We hear so much talk about buyers being pre-qualified or pre-approved, but what about pre-qualifying the house that is being sold.
I was inspired to write this post after reading a post and its comments that was written by Valerie Osterhoudt. ~ FHA guidelines are making it hard to keep deals together ~ She talks about a home that she is trying to sell and just came across another change to FHA loans because the buyer was qualified with a FHA loan. The key point in this conversation was that "everything was going smoothly until ...." Until the loan was being processed after the appraisal was done. Read the article that Valerie wrote in order to get more details. (ps - The issue mentioned in the article is also an issue for USDA loans - Just food for thought)
What I wanted to bring up is that some of these issues can be addressed prior to a buyer accepting an offer. Not everyone can remember every detail when it comes to what is allowed and not allowed, no matter what type of financing the buyer is obtaining. Let's take a look :
Why can this be such a great idea?
You could get a true expert that would know many of the lending guidelines when it comes to appraisals. If one would suggest an appraisal, I would make sure that appraiser is approved to do FHA appraisals also. And have this person view the home from all angles. Some of you might think about just hiring a home inspector. My advice would be to hire an appraiser.
The second idea would be to list the issues regarding the home being sold and not hide them from prospective buyers. Hey, I have heard many types of stories. My main point, if you know about it, make it known to everyone.
Lastly, get your loan officer involved with the issues. Have them run it by their underwriter. I would suggest all things that aren't ordinary within the surrounding area. Valerie's story is a perfect example, because it was well water. Another is that Erica Ramus just listed a property and asked me if this property would be okay for specific types of financing.
Wait, I know many will harp because it would be another cost to the seller when trying to sell their home. Maybe $375 to $500. How could a realtor explain this cost to the seller?
- The listing agent can sell it as the cost of selling the home.
- Split the cost with the seller when trying to win that listing or pay for yourself.
- Have the buyer pay for the cost within the sales price.
Reminder : Throwing caution to the wind. Some of you will think or sell the idea that the appraisal could be used by the new buyer. I would not recommend this at all. To many new appraisal rules on how appraisal should be ordered and or the time period in which an appraisal is good.
Summary : The ending result, how about being pro active. Market yourself aas the problem solver prior to unexpected problems, and not just keeping the fingers crossed. If you get resistance from the seller, use Valerie's story as an example.
Times have changed. Be ahead of those changes before you find out the hard way. It's easy to criticize after the fact, asking why certain loans are tougher on certain issues. This is another reason why FHA loans sometimes get a bad name. But a few things to keep in mind. As I mentioned, Valerie's issue is also an issue on USDA loans. And do you truly know what is the better loan for that buyer? That a conventional loan could be more expensive than a FHA loan, even with decent credit scores?
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really important to stay close to your loan agent, gettting them involved and staying informed. Thanks!
Jeff.. Thanks for mentioning my name and blog. The reason why my seller did not do any of this up was due to being a senior and needing all the money she can get. It truly is a hardship for her, and she was hoping the buyer would go for a conventional loan.
Realtors for both the seller and buyer should contact mortgage experts (like yourself) should they have any questions.
SHANNON... . I think the loan officer should be included, even with the sale of the property. Don't just think of us as helping the buyers.. thanks
VALERIE... . I can understand that the seller might be tight. Just food for thought, that the realtor could pay for this and get reimbursed from the sale of the home. I know realtors don't want to put money up front... but we sometimes do it on the lending side.. actually, on many occasions that add up.. and yes, realtors should contact a good loan officer. And my pleasure in mentioning your post. It allowed for some thought provoking conversation. thanks
I could see how a good agent could use it to get more listings. Well there is the debate as it plays out in my head.
I have a condo listed for $29,000, clearly it is cost prohibitive in that case, and obviously distressed sellers are out unless the Realtor picks up the tab
Hi Jeff. I have an appraiser in my office and we offer pre-listing appraisals to our sellers. They can pay her up front, or at closing. She will update the appraisal every 3 months if the house doesn't sell quickly. Most sellers choose not to take advantage of this.
PS--let me know if you can finance that property so I can tell the buyer. I have a buyer already.
