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If Financing Options are Not FHA Nor VA
A few of my Sacramento home sellers have elected not to advertise their homes as available for sale with FHA nor VA terms. In other words, they want a cash or conventional offer. Apparently, this either sounds like a foreign concept to some or they just don’t care and will submit an FHA offer anyway, hoping the seller will change her mind.
After watching a few sellers lately reject FHA offers in hopes of a conventional or cash offer, I thought that it might be better to be completely upfront about the fact that some sellers don’t want FHA or VA. There is no point in listing a home for sale in Sacramento with FHA or VA terms if the seller plans to reject those offers in favor of conventional or cash. Because odds are in the seller’s favor, especially in this Sacramento seller’s market, that she will receive a conventional or cash offer. It seems the fairest and most effective way to honestly advertise a home is to eliminate those types of financing options from MLS when the seller doesn’t want to accept those types of offers. We don’t want to mislead a Sacramento REALTOR.
I realize some agents believe that agents routinely fail to note FHA or VA as financing options in MLS when they really meant to do so. This means that agents think other agents make mistakes. Sometimes, they do. But the odds still exist that when FHA and VA is not noted, then it is not available for that property.
I’ve had buyer’s agents call and try to talk me into accepting an FHA offer. They are relentless. They will write emails, too, and go into great detail all about the strengths of their buyer’s FHA offer, explaining what their buyer is willing to do in the event there are funding conditions, and they won’t take no for an answer when the answer is no.
I feel like saying: Read my lips. No, the answer is no. No FHA and no VA and no exceptions. I realize the market is tough for buyers, and that’s why I believe it is more important now than ever to accurately advertise a home and to not mislead buyers into thinking they have a chance to buy that home if they do not. I am not obligated to explain my seller’s reasoning when the answer is no. It’s just no. Accept it.
If you need a Sacramento real estate agent, call Elizabeth Weintraub, Broker, #00697006, with JaCi Wallace at RE/MAX #00773532 at 916.233.6759.
How to Avoid a Bad Mortgage Lender in Sacramento
You can reduce chances of getting a bad mortgage lender by staying local to Sacramento.
If you’re working with a bad mortgage lender, you probably won’t realize it until your file is submitted to underwriting and rejected. Because bad mortgage lenders, bless their little inexperienced souls, don’t generally mean to screw up your loan; you know, that’s not their intent. They should know the terms for which your loan will get rejected, but often they don’t. And to be even more objective, sometimes institutional lender guidelines allow for exceptions that mortgage brokers might not.
Let’s take Wells Fargo for example, just because that has been my most recent experience. As a top producer listing agent in Sacramento, I don’t work with Wells Fargo loan reps very often because most homebuyers in Sacramento choose to obtain their loan through a mortgage broker, and not a big box lender. They don’t like the impersonal service and mistakes they often obtain from big box lenders. Lenders all charge about the same rate. While you’ll always get those buyers who would throw their grandmother from the train to save 1/8% in rate while forgetting what happens when they bend over to grab the bar of soap, all the available lending money is pretty much the same big ol’ bag of money.
Still, I called this bad mortgage lender in San Jose when the first 3 weeks went by and my Sacramento seller’s escrow showed zero signs of closing. Let’s call that loan rep Dick, short for you know what. Dick explained the buyer could not qualify for a conventional loan because he had a short sale on his credit report from 3 years prior. The underwriter threw out the file. When I deal with these situations with our own buyers, we walk the file through underwriting for underwriting approval prior to even looking at homes, because conventional lenders are not required to make loans to people who had a short sale, and . . . the waiting period is 4 to 5 years, not three years.
In my opinion, this loan should never have been submitted for conventional financing due to the short elapsed period of that previous short sale.
But Wells Fargo did not disclose the short sale dilemma to us and, in fact, could not close this loan. I asked Dick why he tried to close a loan that did not fit guidelines in the first place. Because they make exceptions, he said. How many times have you gotten an exception? I pushed. A bunch of times. How many times, Dick? Would you say 10 times? Have you received exceptions 10 times? Well, yes. I don’t believe it. I’d say not only is he a bad mortgage lender, but he’s a liar, too.
The second time around, Dick at Wells Fargo suggested an FHA loan. FHA short sale guidelines are 3 years. However, unknown to us, the buyer was not intending upon occupying this property, even though the purchase contract stated he was an owner occupant. And let’s not even get into the fact his agent vanished for a while and I had to step in to help out the buyer. Of course, this FHA loan was not approved by Wells Fargo. The buyer lives and works in San Jose, not Sacramento, another fact undisclosed. You have to live in the home to get an FHA loan.
