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You have to try hard to over-pay in today's market.With the bank's underwriting departments scrutinizing every little detail and the new laws put in place as to how the appraisals are being done in Massachusetts, it is virtually impossible to pay above market value. Even if you get an offer in on an overpriced listing, you will need the buyer to have a large enough down payment to get financed if the appraisal comes in low. Most first time home buyers are working with programs that only require a 3.5-5% down payment.
The condo market is being particularly effected by the stringent FHA guidelines that have been put in place to protect their financial interest as lenders. Many condo owners are finding out that their units are not eligible for the popular FHA loans being used by today's first time home buyers. Without these programs a buyer would need 20% down payment or all cash to get financing. Prices need to be lowered in order to make this a realistic possibility.
When purchasing or selling a home you really need an experienced agent that works full time in today's market. Knowing the guidelines and understanding the appraisal process will eliminate the last minute chaos that seems to be happening on a more frequent basis.
The hardest part of this market should not be finding a buyer!
They are out there and they are finaly BUYING! The credit built into the stimulus package is working. The key is getting the right price on the property. As a Buyer today, it is virtually impossible to over pay for a home. The appraisal process has been dramatically changed and homes are appraising much lower than expected.
My last two SOLD listings were very motivated Sellers and were willing to listen to what the market data was telling them. One had an accepted offer in 13 days at asking price and the other in 16 days $5000 under asking.
It is unfortunate for those who bought at the height of the market that your only real options are bringing money to the table or if the situation is dire enough, to work out a short sale with your bank(s).
With more sales happening it is becoming easier to pinpoint a good listing price that will attract offers. If you have the need to sell, sit down with a Realtor and go over the current MLS data and get a good idea as to what your home may be worth.
If you would like to see what is for sale and what has sold around you, please use my free Market Watch system. Use this link to view a sample report prior to signing up! Pinpoint Market Watch
We all know by now that a short sale can be a very frustrating transaction for all involved. There are way too many variables to guarantee a positive outcome once an offer is made. The bait is that more times than not you are getting a house at below market value. If you have the time to wait (usually 90-120 days)and prepare properly you can get a real deal.
Biggest mistakes made by Listing Agents:
How can you use these to help bullet-proof your offer and increase the chances of you having a successful transaction. First of all, find a buyers agent that has experience and doesn't shy away from Short Sale properties. Knowing how other agents work and the right questions to ask to get an idea of how they plan on conducting the process can help you decide if this is going to be a lost cause.
Have your agent do a CMA on the property to make sure that it is not priced too high or too low. As part of the process the bank is going to perform at least one and sometimes multiple BPO's. A BPO is a Broker Price Opinion. This means that a neutral Agent goes out and does a CMA for the Bank to assure that the price is relevant to the market. If you find a property that is on for $189,000 and your agent can show you that it is worth $250,000 in the current market, you are going to hit a snag when the BPO comes in to the Bank. Banks are willing to take less than the BPO, but only within reason. Contrary to popular opinion, Banks will foreclose on a property before giving it away.
You want your Agent and the Listing Agent to treat this as a normal transaction. The dates and time lines should be the same except of course the closing date. Most agencies have a Short Sale addendum that they will add to the contract explaining that the offer is being accepted subject to third party approval. IT IS NOT UP TO THE BANK TO ACCEPT THE OFFER A sure way to slow down the process is to have a listing agent send every offer they get into the bank to review. If this is how the Listing Agent chooses to work, you are increasing your risk factor and time line. As a Buyer, you want to get the offer accepted, have your inspection done and get the P&S signed as quickly as possible so that the accepted offer can be presented to the Bank for approval. Any other offers at this point would be back up offers in the event that yours does not get approved.
Be leery of a property that has a Realtor trying to work with the Bank themselves. Make sure that they at least have a Real Estate Attorney working with the Bank on behalf of the Seller. There are companies that specialize in dealing as third party negotiators on the Seller's behalf. Normally they negotiate their fee with the Bank as well, meaning that there is no additional cost to the Seller. If your Agent has a company that they use you can write into the offer that it is subject to using the third party negotiator.
Getting back to the contract time line, the number one question is "why would I want to pay for an inspection on a property prior to getting third party approval?" Remember that in this situation the Home Inspection is going to be informational only. The Bank is not going to negotiate any problems that may arise. It is a much easier decision for a Bank to accept an offer that has all potential road blocks already addressed. It is also beneficial to know if there are any major problems that might scare you away before you take yourself out of the market for 3-4 months. Typically. once approved the bank gives you 10-20 days to get the deal closed. This is not a lot of time if you need to schedule an inspection, have a P&S signed and get the buyer's financing through underwriting. Do not have a Home Inspection if the Listing Agent is submitting multiple offers to the Bank.
Nothing will be more frustrating than getting through the entire process of having the bank approve your offer only to find out there is an outstanding lien on the property. Your agent should do a quick search of the property through the local registry of deeds prior to making an offer to assure that all leans are accounted for in the final numbers. You also want them to monitor the property to make sure that no new leans are put on the property during the process. The bank will not change the final approved numbers. Any unknown costs will need to be paid by the parties involved in order to close the deal.
Every short sale has it's own set of problems. A little homework and understanding of the process will take away some of the risk and shorten the amount of time needed to get to closing.
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