So I promised many of you that I'd watch for the results of my lost deal back in October that involved my Buyer who chose to finance their purchase using FHA. They wanted to take advantage of rates in the 5% range and only bring 3.5% down. My post is below for reference.
It just closed with the prevailing Buyer and as it turns out, the Seller (Freddie Mac) took $10,000 less than our offer, and closed 2 weeks later then what we offered. The Buyer incidentally got a Conventional Loan with 20% down. Are you kidding me!!
Tell me a Seller who would seriously take $10,000 less, prefer an Inspection condition, and close 2 weeks later instead of at the end of a month unless there was some form of discrimination going on. I understand that if a property has some issues an FHA appraiser would force a Seller to resolve, then a Conventional Loan looks more inviting but this property was move in ready at $400,000 and my clients waived their inspection provision.
The unfortunate truth is that this type of response from Freddie Mac or any other Seller is going to force Realtors to be as vague as possible when presenting the type of financing their Buyer could choose. If a Buyer can qualify for all types of programs, moving forward I'm inclined to select Conventional, FHA, & VA and then allow my clients to choose after we are Under Contract. If the loan program has no negative impact to the Seller, then the best thing to do (given this recent experience) is not disclose FHA solely to a Seller as it's clear that Buyers are seen as "weak" if they choose that financing route. Again...I say Are you kidding me! Just get it done for the benefit of both parties!
I'd love to hear if anyone has experienced similar results with similar Buyers and properties.
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October 29, 2009. I'd like to know when it became OK to discriminate against Buyers who use an FHA 3.5% down payment loan program. I recently submitted an offer for a newly engaged couple who had amazing credit, substantial savings, and enough liquidity to put 20% down. They chose a foreclosed home that was owned by Freddie Mac. A great home that was move-in ready. They made a strategic decision to take advantage of an FHA program that allowed for 3.5% down. They were going to invest the remaining 16.5% in updating the property to ensure they will earn a substantial gain on their investment. We were in a competing offer situation. My clients put in a full price offer and waived their Inspection condition. I was told our offer was not successful. It was implied by the Seller's agent that our offer needed to show a "stronger commitment" on the part of the Buyers. EXCUSE ME!!!! The Seller actually felt my client's offer was not strong enough at full price and no inspection condition???? It is my opinion that Sellers feel anyone who is not bringing 20% down is a weak Buyer. I'm sorry....since when did the value of money change based on where and how it came to be? $400,000 is $400,000 whether it's cash, a Conventional Loan, VA Loan, or FHA loan. I believe there can be a case made that a Seller who discards a Buyer because they made a choice to use an FHA loan is border line discrimination. I'd like Freddie Mac to tell my client, who is an Active 20yr Navy soldier and his Fiance who is a consultant for the Dept of Defense, that they aren't committed to buy their dream home because their choice to use FHA (which comprises nearly 40% of all purchase loans in 2009) is weak. Where has this market implosion taken us????
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