by Darlene Kemp, Caliber Home Loans.
I am hearing agents say they are dealing with multiple offers on homes, contracts with guarantees above appraised value, no closing cost assistance and home inspections for informational purpose only.
So first imagine, you finally have a ratified contract for your buyer, and you are heading out to that home inspection knowing, it will make or break the deal. The buyer has already put up all the cash they have for down payment, paying their own closing cost and must leave a little for that guarantee in case the property does not appraise. So, what happens when, at the home inspection, the inspector tells you there is a needed repair that could potentially cost your buyer thousands after closing? Does your buyer walk? Or could you help them come up with a solution?
OR – you found that property that fit your home buyers perfectly but just needs a little updating. Have any solutions? Or do you just keep looking?
As a licensed Mortgage Loan Officer, I am not an expert in Real Estate Sales nor negotiating in today’s market, that is your expertise, but as a lender, it helps me to understand what each Real Estate Agent must experience each day. And as a licensed Real Estate Agent, I do not expect you to be an expert in mortgage loans, that is my job. However, just by understanding what is available out in the marketplace, as far as loan programs and products, it could help you put just one more deal together or save a deal that you already have on the table.
As a Mortgage Loan Officer, let me share a few options with you so you can help more buyers win a bid on a property or keep a contract ratified.
First, let us go back to that home buyer you imagined previously, and they just finished up the home inspection, and the inspector is now explaining that the HVAC unit is in bad shape (or even missing on some properties). What options do you have?
Have you ever heard of an Energy Efficient Mortgage (EEM)? It is NOT a single mortgage, but it is an add- on to the existing VA, FHA or even a Conventional Loan programs. These EEM add-ons would allow the buyer to finance in the cost of energy efficient improvements into the loan without worrying about the appraisal nor qualifying. AND- You do not have to go back to the seller to negotiate anything, the work is NOT done prior to closing and in most cases, will not impact closing date. You simply call the lender and ask- are you able to throw an EEM onto the existing home loan program? If they can, the repair cost is paid from loan proceeds after closing once the work has been completed.
If your borrower has a regular VA loan, they can increase the mortgage up to $3000 based solely on the documented cost of an energy efficient improvement or up to $6,000 provided the increase in monthly mortgage payment does not exceed the likely reduction in monthly utility costs. At today’s historically low interest rates, that is a no brainer. For the FHA buyer, you may want to use a home inspector that is also a qualified home energy rater/assessor also known as HERS RATER. As long as the inspector states the repair cost is cost effective based on his report, you can finance the dollar amount of a cost-effective energy package as determined by the home energy audit (within FHA maximum loan amounts.) You can even use these on Conventional loans up to 15% of the value of the property in most cases.
What about that home that has been on the market a little longer because it needs a little updating or a little tender loving care? Could you possibly match it up to a buyer that has not been able to find a property or win a bid on that perfect house? Most buyers will hesitate to purchase a home that needs updating or repairs for fear they cannot come up with the cash after closing to do the renovation and would have to live with the property, as is, until they could save the money. But with a little vision, you may be able to help a buyer see the property through their personality filter and imagining the house renovated. At today’s low interest rates, they may be surprised how little that monthly payment will be affected. The buyer can use the more common FHA 203K renovation loan, or if you have a Veteran who wants to use his VA loan, the VA renovation loan has now been made available again and buyers who want to use a simple Conventional loan product will have a conventional renovation option, too.
I understand the market is tough and finding and winning offers can be time-consuming and tough, so I hope with a little additional effort and asking a few more questions, you may be able to save a deal or two and make it a great time to sell real estate! If you would like to know more about the loan programs that are available, please feel free to reach out at Darlene.Kemp@caliberhomeloans.com.
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