Wow! I just haven't had time to write in a long time. But let me update you on some interesting issues that we are facing when processing sales in today's lending environment.
First, let me start by saying that here in Baton Rouge, LA we have a remarkably healthy real estate market. Properties are moving. We've had a couple of properties with multiple offers. And there seems to be a healthy supply of inventory and buyers. Having said that, this means that we have been selling. And in selling, we've seen a few interesting things pop up!
For investors: Keep your reciepts! If you purchase a home to fix it up and sell it quickly - especially if you got a great deal on the purchase - keep your reciepts. We've noticed that the buyer's lenders are asking for those receipts to justify the increase in value. Now, I, personally, am not fond of this. I think the lender should trust the appraisal to determine value. And it concerns me if underwrters are now placing a value on the improvements made to a property. But despite that, this is the world we live in. This should be an issue if you double the value in less than a year and the buyer is getting an FHA loan. However, we've seen this issue pop up even when the property did not "double" in value. So keep those receipts and be prepared to deal with this issue if it pops up.
Here's the other item that's seeping it's way into our perfect little world. It's a thing the underwriter calls an "inducement to purchase." In some parts of the country, I've heard that sellers are giving away cars, cruises, vacations, etc as an inducement to the buyer to purchase their property. This is not the case in Baton Rouge, but we are feeling the effects of this down here. So how does this affect us now? If you have a purchase agreement that states that a "washer and dryer will remain at no value," the underwriter will ignor the "at no value" clause and subtract the value of those items from the purchase. In fact, I'm dealing with this right now!
I can't believe a common household appliance would be considered an inducment to purchase. And quite frankly, I'm concerned at where this stops? It starts with a washer/dryer, then a how about a dishwasher, a stove, the toilets, etc. It's a slippery slope is all I'm saying, but it's one that we don't have any control over. These rules are dictated by Fannie Mae. For now, just be aware that these items are probably better left off the purchase agreement and sold separately to the buyer from the seller. And keep an eye out for what Washington, D.C. does. As unemployment rises in other parts of the country, rules and laws that they implement may have further affects on us.
On the bright side our unemployment rate is much better off than the national average and we've actually seen job growth in Louisiana. That's all for today. If you're considering a move, let me know!
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