Special offer

10 Real Estate Deal Killers........

By
Mortgage and Lending with Waterstone Mortgage Corporation

I attended a class the other day called "10 Things to Ask Your Buyers Before Taking Them House/Condo Hunting" and will be addressing those issues in an upcoming blog entry but wanted to put together a list of what can kill a deal for a buyer or a seller.  Please feel free to share this information with your buyers and sellers!

 

  1. Skipping the Mortgage Preapproval Process: For buyers, getting preapproved for a mortgage gives them a clear idea of how much they can safely borrow, plus it addresses credit issues and kick-starts other financial paperwork.  What's more: it identifies them as a SERIOUS BUYER.  With mortgage guidelines changing almost daily these days, a buyer needs to be 100% sure that they can afford the down payment requirements and meet the credit score requirements of a particular property type.  Sellers with a hot property should demand nothing less than proof of preapproval from the potential buyer's lender (hopefully it's Northstar Mortgage!)  There is no sense in wasting time on time wasters!  I know most Realtors require their clients to get preapproved prior to ever showing them the first house but I also know Realtors who spend sometimes months showing prospective clients properties, taking them to lunch and/or dinner, searching the MLS for them and then find out that the client cannot get approved for a mortgage at all!  On top of having spent countless time with an unqualified prospect, the Realtor has also spent money on them.  IF A CLIENT IS UNWILLING TO GET PREAPPROVED, HOW SERIOUS CAN THEY POSSIBLY BE??
  2.  

     

  3. Not Knowing What a Condotel is: As Fannie Mae, Freddie Mac, FHA and VA tighten up their credit guidelines, they have basically choked the ability to do a fixed rate mortgage for a condo in a resort area.  If you have a client that is buying a condo and you can go on Google, put the name of the project and the city in, and find that you can rent a unit in the project for a day or for a week, chances are you seller will NOT be able to get a fixed rate mortgage to buy a unit in that project as it will be considered a "condotel" or "condohotel".  If the HOA has 10% - 15% (depending on the investor) or more of the units in the project as delinquent on their dues, it makes the financing in that project even that much more difficult.  If the project has the word "Resort" in the legal name of the project, it is a condotel.  Here in our local market in the Panhandle, one or all of these affects about 99.9% of the condo projects!  Before you show condo units to a prospective client, MAKE SURE THEY ARE AWARE THAT THE AVAILABILITY OF A FIXED RATE MORTGAGE IS ALMOST NON-EXISTENT!  While we are able to finance condotels with several investors utilizing adjustable rate mortgages, you would be very surprised at how many calls A DAY I get from clients who are at contract on a unit and then find out that they can't get a fixed rate mortgage.  You would be doubly surprised at how many of them end up not buying at all!  (It's currently noon as I am writing this and I have already had 5 of these calls today and in all cases: they were at contract and talking about not buying.) The investors we use do NOT require a condo checklist so it's sort of a "don't ask, don't tell" policy on the HOA dues.  If your client knows up front that they can get a mortgage and the type and terms of the mortgage, they are more apt to buy a unit as opposed to finding out after they find the perfect unit.  The prices and deals on condos right now are so incredibly good that some people don't care that they have to do an ARM but if they find out after the fact, it sours them and causes them to take pause and possibly not buy!
  4.  

     

  5. Not Understanding the Length of the Buying/Selling/Financing Process: I have no idea what the numbers are, but there is a high percentage of real estate being sold that is either a short sale and/or REO that have to be approved by the bank currently holding the note.  This process can take as little as 3 weeks or as long as 3 months (and even longer) and sometimes, buyers lose their enthusiasm.  Make sure your client knows going in that buying one of these properties (or selling one, if you are the listing agent) will not happen overnight.  If they know up front, it doesn't create a fear in the buyer or seller because it takes longer than they may have expected.  On the financing side: because rates have dropped to almost historical lows, most underwriters are taking more time to get files underwritten than what it used to take.  Talk to your loan officer and get a realistic idea of how long it may take (I have heard of some underwriters taking 5 to 6 WEEKS to underwrite files based only on the sheer magnitude of the number that they have received recently!!!)
  6.  

     

  7. Assuming the Appraisal Equals the Actual Value: In theory, appraisals are objective estimates of value.  But several different appraisals can yield several different numbers.  For example: an appraisal that's been done for a possible refinance may have been slightly inflated to encourage that refinance.  So make sure that, as sellers, when a house is put on the market the agent do a CMA to better indicate the home's worth.  As a buyer, get similar comps from your agent!  But realize that the TRUE VALUE of a property is what someone is willing to pay for it.  There is no emotional value added to an appraisal.
  8.  

     

  9. Exposing Your Hand During Negotiations: Buyers should never let their love for a house cloud their vision.  They need to try to contain their enthusiasm.  Otherwise, the sellers and/or their agent will know they've hooked a live one and assume you may forgive certain flaws because they think a particular property is right for them.  Also, I always suggest to my clients that when they make an offer on a home that they tell me the amount and I will send a preapproval for that exact amount.  If a client is preapproved for $200,000 but is offering $179,000 for a house that is listed at $190,000, they are giving the seller an unfair advantage in knowing that they can afford more!
  10.  