The only way I know that Wells Fargo rejected the loan is because the buyer received a rejection in the mail and contacted me when he couldn’t reach his agent. Dick over at Wells Fargo in San Jose could not be bothered to pick up the phone, call or send a text message. I contacted him using all 3 methods for four days straight. Usually, leaving voice mail messages and continuing to badger a bad mortgage lender will eventually get a response, but this time, nothing. No response. No phone call. Nada. The last time Dick failed to respond to me, the listing agent, or the buyer, he eventually would after I kept up the inquiries. This time, no. Communication should not be this difficult with these guys.
The buyer’s agent asked to extend while the buyer pursued a loan for investors. Nope, not doing it now. The seller will undoubtedly demand that you can cancel and submit a new purchase contract for the seller to consider, and the buyer will need to get approved through my recommended Sacramento mortgage lender. Unfortunately or fortunately — depending on how you look at it — my recommended mortgage lender could not approve the buyer because each desktop underwriting file, regardless of loan type, reflected a red flag. The buyer could not do an investor loan because then he would not have enough money to bridge the gap between appraisal and sales price.
I don’t know why bad mortgage lenders don’t see the same red flags. Maybe they look green to them, or maybe the mortgage guys aren’t wearing their glasses? Maybe they have canine eyes, and aliens swooped down at night to switch out their eyeballs? Dogs can’t distinguish colors between red and green. That’s the best explanation I have.
However, I did learn something new. There’s always a silver lining when you learn something new. Freddie Mac can now underwrite a file with a short sale after two years, providing the credit file is strong. If you’ve had a short sale on your record and want to buy a home in Sacramento, call Elizabeth Weintraub at 916.233.6759, Lyon Real Estate. We close our escrows for our own buyers who’ve had a short sale because we don’t refer you to bad mortgage lenders.
Writing an FHA Offer for Homes Listed with Conventional Terms
Writing an FHA offer for a home listed with cash or conventional terms is sorta like trying to stuff a square peg into a round hole, yet buyer’s agents in Sacramento do it all the time. It’s not like we listing agents can play the listing police and stop the offers at the door. We have to present all offers to the seller, regardless of whether they fit criteria. It’s not the job of the Sacramento listing agent to determine whether an FHA offer should be presented; it’s just not our call to make, yet it can be a waste of time for everybody involved when buyer’s agents don’t do their homework.
It’s a lot of work for a buyer’s agent to write an FHA offer for a buyer. Not to mention, the emotional toll it takes on the buyer. Because after all, the buyer’s agent has shown Suzy Creamcheese the home of her dreams. Ms. Creamcheese has already figured out on which wall she’ll hang her flat-screen TV. She’s stuck photographs of this home on her refrigerator. She’s fallen in love with a home that a) she cannot buy and b) should not have been shown to her, and whose fault is that? Between the two agents, it’s not the listing agent.
The listing agent has most likely entered this particular home into MLS with cash / conventional terms. Was it an oversight or can the home be approved by an FHA appraiser, will it fit FHA repair requirements? Every so often in this business, you’ll find some listing agents who might automatically assume a home won’t pass an FHA inspection when it will, or their office staff might have forgotten to check a box and made a mistake when inputting the listing. The way to find out is to call the listing agent and ask.
Even so, the listing agent might not know the answer without asking the seller. Some sellers, quite frankly, do not want to sell to a buyer who is obtaining an FHA loan or a VA loan. There are a variety of reasons for that stance, which I won’t go into at this point, but one of which is often the fact the home might be tenant occupied with long-term tenants, and month-to-month long-term tenants require a 60-day notice in California. Not every seller wants to give their tenants a notice to vacate, for obvious reasons. Too much risk. Some prefer to let the buyer do it.
FHA guidelines require occupancy within 60 days. Notice from the date rent is due might exceed 60 days. Tenants might refuse to move. There could be problems. Yet, even if a buyer was willing to deal with the tenants, given a seller’s choice between a 15-day close with a cash buyer or a 35- to 40-day close with an FHA buyer — moreover, subject to all sorts of ways the transaction could blow up with that FHA buyer — which do you think a seller will choose? It’s a business transaction to many sellers, especially investors. They are not required to care about the buyer. It doesn’t make them heartless.
Buyers, before falling in love with a home in Sacramento, you might ask your buyer’s agent to find out whether the home you want to buy is a) listed to allow an FHA offer and b) likely to qualify for an FHA loan. Be aware that you’ll probably struggle with a CHDAP loan as well. Sacramento agents don’t create the markets; we just report on them, so don’t shoot the messenger.
