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Why can't my buyers find a home?

I'm mostly a listing agent so I don't work with many buyers these days....back when I sold Real Estate in NY...I spent more time with buyers but that was then and this is now.

I received a referral from out of state Keller Williams agent. I met with the buyers and asked them questions so I would know exactly what they were looking for. I found out that they were approved for an FHA loan. At first....they requested to see all REO's and foreclosures. Now that's fine when you're dealing with a buyer and a conventional loan but its virtually impossible for them to purchase these types of homes because of the FHA guidelines regarding inspections. I advised my clients that they have absolutely no protection and that they basically were at the mercy of the bank or holding company.

I met with them and showed them one of these properties in good faith and then I brought in an addendum with a laundry list so long it had to be printed on two pages.

I have them set up on an automatic responder that is set up to send them a link to any property that comes on the market or changes it status. I've probably sent them over 100 prospects...yet they've only had 1 choice so far and I plan on showing them the property tomorrow.

They're also are a bit antsy right now because they were hoping to take advantage of the $8,000 credit.

Any suggestions? Probably not.

I also failed to mention they also require the seller to pay some of their closing costs.

I'm willing to keep looking for them but they don't have many to chose from and I think that these types of homes are more tailored for the conventionalloan , cash buyer or an investor.

I understand the concept but with inventory levels cut in half and less normal opportunities out there......it's making it very difficult for a consumer to purchase a home in my area.

The moral to this story is if you're a consumer...ask your Realtor® these questions.....maybe they can help you.

For more information please contact Neal The Real Deal Bloom-Realtor® /Keller Williams Properties

1625 N. Commerce Parkway,Suite 105

Weston FL 33326

(954)608-5556

Posted by Neal Bloom-Realtor ® Assoc.-CRS-Weston FL on 08/26/2009 08:39 PM

Comments (39)

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Originally posted at: Weston Florida Real Estate Blog, Neal"The Real Deal"Bloom : Why can't my buyers find a home?

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39 Comments on Why can't my buyers find a home?

AUG

Some buyers have unrealistic expectations because everybody says there are great deals.

Neal, I think you keep asking questions and listening to the answers but in the end reos will always be difficult to close with an fha buyer. I've explained this to a buyer or 2 and they still want to look for that deal. At least now, timing with regard to the 8K credit is an issue so hopefully they understand that.

It's similar out here in Phoenix Neal. Although we haven't had too much of an issue with FHA financing on the R.E.O. homes. Our problem is that a lot of these buyers are in the $100k or less price range, which is RED HOT in our area right now. So first time home buyers, or second home shoppers are going up against savvy investors with lots of cash on hand. It's frustrating and discouraging for the buyers, and it adds a tremendous workload to us, the buyer's agent. Where once we used to show 12-15 homes to a buyer before a transaction was under way, now we show as many as 70-80 homes before we land something. Good post and best of luck to you.

Your FHA Guru Hey Neal, what FHA guidelines require inspections? Is this a Flordia requirement because I don't know of such a requirement in California. FHA dose urge buyers to purhase a home inspection for their own good... and yours but it is not a FHA requirement.

It's just a very difficult situation for some nice people just starting out. They just had a baby and would really be great if they had a home to live in with so extra room.

Oh and I failed to mention that they also require closing costs from the seller.

Bill,

I haven't seen a contract without it as a requirement....and the appraisal will only be completed when the electric and water are turned on.

You're letting these buyers dictate to you how you do business. A good buyer's agents' job is to consider the location and price range that suit the buyers' needs and then select the BEST homes for them in that location and price range.

BTW, we sell bank owned homes to FHA buyers daily. We show the best homes in the price range whether they be short sales, bank owned, FSBOs or plain listings. The only time we limit the homes to show is when a buyer needs a quick settlement in which case we eliminate short sales.

If the buyer wants to buy a bank owned in their price range, write it. If the appraisal lists conditions to close, then we switch to a quick FHA203(k) and add about $5,000 to the price. Banks usually accept that. If the house needs more repairs, it's no longer in the price range.

Buyers don't get to dictate how we do business. We know our job and we know real estate. Buyers don't. If a buyer can't cooperate with your business model, let them go.

Just a bit of advice from a veteran buyers agent.

