Just want to know how many of you are having problems getting an accepted offer on an REO property when your buyer wants to purchase using FHA financing? 

I recently attended the Five Star Conference in Dallas, and the REOMAC dinners in both Dallas and Los Angeles. What they announced in regards to FHA buyers is certainly not what is happening in market place in Orange,CA.  They (meaning asset managers) stated they welcome FHA buyers and do not shy away from necessary repairs as found by Fha or conventional Appraisers, and,or, Property Inspectors...all within reason, of course.  However, here are just two of many, many, many, true stories and personal experiences.

Prop. #1: REO Listed for $399,000. Property is a disaster. No trash out, no repairs, toilets black and overflowing. Litter in front yard. Certainly a property that is not being properly managed by the listing agent. However, buyers Offer  $330,000 with 10% down, conventional loan, buyer pays own closing costs. 30 day escrow.  Buyer's agent receives a Best & Final. Buyer's offer changed to $360,000. No contingencies and as-is. Offer declined with no explanation (or even proof it was submitted...but that's another blog for another day.) Approx. 15 days later MLS is marked pending. Aprox. 30 days later, property marked sold for $336,000. ($24,000 less) Selling agent is the listing agent.  (There were not other offers on the property, or, if there were, they too were not accepted.) 

Prop #2: REO Listed for $369,000. Property has some very much needed repairs...leaking pool, 3 broken windows, required fencing is down between two houses (code violation for a pool). Commissions offered are 3.5% to the selling office. Buyer offers $340,000 FHA, with $10000 closing costs. Listing agent would not present offer due to FHA financing. The same day price is reduced to $363,900 and put on a HOLD DO NOt SHOW while repairs are made. EIGHT weeks later the only repair made is to repair (not replace) the existing fence and interior painted (even though property is still dirty). Commissions offered still 3.5%.  Another offer is made for $363,000 FHA, $8500 closing costs, 2.5% commissions (buyers agent willingly reduced commission 1% to assist with the $3000 pool repair & other minor repairs, which were under $500). Offer rejected without explanation. Same day rejected price is reduced to $345900 and 3.5% commission. Listing agent "thinks" it was rejected because Asset Mgr wanted an offer with more money down. Aprox. 1 week later property is posted as pending. It has not been reported closed yet.  (When offer first made there were no other offers...agent waited over a week to submit offer, by which time there were two offers...neither were accepted.) (Appx $12,000 net less to lender)

Does anyone see the number of issues in these two scenarios? The biggest flaw I see is the reduction in sales prices, which will reflect on the rest of the neighborhood. With the economy being in its current state, these lenders, asset managers and possibly the REO agents are doing a disservice to THEMSELVES. In my particular area, the majority of loans were made by five big players in the market.  In rejecting the higher sales prices they bring down the neighborhood...many of which have loans they made. DOes it make sense?  Secondly, are they discriminating against FHA buyers? In addition, since when do the listing agents have the right to determine if an offer is submitted to the lender?

What can we do as an industry to be sure FHA buyers are not discriminated against? What can we do to be sure the REO Listing Agents paints the right picture for the Asset Manager? What can we do to be sure the offer even gets presented...mistrust is setting in? Since both of these offers were rejected without a reason, how can we reassure the buyer they can still buy FHA?  Can the govt do anything to assist an FHA buyer to be treated fairly? 

Do lenders need to revamp how they sell their REO properties?

The above two scenarios are just a few of the many examples I could have given.

What do you think?