One of the things I look for when I take a short sale listing in Sacramento is whether the home will qualify for an FHA loan. Because if the home will meet minimum FHA requirements, that means an FHA buyer can buy it. I care whether an FHA buyer can buy that home because FHA buyers make up the majority of the home buyers in Sacramento today. Ten years ago, it would be odd to get an FHA buyer. Not so today.
I don't know the exact numbers but I would estimate 5% were FHA buyers 10 years ago. Today, it is closer to 70%. That's because requirements for a conventional loan have become so stringent. Not necessarily because FHA is so great. You can still get a conventional loan with 5% down, but you will also pay for mortgage insurance. You must have a higher FICO score (by almost 100 points) to get an attractive rate. Not every first-time home buyer enjoys a high FICO.
So, if you want to knock out 7 of every 10 potential buyers for your home, then don't offer FHA financing terms. You can pick the type of offers you will accept. As a Sacramento short sale agent, I would prefer that my sellers have unlimited options and open their homes to every type of buyer who would like to buy it. Because not every buyer wants to buy a short sale.
I particularly like to encourage my sellers to accept offers from buyers getting a VA loan. That's because VA buyers get shot down almost every time they turn around. Few sellers want to accept a VA offer because they don't understand them. Their agents probably don't understand how they work, either. They hear "VA" and think "funding conditions" or "too many repairs," which isn't necessarily true.
With a VA buyer, I know that buyer probably won't be tempted to cancel escrow and buy a different home because there are few and far between offering VA financing for them to buy. They're committed to the short sale transaction. They will do whatever it take to get it closed. You VA buyers? You give me a ring.
Sometimes there are repairs required, but they're generally simple. If I know that the seller is incapable or unwilling, I'll arrange for the buyers to do the work. There are sellers who will say, when I ask where their gas meter is located so I can put the lockbox there, "Gas meter? Do I have a gas meter?" And I know these people are not very handy around the house.
You would be amazed at what FHA and VA will let pass in a home. For example, a home can have an exposed concrete slab floor and the appraiser won't care. But if you don't paint your rain gutters, you're in big trouble. If you want to know whether your home qualifies for an FHA or VA buyer, give me a jingle. I'll explore all of your selling options with you before listing and selling that short sale.
As a Sacramento short sale agent, I list and sell short sales in Sacramento County, El Dorado County, Placer County and Yolo County.
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Certified HAFA Specialist
My Sacramento Real Estate Listings
Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout the four-county Sacramento area. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. Broker-Associate at Lyon Real Estate. DRE License # 00697006.
The Short Sale Savior, by Elizabeth Weintraub, available at Amazon.com.
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The views expressed herein are Weintraub's personal views and do not reflect the views of Lyon Real Estate.
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Nice topic. In our area, each appraisal is unique and subject to the modd and whim of the appraiser.
Hi Melissa: Well, that's why a listing agent should work around the house and carefully examine it through the eyes of an appraiser because it's those eyeballs that can screw up your deal.
Elizabeth, doing these HUD REOs, I've learned that you can even do a FHA 203b Repair Escrow for up to $5k in repairs and of course the FHA 203k for more (not needed for short sales but for REOs). My loan officer can get small stuff done through seller concessions for VAs. We just closed one.
I so agree with you. I've been fortunate lately and getting newer short sales that can go VA or FHA. Have a great week! Still looking to see if you bought that second home....for vacations?
I completely agree. VA and FHA buyers are more liekly to stay in the transaction. In my market these buyers have just zero opportunitry to purchase a foreclosure and a lot of short sale agents would prefer to not work with them. I do have some short ssale listings where we need cash buyers but if not and FHA or VA buyer can be good deal for all parties.
Hi Jeanean: I heard last week that they might stop doing the 203K. Or maybe that was the down payment assistance program. They're cutting out so many things lately. And nope, have not yet bought that second home. I am still looking but I have not found it. That's because I don't want to spend a million bucks for that oceanfront, and there aren't that many on the market.
Hi Broker Bryant: FHA and VA buyers typically need and can get a closing cost credit. It find it funny when cash buyers ask for a closing cost credit. I mean, what are they thinking?
Good morning Elizabeth: Great blog about FHA and VA buyers for short sale homes. VA buyers most likely will close escrow. After moving from place-to-place, there is a strong desire to settle down and become part of the community. Lots of soldiers are returning from overseas. Remember they were not shopping at the mall every weekend, so they have saved their money for buying a home. (I have not heard or seen an ocean front home less than 1.2 million in my area.) If I see something in your price range, I will let you know immediately.
Have a great day!
Elizabeth, I wish there was a specific FHA category on our MLS that was consistently checked that would help to target my inventory when performing home searches for FHA buyers which are a large part of my first time home buying pool. What annoys the agents that will put "will go FHA" but then in the private remarks they mention an unpermitted garage conversion and how the seller will not perform any repairs or restoration. Grrr...
Elizabeth - Wow, that is a high percentage of FHA buyer, Wellington is usually around 14-16%.