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Comment by yardie | Hacker News Reader

Banks are conditional and have 30 days. Cash offers have no conditions, literally sign, wire money, and hand over the keys. Conventional loans, backed by HUD, need to go through a process. Because ultimately it's HUD who owns these loans and they are, well, slow as any government bureaucracy.

Before these times, cash offers came with a slight 5-15% discount because of the convenience and speed. Now, cash offers are overbidding other cash offers who are overbidding conventional loans. This happens in the hottest markets; South Florida for example.

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It's not just convenience and speed. In hot markets, the appraised values can't keep up with market prices (since the comps are a half year old). If the buyer doesn't have resources well above the minimum to make up for the difference between the appraised value and the sales price, it's likely a loan cannot be approved. Before 2009, appraisers would just appraise at the sale price because the real estate agent that hired them wouldn't hire them again if they didn't.

>Before 2009, appraisers would just appraise at the sale price because the real estate agent that hired them wouldn't hire them again if they didn't.

Appraisals are made by the lending institution. That would be a very obvious conflict of interest otherwise.

Most mortgages are made by mortgage originators who resell them. If I remember how it worked before the crash, the agent, mortgage originator, and title agent would work together to make the deal happen. There were some kickbacks. The mortgage originator would hire the appraiser directly. Now the appraiser is assigned by a 3rd party, with one consequence being that appraisers generally don't know the nuances of local markets and are unable to properly price in a hot market.

Where I am, the appraisal gap is is ~18% of the sale price. So the houses are listed at ~$450k, get 12 offers for ~$530 in 36 hours, and get appraised at ~$450. Such is the competition, that buyers have to just pay the gap outright, turning the 20% downpayment into the appraisal gap.

Insane when you consider South Florida's future with sea levels. Some geologists think it has less than 50 years to go. https://www.newyorker.com/magazine/2015/12/21/the-siege-of-m...

As long as the problem is 30+ years away most banks don't particularly care about sea level and water table rise. On a 30 year mortgage they will have recovered their money. Now, when it's 10-20 years out that's when you'll see banks being more cautious. And by then it will be someone else's problem.

> Banks are conditional and have 30 days

Depends. The new timeline is ~20 days to close in this market. Banks are getting huge pressure to up the tempo. Interest rates are so low that an extra 0.5% is worth it for the faster close.

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