Realtors should know basics about Mortgages in New Jersey– Especially FHA Mortgages
When it comes to realtors giving in depth advice about mortgages, it does crawl under my skin. Some of you know this, and some of you disagree with me. Some realtors think a realtor should go as far as to pre-qualify a buyer. One reason from a realtor was that he could do it better than many of the loan officers. Sure, there are bad loan officers and good loan officers. I can make the same statement in regards to realtors, and in most other professions. But lets put all of that aside, because that is not what this post is about.
So why do I bring this up then? I will say that a realtor needs to know the basics when it comes to mortgages. They are suppose to be knowledgeable when showing homes, right? How does one usually buy a home? Usually with a mortgage. And in today’s mortgage arena, there are really only four types of mortgages.
Conventional Loans – easiest of all appraisals and what is required.
FHA Loans – appraisal issues are not as strict as the rumors that say FHA is harsh. Maybe back in the day, prior to 2002. The VC sheet was even dropped from the appraisal almost a decade ago. Broken doors, cracked windows, cracks in the foundation, chipping and pealing paint, and mold are usually the biggies.
USDA Loans – people need to be aware that not only does the lender underwrite the appraisal, but that the USDA needs to review the appraisal.
VA Loans – in between conventional and FHA requirements.
Each mortgage is different, and some are more lenient than others when it comes to appraisals. But here is the part that a realtor should focus on. Many sellers and listing agents want at least a pre-qualification letter from the buyers mortgage company. It makes total sense and is not unreasonable. The pre-qual letter should state what kind of mortgage it is, right? Well, if my pre-qualification letter says that the buyer has been pre-qualified up to x,y,z; with a FHA mortgage, then that means that buyer is getting a FHA mortgage.
Here is the dilemma or issue at hand. I know of a buyer getting a home with a FHA mortgage and the sales agreement was written as an ”as is” purchase. Which means that the seller will do no repairs. Well, the house is not only a mess, but several things are wrong with it. The main issue is that it has mold, and they knew about this because there was a previous buyer, in which that transaction fell a part. Secondly, there are like eight electrical outlets that needs covering and an electrical box. Anyone with little experience regarding FHA mortgages would know that this would need to be addressed and fixed prior to settlement. Regarding the mold issue, the realtor said FHA doesn’t get worried about mold issues. The other issue is that the buyer is using a friend as their realtor who really only does commercial deals. So you can see why that realtor didn’t even pick up on these “red flags”, even though the house is being sold “as is”.
Here is a picture showing you one of the outlets. You tell me what you think.
As you can see, not only does the box have to be covered, but that the wires are exposed.
Conclusion : Realtors should know the basics about mortgages, especially FHA mortgages, since this is about 40% of all mortgages in today’s real estate transactions. In some areas, FHA mortgages are even 50% or higher in specific markets.
Let’s try to look at this another way. Would a buyer really want to buy the property if it has some major issues? Shouldn’t a realtor be focused on the condition of the property prior to listing it? If the realtor sees some potential “red flags”, and they aren’t sure, wouldn’t it be wise to call a few lenders to find out. As a sales person, shouldn’t that person know his or her product? If selling a home, not only knowing the condition of the home, but understanding the basic appraisal requirements for the basic mortgages? Just some food for thought. Because I have always said, “the stupid question is the question not asked if it has been thought about.”
So in my honest opinion, realtors should know the prime basics of mortgages in New Jersey. The primary focus should be on appraisal issues.