Jeff, A knowledgeable lender we trust is imperative in our business. As agents we should have a decent amount of knowledge ourselves when dealing with listings as to what problems may arise. You said it all here:
"how about being pro active. Market yourself as the problem solver prior to unexpected problems"
Bravo on the post my friend!
DANIEL... . I think an agent could even add more to their services if they talk about this or bring it up to the seller. And I know there is a debate out there about this, and would love to hear more opinions from other realtors.. or for someone to write about this, opposing this idea. thanks
ERICA.. . I think that is a great idea... and I can see why many sellers would not jump to this opportunity, but regarding those unique properties... or properties that need work.. or might be lacking something that a lender or agency would want the house to have. And yes, I will let you know tomorrow about that property.. thanks
COOP.. . why not ask a trusted lender/loan officer when listing a property... especially if you know the property has an element that might not be so common in that area or neighborhood. And thanks for the polite compliment. Just hope more see this post.
Jeff. That is wonderful advise...Hope you are doing well
HelpfulHannah
Excellent stuff there Jeff! I concur 100%!
Hi Jeff, I like the seller's appraisal. Its pretty much on the same lines as a seller getting a home inspection done. Just like with anything else, a seller willing to go the extra mile when listing their home for sale -- whether it be my getting a home inspection, an appraisal or even pricing it correctly, is a motivated seller.
Jeff, I have had sellers get appraisals first. I give them the names of 3 good ones. Tell them to call and pay for it.
Then I also tell them that I will credit that back to them from my commission at closing.
I do it when a seller has an over inflated price about the comps I did.
Or a unusual property.
I need one seller to do it NOW!
I ask them to pay for it and hire one because I want them to know I had NOTHING to do with it, their appraiser, their money.
HANNAH... . thank you very much for the polite compliment... and I hope all is well with you also. thanks
PAULA... . thank you for the polite compliment. Wish the AR gods would think the same.. ;o)
GINA... . yes, I hear some that suggest home inspections... but not all home inspectors know the lending guidelines and such... and the fact that the appraisal could help determine the value ahead of the game.But yes, it definitely has to do with a motivated seller. thanks
MISSY... . thanks for sharing this... probably another reason why you are successful, because of what I know, this would be common sense in many cases. And some realtors say that their clients flat out say no to this or other suggestions. Why don't these same realtors throw it back in their faces and say.. "why did you chose me then? I highly value my advice..."... and not just walk away from a stubborn client. Just my opinion. thanks for sharing yours...
Pre-list inspections are a good idea too! Last year I had a standard seller that got a pre-list inspection - fixed everything and then when the real inspection came it was VERY VERY minor stuff!
Jeff,
One of my sellers just alerted me to your fine post because she has a well in an area where FHA loans are most common. The home HAD been through an appraisal for an FHA loan but that buyer then backed out. (Before I listed it, of course!)
Jeff - You couldn't be more right. In fact I listed a house about a week ago, refraining from listing it as FHA / VA approved. Seller wanted to know why I wasn't including those types of loans... "bare floors, broken glass (doors & windows), and exposed wires" for starters. Knowing at least the "basic" FHA guidelines will certainly prevent a lot of grief down the road. The house is already under contract and I didn't have to go through any unnecessary "grief". Great post.
IMPORTANT SUBJECT that might take place by midnight tomorrow night...
Possible government shutdown could affect FHA loans & USDA loans
Jeff, you are dead on. A lot of times when the property fails to be approved, the loan officer is looked at as the problem. The LO has nothing to do with the property. We had a seller who has a newly built house that hasn't been CO'd yet due to not wanting to pay taxes on an improved property. The seller didn't want to CO the property until the client was guaranteed to close (FHA). We are at that point and low and behold, the seller built a house in a flood zone (no-go) and put in a well & septic with city sewer and water being available. Appraiser made note of such and you guessed it. The seller has to hookup to city water/sewer and has to make a request to FEMA for a flood zone variance. The seller is also a realtor and the buyer's realtor.
Your suggestion of an appraisal before listing would have been a huge help.
RENEE... . I would think so... I guess just getting the seller on the same page is the key point. thanks
IRENE... . really? How cool... I wonder how she found me. Was it my post here on AR or this post on my outside site.. Attention Sellers - Is your home approved? - thanks for sharing this and good luck with that home.
