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.