Why Your Mortgage Lender in Sacramento Matters
Out of the 7 closings this Sacramento real estate agent is working on this week, only 2 transactions, according to the mortgage lenders, are closing are time, which makes closing delays pretty much par for the course for this week. Why? Because of the mortgage lenders. A few of the escrows are delayed because the buyers could not qualify for a conventional loan and were informed at inception that they should choose FHA but instead opted for conventional. Or, at least that their mortgage lender’s story and the guys are sticking to it. In others, everybody else thought somebody else was doing a job that nobody else was doing. Total cluster-you-know-what.
It’s also possible that the buyer’s agent felt the buyer didn’t stand a chance in hell of getting an FHA offer accepted upfront so the agent wrote the purchase contract with conventional terms and obtained the preapproval letter showing conventional financing, figuring who gives a rats if the transaction doesn’t close on time. But most buyer’s agents aren’t that devious. I suspect the truth of why some mortgage lenders can’t perform lies somewhere in between.
When a buyer runs past the closing date, the contract has expired. The seller has the option to cancel the transaction. The seller is not obligated to give the buyer more time to close the escrow. A lawyer might argue on behalf of the buyer and say the buyer invested money for the home inspection, paid for a pest inspection, perhaps other reports, and showed a good faith effort to close. She might say it’s not the buyer’s fault that things were delayed in underwriting or the mortgage lender messed up.
But that’s a tough argument if the contingencies haven’t been released, and the seller might believe the buyer is in breach of contract. The seller might give the buyer a Notice to Perform and then cancel. And let’s face it, many first-time home buyers barely have two nickels to rub together, and they can’t afford to hire a lawyer. So, they better choose a mortgage lender who can properly advise them and then follow that advice.
Here is my advice for home buyers today. For crying out loud, mortgage lenders all have access to pretty much the same ol’ bag of money, and you’re not gonna save 1/2 point here nor there, so pick the mortgage lender in Sacramento who can perform. Pick the company that won’t lead you astray. Pick the loan officer who will have your back. Don’t go with the guy who dishes out apologies when you’ve lost the house.
In all of my years of working with and referring business to Dan Tharp, this mortgage lender in Sacramento has never disappointed.
Outbuildings and Old Garages Might Be in FHA Repair Requirements
A prime example of an FHA repair requirement
I’ve got a real pickle coming up soon with a new listing in Sacramento because it’s likely to sell to a buyer obtaining an FHA loan. Why is that a pickle, you might wonder? Well, back when cash investors were quickly snapping up every home that came on the market, real estate agents didn’t much worry about FHA repair requirements, but that’s not the case anymore. FHA loans are a big deal now because the investors have pretty much left the market.
The investors who remain won’t pay market value. They hit prices hard. I’ve yet to see an offer lately from an investor at or above the list price. They are all trying to grind. It makes you want to say whoa, thanks for driving up the prices, now stop trying to drive them down. Most sellers would rather sell a home to an owner occupant anyway. They don’t want to change the demographics of their neighborhood by moving in tenants. They want a first-time home buyer to purchase their home and love it as much as they did. Homes are very emotional vehicles.
Selling to a first-time home buyer means dealing with FHA (or VA) appraisers and being on the lookout for the types of items that could cause FHA repair requirements noted on the appraisal as a condition to fund the loan. Sure, FHA has guidelines for its repair requirements, but it’s also largely left to the appraiser, and not every appraiser shares the same opinion nor interpretation of the guidelines. An item one appraiser will note, another might miss or overlook or just not care about. It can be the luck of the draw.
The time to discover whether a repair is called out is not a few days before closing, though. It’s much better to be proactive and take care of this stuff beforehand. One item I am seeing pop up more often on repair requirements is an old outbuilding. That old storage shed or garage in the back yard that nobody uses and is rotting in the sun? Huge problem today. It most likely needs to be demolished and removed.
While meeting with sellers in Sacramento yesterday, I walked the property line with them. They had talked with several other agents and discussed whether the fences needed repair as a few boards were old. Turns out the other real estate agents were so busy staring at the fences that not one had pointed out the dilapidated garage. This big white elephant sitting in front of their faces. This is a structure that several decades ago was accessed by a long driveway, which no longer exists. The driveway does not exist because the lot was split. Today, the new garage is attached to the home.
This means not only is there no access to this old garage, but a person can’t so much as squeeze a small bulldozer into the yard, There is no way to get into the back yard, even by removing a fence. And the building has to go. Hello sledgehammer and wheelbarrow. Yet, another reason why working with an experienced Sacramento real estate agent is a huge benefit to a sellers.