Lenn,

Thier search is set by price range...I think 6 or 7 cities.......It's not the buyers...it's the holding companies or asset management companies that seem to dictate....oh did I fail to mention that they reserve the right to take any other offer...so the buyers could be knocked out as well....everytime we pull those listings they have a list of everything they want from the buyer. The buyers is still going to get the home inspected....the owner won't do the repairs on 99% of these homes. Our inventory here really is scarce and if they don't jump on it immediately then the properties have multiple offers on them. Also the REO's expect the buyer to hold their escrow with the sellers title company...I've also seen it say that if they can't get the loan for whatever reason...they automatically lose their deposit. I underatand the buyers should know that they are fully able to get the loan but you have probably seen it beofre...they fall through sometimes. They also expect the buyers to pay the listing office an additional processing or administration fee. I have no problem showing them these properties...but they know its hard and I'm not sure they can even get the 203 at this point.

Thanks for your usual good input.

I know with VA /FHA loans they have strict guidelines as far as structural, hazardous, plumbing and electrical problem...also with non permitted rooms/additions/bathrooms/walls and so forth. Yup....REO's that are not in good condition may have problems. I sold one last year that was built in 2004 and in great shape....with a VA loan. Only would have recommended to continue after the homes inspection ....which had very little problems...nothing a home warranty couldn't fix :)

I suggest that you make offers on multiple properties at prices significantly above the asking price. but as you are finding; its difficult for the first time buyer, using an FHA loan to buy an REO

Better advice would be to concentrate on a "regular sale" Even in a market like ours, dominated by foreclosures and short sales, there are still regular folks trying to sell their homes

AUG

Neal, in regards to your comment #7, "I haven't seen a contract without it as a requirement" that is buyers agents protecting their clients and CTAs but not an FHA requirement.

And comment #9. it is true that banks are selling REOs "As Is" but when reprairs are $5,000 plus or the buyer would just like to upgrade their new home a FHA 203k rehab loan would be prefect.

When you use an experienced loan officer, FHA loans are really not any more difficult than conventional loans and with FHA you can still select your favorite local appraiser who understands the local market.

Best of luck with your FHA buyers.

Sally,

Our biggest problem is inventory right now so you could probably find one but it's rare.

Ron,

We would love to if we could find them...very difficult...also these people need a minimum amount of sq footage IE bedrooms and baths which also limit our searches.

Bill,

I haven't been able to speak with their lender as of yet but today I had plans to contact them so we can see if they'd even be able to upgrade to a 203 which I had suggested early on. So far the homes that they've been sent have a list of demands that I wouldn't accept if I was the buyer...we are supposed to protect the clients best interest and I feel that if there isn't any protection that they should be advised that way...its not about me letting them tell me how to do business. I wish agents from other states could see the types of properties we have out there now...most of them are in need of major work and I think that most buyers would be very unhappy if they inspect a property and find lots of problems and then can't repair the homes...they all say as-is and the one we did look at also said they needed to inspect first and then submit the offer.

Ron Paries' advice is good for my area. Bank owned properties priced in the 175K range often sell for $225-250. They are priced low to create a bidding situation. Unless a cash offer comes in, the highest non-contingent gets that house. Although we often get a call that the first contract fell apart.

This is a market that tries the patience of the most patient buyer's agent.

One thing for sure. If a buyer doesn't listen to and cooperate with the agent, that buyer is history. We refuse to be indentured by an unrealistic home buyer.

Neal, FHA relaxed the Appraisal requirement, about three years ago. A house has to be in pretty bad shap for the FHA Appraisal to be a major concern.

When we had some inventory I could sell REO to FHA buyers. REO sellers would even do some lender required repairs and adjust the price downward in the event of a low appraisal.

Today?

HAHHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA

I think most people think they will find a turn key foreclosure in perfect condition and will pay about half of market value for it. Or they think that if it needs work, it will be simple things that won't take long or much money to fix. The real world is a rude awakening for them.

It sounds like your buyers don't really know what they want...or at least maybe they just want to dink around in the foreclosure arena to see if there are any good deals out there. When they exhaust that, they'll then turn to non-REO properties. You need to sit down with them and ask some pointed questions about what exactly they are hoping to accomplish...price wise, move in date, condition of home, etc.

Just closed an FHA buyer with minimum down who bought an REO without electricity. Buyer had the energy company turn it on in the buyers name - took a risk - so the inspection could be done. Thankfully the water had not been turned off (condo). The property was in overall good condition so it went pretty smooth.

I think your buyers have unrealistic expectations probably due to media hype and well-intentioned friends and relatives who all know more than you do of course.

They need to GET REAL! Show them some of these comments!

