The difference between national or online banks and local banks.
I've personally worked with (or at least tried to) national and online banks, as well as local banks in my own home buying journey.
When we bought our first house…
I was not yet a real estate agent and my partner and I had no idea when we were doing. We stubbornly rejected our own agents advice to work with a local bank, because the rate we secured with an online bank was .25% lower. In hindsight, I would have paid many percentage points higher on the rate for a better experience. The online bank was VERY slow to get us to the closing table. Emails went unanswered, underwriters did not act with urgency - we were totally in the dark until the clear to close popped up in our inbox from an automated address. Not exactly personal or efficient. Luckily, the appraisal was exactly at asking price, however this is not usually the case. Online banks tend to appraise homes, especially second homes, lower, because they are not familiar with the local market. While we eventually made it to the closing table, I would never use this online bank again.
I’ve mostly blocked this experience out of my brain, which is why this portion is so short. Learn from my mistakes, avoid the guesswork and lack of personal care at online banks.
Appraisals from national vs. local banks.
A few years after we purchased our home and made a lot of updates ourselves, we decided to take out a HELOC (Home Equity Line of Credit) to complete some of the larger price tag jobs on our list. The timing was right: we did a ton of cosmetic work and the market had seriously exploded. We had a hunch the price had doubled in value and we could capitalize on that opportunity to borrow against the equity we had now gained. This is were the national bank comes in.
After doing some research, we found that a particular large national bank had the best rates for HELOCs. Getting a HELOC is similar to buying - there is an appraisal, underwriting, and a closing. After applying, we got a call from a “photographer” to schedule an appointment to take photos for the appraisal. A random person showed up, took the usual photos of the house, and let us know she would be sending them in to “the service” and we’ll hear back soon. We had no idea what she was talking about.
Too many weeks later, our appraisal shows up LOWER than what we had paid for the home pre-renovation and market upswing. Why? The appraisal service (based in Wisconsin, with no idea what the market is like in Upstate NY) had used the geographically closest 2 bed, 2 bath homes that were not at all similar - literally they used a manufactured home, a serious fixer upper, and a very dated cabin as comps.
We were overly frustrated at the time wasted at this point, yet the sunk cost fallacy got the better of us, so we countered using relevant comps. Long story short, they would not come up in value, so we walked away.
Queue the local bank: Ulster Savings. Minutes after submitting the application, we got a call from an actual appraiser to schedule an appointment. A quick week afterward, the appraisal came in at more than double what the national bank said. Within days the underwriter completed the paperwork and we had our HELOC for way more money (and way less headache) than what a national bank offered.
This example applies to a mortgage, too. Across the board, local banks are always better at valuing properties, which is beneficial for the buyer.
Buying our second home…
After the HELOC fiasco, we knew we would never go national/online again. We worked with Ulster Savings on an Adjustable Rate Mortgage (ARM) since the rates were climbing and this allowed us to secure a much better rate for 7 years. The appraisal on our new home came in HIGHER than our above asking offer, amazing news! And, no, you do not pay more if the appraisal is higher. Our originator was updating us weekly on the status of our loan, making it an easy ad personable experience. We were quickly cleared to close and on our way.
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