     

  11. Opting to Use An Agent That is a Friend of a Friend or a Family Member (aka: choosing the wrong agent):  Buyers and sellers should interview several agents from small and from large firms.  Get references and success stories.  Opting for a friend or family member who is a Realtor doesn't assure one of the best results in all cases and it could cause a rift.  Choosing an agent who suggests the highest list price is not a recipe for success and neither is opting for the agent who charges the lowest commission.  Remember that the following qualities in a Realtor will usually get the job done right: smart, empathetic, experienced, dedicated and one that pays attention to a buyer's list of wants and needs in a house!
  12.  

     

  13. Not Realizing The Other Costs Involved in Homeownership: If a client is preapproved for a mortgage with a lender, that preapproval is based on their gross, not net, income.  This means that they may can qualify for  a payment that is higher than they may want to spend.  Mortgage lenders do not take into consideration, unless it's a VA loan, the cost of lawn maintenance, utility bills, groceries, insurance, childcare, pool maintenance, entertainment, gas, auto repairs, etc.  Just because a client can afford $1,500 a month doesn't mean that they should buy a house that uses all of that to pay just the mortgage payment.  Because today's largest pool of buyer's are first time homebuyers, it is very important that the Realtor explain all of the other expenses that the client may not realize will be involved with owning a home!  Opting for a dream home that may otherwise create negative quality-of-life challenges (ie: longer commutes, higher taxes, bad schools) can cause buyers to question their decisions after a few months.  If a buyer purchases a home and finds that the other expenses involved causes them to lose that home or not be able to afford to do much else (house poor), how many referrals do you think they will give you??!!
  14.  

     

  15. Not Knowing What They're Signing: The sales contract is a legally-binding document.  Buyers and sellers should review it as if their legal well-being were at stake (because it is!).  It should address all concerns of both parties, such as who will pay what for closing costs and repairs.  A poorly written or incomplete contract can cost time, money and emotional energy and tie up a deal for weeks or months.  If there have been any oral commitments, they should be put in writing.  Also, realize that just because a house is being  sold "as is" per the contract, most lending programs will not let a property close that has certain repairs necessary if they are pointed out on the appraisal (ie: roof leak, exposed wiring, etc.)  Always address a dollar amount of repairs that a seller is willing to pay on the contract instead of leaving it blank to make sure that the house makes it to closing.
  16.  

     

  17. Not Paying Attention to The Good Faith Estimate: As mortgage lenders and brokers, we are all required to give a client an estimate of the costs involved in the closing of the property.  In fact, we are required, BY LAW, to give this to a client no later than 3 days after they make loan application.  As a Realtor, go over the estimates with your client!  There are unscrupulous lenders and brokers who will intentionally leave certain costs off (ie: escrows) or intentially underestimate the cost of other items (ie: taxes, insurance, title company fees) just so that a client will go with them and then the client finds out too late (at or immediately prior to closing) that they have to bring more money to closing than they initially thought.  What do you suppose happens if the client doesn't have the additional money to pay these fees??
  18.  

     

  19. Waiting for Prices to Go Down or For Interest Rates To Drop (aka: timing is everything, but maybe not in the sense you're thinking): Right now, mortgage interest rates are at or very close to historical lows.  Housing prices have decreased, as well.  I read an article that indicates that we are very close to reaching price stabilization.  Once that is reached, prices will start to increase.  Mortgage rates may go a bit lower, but there is always a chance that they will increase.  If a buyer is hoping that the price or rate will drop and either one goes the other way, it will end up costing them.  How do you know the bottom is reached until it is too late?  Buyers need to get the psychology of "what is my interest rate" out of their head and look at the monthly payment - that is what you write a check for every month!  Increasing rates and decreasing prices can cause a mortgage payment to be higher than what it may have been at a higher price!  If you have a client looking for to purchase real estate, find out what PAYMENT AMOUNT they feel comfortable with and work back from that instead of calling your lender to ask "what's the rate".  Rates these days are contingent on exact credit scores in most cases and while someone with a 740 credit score may be getting a rate of 5.25%, a client with a 650 credit score may end up with a rate that is 1-1.5% higher than that!  It's not about the rate - it's about the MONTHLY PAYMENT!
  20.  

 

I hope that this list offers you some insight into those things that we see that make buyers and sellers upset and can cause them to change their mind about buying or selling real estate or referring their friends, family and coworkers to you in the future.

 

If you are working with any buyers in Florida, Alabama, Georgia, the Carolinas or Tennessee, we would love the opportunity to work with them and insure that your deal gets to closing and, if it's not doable, not hesitating to tell you up front!

 

Comments (4)

Barbara Hughes
U.S. Air Force - Niceville, FL

Good tips, Sue.  Nice to see you tweeting.

Mar 06, 2009 08:43 AM
Carl Stars
Sutton Group About Town Realty - Burlington, ON

Bringing your  Uncle Harry to act as a home inspector !!

Mar 06, 2009 02:03 PM
Jim Palmer
Chipola Realty - Chipley Office (850) 638-2777 - Sunny Hills, FL
Washington County, Florida

Very good list. With your permission, I would like to print this out to share with all my fellow agents. Helps to be reminded some times of what we think should be obvious.

Mar 06, 2009 09:28 PM
Anonymous
Best Mortgage Deals

Hat’s off. Well done, as we know that “hard work always pays off”, after a long struggle with sincere effort it’s done. -------- shailenago Best Mortgage Deals

Nov 11, 2010 06:10 AM
#4