I have the same case here in San Mateo County; I have a buyer who is approved for only $300,000 FHA loan that wants to purchase REO or properties that needs work. They need to get educated about FHA guidelines.

Did I hear anyone mention the FHA 203(k) loan?? Just a thought

It looks to me that as always, Lenn has some very good advice for you.

AUG

It's the same situation here in California. I'm mostly a buyer's agent and your situation is my biggest challenge.

It usually takes a few weeks and a couple of rejected offers, for first time buyers to begin to understand the reality of the real estate market. Also, remember that they have a lot other individuals (e.g., friends, family) giving them advice as to what they should be doing.

I suggest you be patient with them, and continue to work with and educate them about what they are dealing with. They want to purchase a home so they will set their expectations to what they can afford.

Good luck.

It is rare but have an REO listing that is going FHA and NOT an FHA 203k and closing in a week (I HOPE). What your buyers are wanting IMO is not necessarily a foreclosure, but a deal! They really don't care that it is a bank owned home. Investigate the FHA 203k and get them with a LO that knows that program. Great that your inventory is shrinking!

Thanks Carla, you stole my thunder!

Neal, what Carla is referring to is the FHA 203(k) Rehabilitation loan. This is a great program for homes that need anything from just a few gallons of paint all the way up complete tear downs and rebuilds and everything in between. Many opportunities are lost between buyers and sellers because many people are not aware of this program. Buyers can turn those fixer-uppers into a dream home with virtually no money out of pocket. All the costs of improvements, upgrades, and modernizations can be included in the mortgage - even on a purchase! In addition, the seller can still contribute up to 6% of the purchase price in closing costs.

I wrote a series about the FHA 203(k) Rehabilitation loan program. You can find all the articles in the series here on ActiveRain at http://activerain.com/blogs/lewcorcoran/tags/fha%20203k%20rehabilitation%20loan%20program.

What about when a buyer loses a bid 3 months ago and now, more than two dozen houses later, is looking for that exact same house or one very close to it in time to take advantage of the tax credit.

Frustrating!

Well good morning everyone....didn't know this was featured until I started seeing all the great comments coming in.

I'm going to give you a little update...I met with the buyers last night to show them a home they asked me about...there were actually two but the first never changed their status and had multiple offers on it and a contract signed so there was only one at this point...I told them I like to show a minimum of 5 in one sitting if not more. I discussed the matter with them...FHA..FHA 203. The LO that they picked was referred to them by the last Realtor they were using...they stopped because they were never available to show them homes so I guess that since I seem to be more proactive...they are keeping me as their agent. Now they did tell me that the 203 would be available but they are concerned about moving into a home that needs to many renovations and that they don't have much time to over see them plus they have a newborn baby so that's added as an obstacle right now. I have adjusted their search to now include townhomes as well...which will open up their variety of choices. I've also asked them to consider a lower sq footage since they aren't having much luck at their original search.

I've also suggested that they reconsider looking into these REO properties and I think they are now seeing the light a bit more. They still want to stay away from the short sales which I agree.

As far as me not servicing my clients best interest...that's a bunch of bull...I am here to protect their interests and also I don't let them dictate the way I do business...it was totally misinterpreted. It all comes down to that if I were to recommend to put in contracts on properties that leave them open to lose their deposit or misdirect them into a situation that might burn them...then I'm not doing my job...it's not just about making the deal ...its about helping people and making them happy too.

I haven't stayed in this business for almost 14 yrs because I'm a lousy agent...I'm not perfect because if I was...I wouldn't be asking other people for their opinions. I must be doing something right because I'm still doing this full time and not just as a listing agent...we do complete transactions with buyers too...and I'm sure anyone here who knows me will tell you my reputation is impecable...I'm pretty busy...its the ones who arent as fortunate that like to complain that they think they know it all.

I'm only saying this because there was a comment here that was suddenly deleted...I don't know why or who did it but I originally saw it on my email and then when I went in to respond it was gone...it was a bit of a rude comment and it was WRONG! It seems the person who wrote it ...thought they know it all.

I don't need to justify how successful I am...I know it. Not to toot my own horn but since I move to Keller in April..they have given me two awards and I didn't know about them and never even showed up at the meeting. I was surprised so I must be doing something right so I took offense to the comment.

Also let me say that ...every area and situation will be different.

But I agreee with many of these comments and there isn't anything wrong with constructive critisim. I would do the same on anyone elses post too...just consider it good advice.

