Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
There is a great video circulating on social media that sums up the current real estate and housing market. It’s a parody of someone selling a simple ‘apple’ to the open market, mimicking how competitive it is to buy a house right now. The auctioneer announces: “Okay, people, here’s how this is going to work. I have an apple. The highest bidder is going home with this apple. I want all bids for this apple in the next two minutes, and then we are closing it. Biding starts at $5.00.” The video has gone viral, mainly because it’s an accurate depiction of what is currently happening in the marketplace.
The video shows many “potential buyers” (all played by the same character) frantically bidding for the apple. It quickly goes from $10 to $40 to $100 from various bidders, all adding a different reason why they deserve to be chosen. An onlooker is on the sideline wondering why people are bidding so much for a mere apple. In the end, in a desperate attempt to win the auction, this same skeptical buyer screams, “$120!!” The video ends with this winning bidder mumbling, “why did I do that?!”
No, I am not here to deny that houses are genuinely needed and wanted in this market. Even if you are not in the market for a home, you are well aware of how hot the housing market is, and how prices have sky-rocketed over the past year. Indeed, everyone is now well informed of the “lack of inventory,” which has actually plagued the market for the past few years – and not just a consequence of Corona. Buyers are coming up with aggressive tactics to make their offer stand out, including risks such as waiving their mortgage contingency, bypassing a home inspection – or offering to buy the house all cash and in record time.
What’s really happening is that most “cash buyers” are running to get a mortgage because they genuinely don’t want to buy the house all cash – and that was never their intention. They are sneaking in inspectors, appraisers, contractors – all while alluding to the fact that they are biddable and ready to take the house “as-is.” I have even seen situations where the transaction goes so fast that the sellers try to halt the closing because they don’t even have a place to go. Perhaps the most significant concern in this environment is that more contracts are falling through and getting canceled than in recent years.
For starters, there are many banks and brokers that aren’t equipped to handle deals in this marketplace. They don’t have the appraisers with the local knowledge to get appropriate values; they didn’t truly vet the applicant during the pre-approval process or don’t have the skills to handle a creative and expedited transaction. Perhaps deals are getting canceled because the buyers had a moment to think and decided they acted too hastily in an effort to secure the winning bid. On the flip side, it’s possible that the sellers may become more rigid with contract negotiations because they now realize this is not what they want – and either don’t have anywhere to go or might be holding out for an even higher offer.
I can say with certainty that this is an environment that demands competent and experienced real estate, financial, and legal professionals. It did not take me long to realize that I am in a multi-trillion dollar industry, providing a product that no one wants! In my twenty-plus years working in the real estate and finance industry, never did one of my clients ever say, “please, I want a mortgage.” I understand that my role is not merely to give the mortgage. It is to facilitate, guide, and advise my client to get the home they desire at the right price, the right time, and with the proper guidance.
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