No matter what the general consenus has been that we are in a bad housing market, that buyers can be picky choosers, and houses have dropped in value..... if you need to sell, you sometimes need to be creative. You need to keep an open mind.
I am not here to knock realtors, but you need a real estate agent that is open-minded to all financing options and who is very knowledgable and creative.
I wrote a blog the other day, Nehemiah/AmeriDream Down Payment Assistance Programs (DPA's) - Are they that bad?, where some realtors came out openly and stated that some offers have been turned down because of the financing that was being provided by that buyer's lender. Don't you want to sell your home? If it's legal and proven, why fight it? Just because a realtor says that they are professional and great at their job, doesn't always mean that they will get the job done in a timely manner.
Has a realtor mentioned to you that you can offer seller assistance or a seller concession to help a buyer buy your home? That this could move your house off the market much quicker. I have heard realtors advise their clients not to accept such an offer when it comes to down payment assistance programs. Why? They are legal. They are approved by HUD and FHA. Or is because the realtor doesn't understand them that well, that they don't have a better understanding of how they work? Or maybe they had a transaction that went bad because a buyer using one of these programs was later turned down. And that the lender blamed it on the program. Maybe the fault was really of that lender. I have been using the down payment assiatnce programs, preferably Nehemiah, since 1997. I have never had a problem with them. As a seller or a listing agent, we need to know the basics.
Are you leaving potential money on the table if you refuse a buyers offer, one who is using a down payment assisatance program, because of the advice of your realtor? I wouldn't consider that smart money. Not in today's market. Who cares if there are plenty of buyers in the market. If you get what you wanted or just because you need to sell, why take that chance.
I would say on an average, that many homes are sold for about 4 to 6 percent less than the original asking price. As long as it was priced accordingly. FHA loans allow the seller to pay for 6% of the buyers closing costs. Most other loan programs only allow for 3%, depending on the down payment. In many cases, you won't have closing costs that total 6%. FHA's guidelines state that the buyer needs to have 3% of their own money which can also be the form of a gift. They can get 100% of their gift monies from a realtive or a non-profit organization. The non-profit company offering one of these down payment assistance programs, such as Nehemiah or AmeriDream. This money from the non-profit can be used for the buyers down payment or closing costs.
So, how does this program work? It's very easy to comprehend. Let's say you have listed your home for $100,000 (to keep numbers simple). Let's say you would accept nothing less than $92,000 because you owe $75,000 and you need to pay the realtor and have some walking away money to buy your next home. The offer is made at $93,000, but they are asking for $7,000 in seller help. That is 7% of the purchase price. This is where a down payment assistance program is most helpful, especially when it comes to FHA loans. You now sell the house for $100,000 and your buyer is now getting $7,000 to help the sale of your home.
Let's take this a step further. Let's say they need $9,000 instead and you can't really go below the $93,000 offer to give them more money back. They could buy the house from you for $102,000 and still get the $9,000 that they need. This only works if your house is truly worth $102,000 and an ethical and honest appraisal is done in accordance to the guidelines set forth for appraisers. In either scenario, both parties are happy.
Food for thought.....
- You can negotiate with your realtor to where they would only take commisson on the original offer, since that is what you could have sold it for. Makes sense, right?
- Yes, if you live in a state to where you have to pay a transfer tax, you will have to pay it on the amount sold. But we are talking about pennies here. Okay, dollars, but time on the market could cost you more than what you ended up paying.
- And if you want to understand more about these down payment assistance programs, please read : Creative FHA financing -- No money out of pocket from the buyer!!! -- Part 1
- If you hear people say that FHA mortgages are worse than convnetional loans, please read this for some claification : FHA loans, why can they be better than conventional loans
- Lastly, FHA appraisals are no different than conventional appraisals. This use to be true over 5 years ago, but HUD changed this and made it simpler. There are no FHA VC sheets anymore.
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For more information on FHA loans, please go to this link. The FHA Expert
For more information on how you can obtain your dream home, please click here : Mortgage Financing Options
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!
Copyright © 2008 by Jeff Belonger
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