I have been in real estate for more than 20 years, and at this point, there isn't much I havn't seen or at least heard of when it comes to lending, appraising, and closing a real estate transaction. But, as a sign of the rapidly changing real estate times, I was hit with a new problem the other day.
My seller accepted an offer from a buyer using a 100% financing program through Fannie Mae. Because of the general sense of panic about the current real estate market, evidently, Fannie Mae has decided to take it upon themselves to decide where it may be risky to lend to a buyer. Now, this happened in an area of our fair city that has experienced enormous growth in value. It even continues to be a profitable area in these uncertain times.
As a result of the designation "potential declining market" from Fannie Mae on this listing, we had to order an appraisal that was required to meet a fairly extensive set of conditions, or the buyer (who obviously doesn't have any cash--100% financing) would be required to put an additional 5% down in order to obtain the loan. This is determined solely through the discretion of the underwriter, as far as I understand. So, even if your appraisal comes in at value, a panicky underwriter can still kill the deal.
I understand the rationale behind the Fannie Mae policy, especially when lending to buyers who will not have instant appreciation or down payment equity in the event of a defaulted loan. However, I will certainly be more cautious when examining offers on behalf of my sellers that are Fannie Mae.
Keep your fingers crossed for me; our appraisal came in $13,000 over value, but we are at the mercy of the underwriter. And, keep your eyes open--these are indeed interesting times in the real estate business!
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