Saturday, January 30, 2010

You Might Not Need A REALTOR IF.... Reason #5

you understand the financing your buyer will need to purchase your property, and how to evaluate the financing your buyer proposes in the contract.

In today's market this is critical.  The lending environment is changing daily, and it is hard for even those of us who work in this day in and day out to keep abreast of the changes in programs, laws and the variances between the different types of lenders and brokers.

First of all, the basics... Do you know the difference of the varying loan programs available?  Do you know the difference between VHDA, VA, Rural Housing and FHA loans? 

Can you do seller financing, or partial seller financing? How is that structured and is it a good idea?

Which of these (and other) types of financing can be used to purchase your home?

  • Some loans are only available in certain geographic locations.

  • There are requirements for some loans about the physical condition of the property.

  • There are loans you can't get because you don't have the "right" kinds of utilities, appliances and mechanics in place in the home. 

  • There may be "anti flipping" policies in place, which require that you, the seller, have owned the property for a specified amount of time.

  • Some of the loans are "layered", which means more than one set of rules might apply to your transaction.  Which ones are layered and how do you know?
Are there any quirky or less common things about your home?  Believe it or not, there may be issues that can prevent certain lenders, or certain types of loans, from being used for the purchase of your home. A few examples of things I've seen come up:

  • Some lenders won't loan if the subject home has a well or septic system on another property, or there is a well or septic system which is located on the subject property that supports a home on another property.

  • If a garage (or other space) has been converted to a finished living area, there are rules about how that had to be done.  If they are not serviced by the HVAC system, it could be an issue.

  • "Harry Homeowner" work that wasn't done to code is a common problem with loans; EVEN if it looks nice.

  • Things as small as rotting trim or a warped backsplash behind the sink or a missing handrail can cause loan issues and prevent you from being able to sell as planned.

  • Missing kitchen appliances sometimes cause issues, depending on the type of loan.
And, then there are the "rules"... like:

  • If your house doesn't appraise, then what?  Can you get a new appraisal?  A new lender? A new buyer?  What if they are using the same kind of loan?  Some appraisals stick with the properties for as much as 6 months.  A low appraisal can taint your home and force you to sell low or wait 6 months or more, unless you know how to get it released or overturned.

  • Homes that don't have central heating systems don't qualify for certain loans.

  • There is a minimum processing time for loans now, thanks to new regulations.  Do you know the soonest closing date any lender can offer?

  • Can you do a rent-back after settlement?  For how long?

  • Each loan program has a different minimum down payment requirement, do you know the difference?

  • Are there no money down loans available anymore?

  • Which of these loans requires the seller to pay part of the closing cost, and how much?
Do you understand the financing and appraisal clauses of the contract?  What do they really mean?  In today's environment, don't assume everything will go as planned.  These lenders are tough. 

There are all of these things, and so much more, to consider.... and we've only discussed the requirements for the HOME and "deal", we haven't mentioned the requirements for the buyer yet!  And, yes, there are requirements for the buyer... it is no longer like the good old days where you could sign a statement telling them your income and they'd believe you.  Buyers are really put through the ringer to get a loan now.  Will they qualify?  How can you tell? 

Do you know the difference between a lender and a mortgage broker? between prequalification, pre-approval and approval?   Not knowing may cost you money - a lot of money.

What about rent to own offers - like rent with first right of refusal or a rental option, or a contract for deed or other variation of seller financing?  What are the differences? Where can you get the right advice? Do you know and understand the potential pitfalls?
Based on the contract you might get on your house, you will make decisions - to buy or rent another home, you'll even have to move before you actually sell the house (usually), this costs MONEY....something that no longer grows on trees here in the good ol' USofA.   

What protections do you have, as the seller, if the deal goes south?

While even the best real estate agent can not quarrantee you that any buyer will be loan-worthy, they can help you to minimize the risks of getting half way to closing only to find out your buyer can't get a loan.  A good agent can also try to HELP that buyer get a loan, or solve their lending problem, using the resources he or she has available - which should be a lot.

Maybe you work in the lending environment...that will help you tremendously with this aspect of your sale, so you might NOT need a REALTOR....unless you need any of their other services.

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Stay tuned to the REAL ESTATE WHISPERER for the rest of the posts in this series.

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