases. Appraisals generally lag the market. On this particular deal, I had the home (my listing) under contract pre-MLS for full list price of $175K. My seller paid $168K in 2008, so $175K in a rising market was the right price, and we all knew it (buyer, seller, agents), thus the contract price.
The FHA appraisal came in at $160K. Oh brother. At first I thought the other agent was joking when he called to tell me. “Am I being punked? $160? Surely this is a joke”.
It wasn’t a joke. I had the other agent send the sales comps being used by the appraiser, so I could investigate. Sure enough, these dud comps stunk up our deal bigtime, and undervalued the home. Both me and the other agent knew the contract value was good, but we didn’t have any recent comps to prove it. This happens sometimes. There can be “holes” in the recent sales comps, but experienced agents “know” the value of homes in certain areas. The fact that it was snapped up pre-MLS confirms this, but is NOT a fact that an appraiser can use.
So I started looking at the Pending sales to see if there might be some “comps in waiting”, so to speak. There was one which would support our value which had gone Pending 45 days earlier. Surely that one would close soon. Found another one that was 30 days Pending. That one would work also, provided the contract price was close to list.
The other agent contacted the listing agents on both Pending listings. One home had actually already closed and the agent just forgot to change it to Sold status in the MLS. Done. One down.
The other was closing very soon. The appraiser agreed to hold off on final appraised value and review these new, more recent comparable sales once the second one closed. Still, after all that, he still only came up with $170K.
This is when a buyer and seller have to decide if they want to make the deal work or not. Buyer gave up some of the closing costs built into the deal. Seller gave up $1,400 in net proceeds, and it was worked out.
It would have been a gamble for the Seller to try to find a new buyer and a higher appraisal. FHA appraisals stick with a property for 6 months, so he would need a non-FHA buyer in a neighborhood where most sales go FHA. The buyer didn’t want to start from scratch either. So compromising made sense for both buyer and seller.
I was lucky to have an experienced, capable agent on the other side of the deal who was able to walk the careful line of interfacing with the appraiser without seeming to try to “influence” or “puff” an appraisal. This is a delicate task. Remember, puffed up appraisals contributed greatly to the real estate bubble and bust nationwide not that long ago.
Realtors are in fact allowed to talk with appraisers, ask about the comps used, offer additional information about which the appraiser may not be aware, etc. In this case, we had real, verifiable information that the appraiser agreed would change the value if available, and indeed, he wanted the home to be given the proper appraised value. Lucky, again, he wasn’t one of those “Little Napoleon” appraisers who get his chest hairs all standing on end when the appraisal is questioned. Had that been the case, there is still formal appraisal appeal process, but that takes time and more effort.
Both of the above deals, in addition to everything I described, also included the typical other “garden variety” hiccups and inspection issues on top of the bigger problems. But we’re use to those and they usually don’t kill a deal, if everyone is calm and reasonable.
Finally, “luck” is very important, as is patience and tenacity, when trying to salvage a deal that takes a wrong turn. It only take one difficult person, whether the buyer, seller, agent, inspector, appraiser, lender, buyer’s mom, etc., to make resolution even harder to achieve. When everyone works toward the common goal of a successful outcome, and egos and emotions don’t cloud the process, even the toughest deals can be worked through to completion.
What I tell every client, both buyers and sellers, is that “something is going to go wrong, or not as planned with your deal. I don’t know what it is yet, and hopefully it won’t happen at all, but when it happens, we’ll deal with it and get through”.
And that’s usually what happens.