In a bid to get a leg up on the competition, Better Mortgage is allowing prospective home buyers to get an appraisal on a property before actually making an offer.
Ideally, this gives them the power to go head-to-head with all-cash buyers, who are often favored because of the relative risks involved with obtaining a mortgage.
One of those risks centers on the home appraisal, which may not come in at value. If it happens to fall short of the purchase price, the buyer and seller would need to renegotiate, and it’s not always a positive outcome.
How the Pre-Offer Appraisals Work
In a nutshell, Better Mortgage has so-called “appraiser panels” in select markets, which are made up of independent local appraisers or Appraisal Management Companies (AMCs).
Like other home appraisers, they will visit the subject property, inspect it, and provide a value. The difference is that they come up with a valuation range, not a specific home value.
Once the home buyer executes the purchase contract, the same appraiser will return to the property and complete the appraisal, fine-tuning the valuation as they would on a normal appraisal.
They are basically at the ready if and when a prospective home buyer is interested in making an offer. Per Better, they were developed to ensure “aggressive timelines” could be met so borrowers relying on mortgage financing could “win and close on a home.”
In effect, a borrower can elect to waive the financing contingency, if they so choose, to improve their chances of competing with all-cash home buyers, or even other offers where mortgage financing is required.
The company provides guaranteed financing to a specific price or they will repay any earnest money lost by the buyer.
The idea is to level the playing field somewhat so anyone can make a competitive offer on a home, even those who need a mortgage to get the job done, which is most of us.
Where It’s Currently Available
At the moment, the appraiser panels are available in seven housing markets nationwide, in places where buyers are waiting weeks to get an appraisal.
They include Alameda, CA, San Diego, CA, the Denver Metro Area (Arapahoe, Adams and Denver counties), Atlanta, GA, Hudson, NJ, Austin, TX, and King, WA.
As you can see, these are all very competitive housing markets, where quality inventory is scarce and home buyer traffic is high.
“In many cities, bidding wars are growing and becoming more competitive each year. The Better Offer helps borrowers compete and our appraisal panels help make that possible in select markets,” Vishal Garg, CEO of Better Mortgage, told The Truth About Mortgage.
“We help our customers understand how much they can borrow and how much the property is worth, empowering them with the knowledge and certainty at the negotiating table. The Better Offer truly brings us one step closer to an equitable, open market.”
To complement the pre-offer appraisal, prospective buyers can also get a so-called “verified pre-approval letter” from Better, which actually requires a hard credit pull and the uploading of financial documents, such as tax returns, paystubs, and bank statements.
Potentially Close in as Little as 14 Days
Once an offer is accepted by the seller, Better Mortgage says it has to the potential to close in as little as 14 days.
For the record, if a buyer gets the pre-offer appraisal completed, but doesn’t get the home, Better will absorb the cost. However, the company believes it’s competitive enough to make that investment and retain the customer once they find a different property.
Part of this has to do with the fact that they don’t charge lender fees, such as a loan origination fee, because their loan officers aren’t paid commission.
As for the cost of the appraisal, Better says it will never charge more than $500, and if the appraisal fee is lower, they’ll refund the borrower the difference. If it’s higher, they’ll absorb the extra cost.
Borrowers who take advantage of the appraiser panel will not pay an extra fee beyond the typical cost of the appraisal.
As always, be sure to shop around and compare lenders of all different types to find a suitable match.
While Better Mortgage seems to be offering some unique incentives to go with them, it’s important to gather quotes from a variety of lenders to determine who can offer the lowest mortgage rate with the fewest closing costs.
And perhaps more importantly, who can successfully get you to the finish line in this competitive market.
Read more: 11 tips for buying a home in 2018