Our builder had no problems with our contract edits! We signed on April 16th without ceremony. Or fanfare. Seems like there should have been a fanfare.
On the loan front, I found two lenders that had a “one time closing” to lock in an interest rate up front on both the construction loan, and the permanent mortgage it rolls into. (Today’s rates will only go up.) I let them know they were in competition. One lender is a good acquaintance and gave his best offer first and I thought we were done! When I told the other bank thanks but no thanks, they decided to play ball and managed to beat the other offer. 3.5% is pretty amazing!
The lender is attempting to expedite the closing by request. (Our builder has had the subcontractor quotes for a while. Those expire.) So a little over a week later our APPRAISAL comes in and it’s LOW. Lenders will only finance the amount for which a 3rd party appraiser thinks they can sell it in case the buyer defaults.
Predetermining a specific dollar amount for what a house will sell involves, in my father’s terms, smoke and mirrors. And to further paraphrase him, the appraisal is likely influenced on whether the appraiser got any action the night before. I’m inclined to agree. Without a suitable comparison property within our neighborhood (probably the largest factor on value), the nearest comp given was a town home 4 1/2 miles away. The second comp was another town home in the same neighborhood, and the third is 14 miles away. Adjustment factors are given to make up for differences between those homes and ours to make it all seem wonderfully mathematical (i.e. indisputable).
Our house was listed as ‘traditional‘ as were the comps. Wait. What!? And with a detached garage. What? WHAT!? And their postage stamp lots (think town homes) were determined as equal in value to ours because they are in a gated community. Furthermore, items such as landscape features, thicker/better insulated exterior walls, and hardwood/bamboo throughout aren’t even factored. (The market is incurably hung up on square feet, number of rooms, lot size, and basics like a fire place, but not quality, design features, performance, or uniqueness. That’s changing as evidenced by the downsizing trend, but Indiana is always the last to these things.) Sales in our immediate area have varied wildly between $120,000 and $425,000 telling me that a definitive prediction of market value is flushable. But it’s part of the system and the game we have to play.
Our two options with a low appraisal, I was told, are to dispute it (and the banker has never won an appraisal dispute) or to come up with more cash. We are not happy, but after scrounging and digging deep, we were fortunate to come up with more cash. We’ll see how smoothly closing goes.