Saturday, January 16, 2010
5 Tips How FHA and VA Buyers Can Succeed
First time home buyers grow frusted! Good homes at good prices are being snatched up by All Cash and Conventional buyers. Homes that are priced well below the market value, a technique called Power Pricing, are meant to get multiple offers in record time. The frenzy created by a low priced home creates an atmosphere of desperation amongst buyers. Each buyer outbidding one another in an effort to secure the great deal.
Unfortuately, there is a heirarchy of loans: "All Cash" is the best, then Conventional, FHA and lastly VA loans. How is an FHA or VA buyer to compete?
1. Representation. Serious buyers must employ the help of a qualified Realtor who can help them catch the brass ring. However, they need the experienced agent to help them understand that everyone is looking for the elusive great deal! They need a representative that can help find a home with their needs in mind, at the same time being realistic.
When buyers are first exploring the market, there are many websites (i.e. Realtor.com, Trulia.com, Redfin.com, etc.) for them to investigate on. However most of these websites have a 48hr filter delay. In this market, those great deals may have multiple offers and not even available in 48hrs.
A Realtor can set up an automated search that is directly connected to the MLS, such as Gateway, notifying buyers immediately of new listings or changes.
2. Ready to Jump. Buyers need to check their personalized online searches daily. They have to be ready to go, to make a quick decision. While a buyer is thinking it over, another one has put an offer in on it. What buyers need to remember is that they can change their mind within a certain period of time defined in the purchase agreement without risk of losing any money.
3. Closing Costs.For sellers, FHA & VA buyers are less desirable when compared to "All Cash" and Conventional loan buyers. The FHA and VA buyers have less down and are less financially stable, often needing assistance from the seller with closing costs, and may not qualify for a loan at the end of the road. Where the all cash and conventional loan buyer may have more money and if the appraisal comes in low, they are more apt to pay the difference. So what is an FHA and VA buyer to do? The price and conditions are the only way to stand out.
The all cash and conventional buyers know they have an advantage and may make lower offers. However the FHA and VA buyer has to come up to the plate with a reasonable or higher offer. With a Realtor's assistance, carefully analyse the comparable home prices and consider the condition of the property and make a reasonable offer. The offer may be higher than the asking price.
If you have the money for closing costs, pay your own closing costs. While you are searching for a home, continue to save your money for the down payment. This will help give you an advantage. If you need the closing costs paid for by the seller, you will need to add those costs into the offer.
4. Ask for Less. When buying a Bank owned property or a short sale, the less a buyer asks for the better. In a normal market, the buyer may ask for appliances or additional items such as a home warranty that the seller would typically pay for. However, the banks don't want to give any frills.
While normally in Southern California, the termite inspection is paid for by the seller, in Northern California the buyer pays for it. In the case of Short Sales and Bank Owned properties, the tide seems to be turning. While VA buyers have to have a termite inspection and clearance, the buyer should put a maximum price tag on the repairs. Banks don't deal well with unknowns.
FHA buyers may want to avoid asking for a termite inspection with repairs altogether, if the appraiser will allow it. Especially, on condominiums where the HOA usually pays for the exterior termite inspections once a year. Buyers should let the home inspector know this so that they can look for any issues of wood rot under sinks.
In regards to houses, if the seller of the short sale home purchased it in the past few years it more than likely had a termite clearance at that time and less likely to have costly damage and repairs needed. However, if the house shows lots of signs of deferred maintence, this may not be the house for a first time home buyer. The bank wants to give you a great price for the house "as is".
5. Stand Out. Buying a home is an emotional purchase. By appealing to the emotional side of a seller, buyers may beat out the competition. In a letter, buyers should give the seller a little history of themselves and reasons for them to like them. Especially Veterans, they need to use their service to our country to their advantage to tug on those heart strings. Even add a nice photo.
These tips will hopefully help a FHA and VA buyer succeed. But the biggest tip is to patient and persistent.
ABR®, CRS®, e-Pro®, GRI®
Coldwell Banker Residential Brokerage