I just felt that you shouldn't assume something unless you're there to see it.

Thank you!:)

I found myself in a similar situation with a set of buyers in Atlanta. Had to move on as their expectations were very (and I do mean very) unrealistic.

Neal, We had a very similar situation with a young couple. In Pa we have PFHA financing which allows the buyer to use a portion of the $8,000 at closing for costs but not the down payment. You can also get "bridge" loans from some institutions to utilize the $8,000 for closing costs. Most banks or REO's won't consider paying closing costs.

We went down the same path showing foreclosed properties that needed a ton of work to a young couple with2 children. Finally we began to add in properties that were not foreclosed. The couple began to see the light when comparing the condition. We found them a 4 bedroom 1 bath home with a separate 1 car garage in a very nice neighborhood that they fell in love with. The home was an estate. We negotiated to $89,900. The appraisal came in at $95,000

There are enough homes on the market where the sellers may be highly motivated. Look for ones that have been marketed in excess of 120 days or expired previously.

Your buyers stand a better chance to get sellers assistance with closing costs in this scenario.

Buyers have a laundry list of wants which are many times not attainable. If they are intractable the odds of satisfying those wants maybe impossible.

If they are still set on their path I'd consider whether I'm willing to keep investing my time on the impossible dream.

The time is running very short to decide on a house. Since HVCC our lead time has gone from 30 days to 45-60 days. With a first time home buyer I'd use the 60 days to close. You have no idea what you run into qualification wise.

Use an escalation clause for a property with multi offers. It's like a proxy bid on Ebay.

I agree with Lenn that you are the professional and should not allow the buyer to dictate. I always show them what they ask about initially, but some where down the road we have a reality check.

I'd suggest sitting down and having the "fatherly" talk with them. Review how they have spun their wheels without success. Point out the obstacles connected to Foreclosures and REO's. Explain that they stand a better chance of having repairs made, price concession, and closing cost assistance if they deal with a motivated seller. Ask them to tour homes that are not distressed as a comparison to see if anything is out there that might meet their requirements.

Seems to me the parameters have opposite requirements which can not be resolved. For example, they can buy a bank owned property, but in my market it is "as is" and with no closing costs paid. Can't get to the end with this closing cost issue as a stipulation.

Sometimes buyers expectations are high. Best of luck in finding a suitable property for them.

I would suggest they find a very nice home to rent, and then wait for the market to "settle" out, or for more inventory to be released by the banks.

Why waste your time and pull out your hair over a nearly impossible buyer. (not your fault or their fault), just the market. Work with buyers who have money to buy.

Or, just refer them out to someone else. Move on to "real" buyers. If they don't have their own money to close the deal then it wont close.

We have buyer we're working with who have non-realistic expectations too. They want it all: a great price (meaning a steal) plus seller to pay closing costs. When we counsel them, they don't always listen!

Sounds like they need to go away and save some money. Foreclosures will be around for a while to come.

I think it is time for an honest conversation with them and help them reshape their expectations.

AUG

Hi Neal, Read your post about your buyers. REOs can be a great buy for some. And believe it or not, even banks will work with buyers to pay for repairs etc., Banks generally do not provide a seller's disclosure of condition of the property, and this is your best leverage. When you give the listing agent the laundry list of what you want repaired (in your contract) for your buyer, remind them that now that the defects are noted, via home inspection or through first hand observation, the listing agent must now disclose that infomration to any and all other potential buyers since the defects are now known material facts about the house. I actually had a recent property I was representing a buyer on and it was a bank owned home. They advertised the usual, 'as-is, no repairs,' etc, etc. They brought the price down from 245K and accepted my buyer's offer of 190K with 5K assistance and they agreed to pay for a serious amount of work on top of that. All I did was hammer home the defects and the extraordinary difficulty it was going to be to sell the place in it current condition to anyone else.

Thanks for all the great input...we have seen a few and we are going back out tonight as well..they've also told me now that if they needed a 203 they had it available to them...they just really don't want to renovate if they don't have to but I think they might reconsider looking at REO's again. But I can tell that in my area...many agents still won't disclose anything even after its been exposed. Their brokers don't even call you back and I really don't have time to blow the whistle..I just want to concentrate on finding them a home for now. Each situation is different in every area.

I've also gotten them to now consider townhomes to open their search up to a broader amount of choices.

AUG

I like Damon's idea about reshaping their expectations. There may be a house in better condition, at a reasonable price, that is a better deal than a foreclosure.

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