Jacqueline Schafer, a first-time home buyer, purchased an apartment in Cloverdale in May with a closing date in early August. But by the time her bank completed the appraisal 10 weeks later, the value of her property was less than what she agreed to pay, and she only had a week to come up with the difference needed to close the deal.
It’s a cautionary tale as buyers and lenders grapple and adjust with rising rates and falling values.
Other brokers and brokers not involved in the Schaffer purchase agree that it is unusual for a lender to take such a long time to request an appraisal after accepting the offer.
“A valuation should have been requested at the time of purchase, particularly in an environment where it was clear that prices were starting to come down and interest rates were going up,” said Vancouver real estate agent Steve Saretsky.
But another said that with the market downturn, banks and other lenders are warning not to act too fast.
“It’s certainly not normal for a bank to take 10 weeks,” said Mayor Arora, a real estate agent in Surrey. “However, I do note a delay and a slow response rate for banks to do assessments and provide approvals.”
He believes that lenders want to make sure that values won’t go down by double digits because that puts their loans at risk.
Schaefer, 25, bought the condo on May 9 for just over $326,000, put in $65,000, or 20 percent, and is looking to close for three months on August 4.
She said her agent at Prospera Credit Union in Coquitlam did not order a full assessment until July 19. He replied in an email that he believed the evaluation had been requested a long time ago. Then he went on vacation between 12 and 19 July.
On July 28, Schafer reported that the full appraisal returned $310,000, meaning her holdings were worth 5 percent, or $13,000, less than she agreed to pay the seller in May, and that she needed to come up with the difference with less than a week even. closing date.
In the end, to close the deal this week, I hastily took out the credit union’s offer of a $13,000 line of credit at an interest rate of 4.75 percent, up from the original 3.78 percent. At first it gave her a much higher rate of 6.7 percent for that amount.
The credit union also let her keep a $2,000 promotional cash bonus even though her mortgage is now technically less than the eligible amount, and he tossed four random gift cards to Canadian Tire, Starbucks, and Home Depot and a gas card worth $175 in total.
Without disclosing specific details, Prospera’s director of communications, Michele Jani, said the circumstances in the case were unusual.
She said Schafer made the offer without any issues, including the issue of financing, “which is inconsistent with her prior approval and puts the purchase at risk.”
“The process took longer than usual, but with the market down in recent months, there was still a difference in the price I offered (well above the asking price) and the valuation (whether done in June or July).”
Schafer said she got pre-approved for a $375,000 mortgage and offered $326,000 for the apartment, which was asking for $280,000.
“Everything in the market was going above and beyond the asking prices at the time,” Schafer said.
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Schafer’s mother agrees that no one can control the market, but she asks what accountable lenders should do to homebuyers in this type of market.
In early July, the MLS record price for all properties in Greater Vancouver was still higher than it was in 2021, but many median rates, which give more of a real-time glimpse, have been dropping since spring as interest rates rise and the market responds. with fewer sales.
“They say they are not bound by when to order it, but we have emails realizing that they were aware of the (market) downturn and it was still out of order until 10½ weeks after her offer was accepted,” said Vanessa Schafer.
She is proud that her daughter was able to make a purchase in this expensive area, working and saving $65,000 on her own, “without a penny from anyone else,” while living at home and paying a small rent.
“I hope to draw attention to this scenario so that other homebuyers are fully aware and their dreams are not lost away, and that banks are more responsible for the actions they are expected to take.”
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