DIEGO... . good call, considering you know the basics regarding FHA loans... the seller was good to have you as an agent. And thanks for the kind words and for the polite compliment.
Jeff: Great thoughts as usual. With everyone scrapping for every deal these days, it pays to have a game plan that will get the deal closed. Thanks again!
I am Irene's seller and I found you on Active Rain right here. I'm educating myself by reading all these posts and trying to be the most cooperative and knowledgeable seller I can be.
Yay! Congrats on the feature. I just had a buyer yesterday that was arguing with me about a home they want to make an offer on. I was showing him ALL the reasons why the lender would say NO (and it was a sold as-is property). I thought i"d never get him to listen. Finally, I told him it was his waste of money for inspections and appraisals and that if he wanted to waste it, I'd be happy to write it up for him, but not to gripe when it wasn't approved, lol. He decided to "think about his house". Ha!
It is important when working with either buyers or sellers to have an idea of what kind of financing will work with the property that is under the microscope. For instance, our team has just signed a listing for a condo. It is in a complex where the non-owner occupancy % is high. The HOA monthly dues delinquency is over 15%. The HOA is in litigation. What kind of financing will the buyer of this unit bring forth? You should all know the answer.
On the other hand, financing is not the only thing we need to keep in mind. I have a buyer who wants to buy an investment property. Within the price point that we are working that probably means a condo or townhouse. In addition to guidelines for HOA delinquency, owner occupancy ratios and litigation, did you know that many HOAs have rental restrictions? It would be very painful if my client was able to get financing, closed her purchase and then discovered that she could not rent the unit without violating HOA restrictions. It would not be quite as painful if the client reviewed the HOA paperwork that is obtained during the escrow period (at a fee that is as much as $500+ these days) and found out about the restrictions before closing the transaction. Of course, the timing is such that it is highly likely that inspections and appraisal would have been done by that time. Cancel the purchase and kiss off about $1,500 in fees!
Jeff - My first thought as you mentioned this was that the buyer would not be able to use the appraisal because of the rules. I see more of an issue with regards to distressed properties.
Jeff, I agree that we can differentiate ourselves from the competition by being problem solvers. and I agree with Missy that there are some sellers who are hard to educate. Like Missy I have recommended that a Seller choose an appraiser and then agreed to reimburse the costs of the appraisal at COE. If I can't convince them of the fair market value of their home and they refuse to hire an appraiser then we agree to disagree and then go our separate ways.
JIM... .not many loan officers even see the appraisal when it comes in. That is why we have loan processors. When it is reviewed by them, usually any issues will be brought to my attention. And definitely when the underwriter underwrites the appraisal. I know loan officers are the point of contact, but there are more pieces to the mortgage puzzle. It kind of cracks you up to when people attack loan officers for various reasons. In regards to your seller... sounds like a little mess and I hope it all works out for you and the seller. And thanks for the polite compliment.
PAUL... . I always believe in a plan and I think more of us need to focus on back up plans... and thanks for the compliment.
MARGE aka Seller... . that's awesome... I am glad that you are trying to learn some things, to educate yourself and such.. Irene is a great agent who I have gotten to know over the years and have met, so you are in good hands. I hope you found this post helpful. thanks and thanks for the comment.
COOP... .glad that buyer finally listened to you... because if they were going FHA and it needed tons of work, there are only 3 solutions... the seller fix it... the buyer fixes it with his cash prior to closing... or a 203-k loan or a conventional program like the 203-k. And thanks regarding the feature... it was an early b-day gift I guess. ;o)
BRIAN... . thank you very much and for the polite compliment.
JOHN... . I think realtors need to focus on both the buyer and seller when it comes to financing... hence why I decided to write about this. And you bring up an excellent issue that I didn't really tackle in this post, regarding condos. But I have written about this before, that listing agents, when listing a condo, need to do their homework before taking that listing... excellent point. thanks for the input & feedback.
CHRISTINE... . are you saying, regarding the appraisal thing that I mentioned, that you see this more of a problem with distressed properties? Just trying to follow along.. thanks
GEORGE... . trust me, even though I am not a realtor, I can certainly see where it would be hard to convince some sellers on this idea. And you make a great point, that at times, it's best to walk away then. thanks for the feedback.