Cliff and I have been up in Tahoe this week enjoying a little R&R in Sarah's sweet little cabin in Homewood (If you can't afford your own vacation property, having friends who are willing to lend you theirs is the next best thing.) It's been a week of hiking, reading, and barbecuing while we do our best to avoid the crowds (and it's crowded in Tahoe). On the heels of a Spring Market that unexpectedly turned the volume way, WAY UP (!!!), I was ready for some down time; in fact, I was overdue (just ask Jill.)
If possible, our dog, Riley, loves Tahoe even more than we do, retrieving sticks until we finally call off the game. A water dog by breed and clearly impervious to the temperature, he can't get enough of the lake, happily bouncing along and jumping emphatically into the cold, COLD water. Given his choice, Riley always seeks out the BIGGEST stick he can physically carry, but just because it's BIG, it doesn't necessarily follow that it's the right choice.
From where I sit (or stand on the beach) the stick has to be large enough for him to see it 30 yards away on the water, small enough for Cliff to give it a good throw, and hard enough that he's not tempted to tear it apart, rather than bringing it back to shore. You wouldn't necessarily think it, but there's an art to finding the right stick (and the right partner; I chose wisely.)
That's true of lenders as well. If you've been in Real Estate for more than a minute or two, every Agent has tales of woe regarding lenders who failed to perform in the 11th hour. With the pandemic continuing to grow, unemployment at record-setting rates, and no clear end in site, many banks have put stricter guidelines in place, no doubt worried that at some point, housing prices are bound to correct (although nobody really knows). That's a fair assumption, given the state of affairs, but as interest rates have never been lower and Buyers are discovering that their current homes no longer suit their expanding needs, we've been experiencing heavy demand, especially here in the East Bay. In short, if the rules have changed with regards to lending, I for one, would like to know.
On Monday morning, I got a text from my friend, Chad Rego, at First Republic Bank.
"Are you up? Do you have a minute to chat?"
"Yes, and yes." (Sleeping in has never been my strong suit, even on vacation.)
Chad currently leads the Republic Relationships Managers' Meeting at First Republic and asked me to represent the East Bay marketplace on a Zoom call later that day with 120+ FRB lending specialists. (I'm honored.) Chad's not only my go-to lender at First Republic Bank, he's the "Deputy Regional Managing Director," my own mortgage originator, and a past client, having helped his family buy a house in Piedmont a decade ago. In other words, when I reach out to Chad, I know he, or a member of his team, are going to get back to me ASAP.
And that's important because besides being challenged by Covid-19 and the MANY protocols that go along with meeting clients in this far more restrictive climate, Agents (and their Buyers) are also having to navigate a market that's essentially gone from two weeks on most listings, down to one. (In many cases, homes are selling off-market.) Put another way, time is of the essence, so whom Buyers choose to align with is more important than it's ever been. More to the point, a clear understanding of lenders' rates and terms can often make the difference between competing offers.
What Chad and his colleagues wanted to know essentially, was: "How do we become better at meeting your clients' needs?" (Thanks for asking.)
The simple answer is . . . better communication!
After 15+ years of selling Real Estate, the underwriting guidelines for loans still continue to baffle me, meaning that even well-qualified applicants will find huge discrepancies from one lender to the next. Moreover, the "underwriter" seems to have a great deal of leeway in terms of setting the conditions for the loan. Consequently, in this new "Covid-reality," Buyers can be fairly far along in the transaction only to have the underwriter step in and deny the loan - despite a pre-approval letter - forcing us to scramble and quickly put other financing in place, or risk losing the property altogether. (That's never a good thing.)
The truth is that ALL loans are "conditioned" upon several action items, including the appraisal of the property, WHETHER OR NOT the Buyer has waived that condition, and WHETHER OR NOT the lender has all but guaranteed the loan via a pre-approval letter. To be fair, the lender needs to establish that the property they are lending on can hold its value given that it is the collateral for the loan.
Lenders ALSO want to know that the the house is in good working order, that CO and smoke detectors are installed, that the water heater has been strapped, that no red flags have surfaced, that homeowners' insurance has been put in place, that the loan-to-value ratio has stayed the same, that the borrowers have remained gainfully employed, and that the Buyers have brought their own chunk of change to the transaction in the form of a hefty down payment. (The percentage required can change from product to product, and from lender to lender.) It's not that the lenders' requirements aren't reasonable, it's that they're often shrouded in mystery, inconsistent at best, and can change throughout the process, piling on one seemingly frustrating request after another. (So explain where the $30 deposit came from . . . Really???)
Still, it shouldn't come as a surprise to any of us that the lender leaves themselves an exit strategy if everything doesn't match up exactly the way they want it to, but unfortunately, it does. (They're the ones holding the big stick.) Nonetheless, whether the clients are buying their very first home, or their last, I think it behooves the lenders to assume that Buyers (no matter how seasoned) benefit from a clearer understanding of the process - as do their Agents. As with all business transactions, clear communication is the key. We're not just looking for the BIG stick, we're looking for the right stick.
To illustrate my point, last month, I helped my Piedmont Sellers purchase a condo in Hiller Highlands with a loan that had A LOT of moving parts. Before this transaction, their last home purchase was in 1972 . . . so imagine just how much things have changed on every front in the last 50 years? (EVERYTHING!)
This purchase wasn't a slam dunk by any means as they are both retired and dependent on social security, but they did own their house outright. It helped tremendously that their lender had a steady hand, a plan of action, a great track record, and open and clear communication every step of the way. Long story short, they got the condo, we quickly sold their house, the down payment was returned to their 401K without penalty, and they'll hopefully live "happily ever after" in their new digs. Did this mortgage broker earn my continued faith and trust? (You betcha.) That very adept gal knows how to throw a stick! (Thank you, Dianne Crosby w/ Guaranteed Rate.)
In the fast-paced world of Real Estate, all lenders, all banks, and all mortgage brokers are definitely NOT created equal. In fact, a great lender can absolutely pave the way, sidestep the hurdles, and deliver the product AS PROMISED so that come the day of funding, it's an easy transition and a joyful experience for one and all, rather than a nail-biting trip down a rocky road.
Buying a home is stressful enough. Securing a loan shouldn't add to it.
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Julie Gardner, has been writing The Perspective for 15 years and has published more than 500 essays. She is also a frequent contributor to the Sound Off column in the Real Estate section of The San Francisco Chronicle.