Seller Proposed Terms - What Does it Mean?

Real Estate Broker/Owner with Criado Realty 0548772

Foundation Issues

When a Realtor seeks out homes we should know what kind of loan product our clients will need and perform due diligence. Some sloppy Realtors either don't know about the condition of their homes, which is a ignoring fiduciary responsibility or just dishonest. Some might say that Realtors are just marketing widely or the buyer will pay for the repairs, but that's a cop-out IMHO.

Why? Because a buyer has no business paying for or being financially accountable for repairs.  If the deal dies, who's left with the bill and who gets a repaired home and profiting by it? Not a good buyer outcome at all.

I thought I'd take a moment to share my story and provide information about what buyers should know with respect to their loan type. 

I am helping a client with down payment assistance from the city that requires the house must be FHA ready at the time the contract is written.

Being the diligent Realtor that I am, I called the listing agents to verify the home condition with respect to their proposed financing terms - FHA. I specifically said, "No structural issues, no electrical or plumbing issues." Four were honest so I set up six appointments to discover only 2 didn't cause us to roll out the back door.

After client frustration and discouragement I assured her that I would be more diligent about verifying. I called on 12 more saying, "Please be honest with me. My client is terribly disappointed that we can't find homes that meet this criteria and I don't want to waste her time or disappoint her any further."   I continued with, "If you think it might have foundation, moisture, electrical, or plumbing issues, please be professional and honest"  Kudos to about 7 who said "There may be issues."   

We went out to see the other 5 and guess what!?!  Five Realtors were not professional nor  honest. One didn't even notice that a room was slipping off the side of the house and we could see the sky and ground. The owner was home and gave us an explanation about repairs she was willing to do. She said, "Oh, don't worry about the dry wall, we'll fix it." Me, astounded by her response kindly said, "It's not the dry wall I'm concerned about, it's the foundation." Lady - "Oh, my Realtor has seen it and doesn't think it's a problem." Gasp.

So what conditions are there to FHA, VA, TX Vet, Conventional, Cash, or Owner Carry?

1. VA & TX Vet are the most stringent of all lender requirements. It means the house can't have any termites, rodents, electrical, plumbing, foundation, roofing, or structural issues.  The house must have GFCI outlets in the bathrooms & kitchen.

2. FHA has the same requirements but seem to bee more generous on a subjective basis.

3.  TX Vet aka Texas Veteran's Land Board offers to Texas Residents to buy the loan from the VA and offer a discounted interest rate. It must meet VA standards.

4.  Conventional - Roof, foundation, structure must be in tact. No "safety hazards" - very wide open interpretation.

5.  If it says "Cash or Owner Carry" - Buyer beware. No inspections or appraisals are required resulting in the highest risk level for a consumer. Not recommended other than by investors.

Your best bet is to find a Realtor who will be professional and consult you on condition issues.

Posted by
Cathy Criado President & Founder
Published Author
Your Real Estate Consultant!
999 E Basse Rd. #180-425, ​San Antonio, TX  78209​
​Direct:  (210) 560-1891
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Jerry Newman
Brown Realty, 210-789-4216, - San Antonio, TX
Texas REALTOR, San Antonio Military Relocation

Hi Cathy, I hear you. I have experienced this same scenario when the listing agents have listed FHA or VA on their listing, but later I find out that these homes will not pass the VA or FHA appraiser. It's frustrating to see homes listed with VA or FHA in the proposed terms in the MLS, and find out later they really aren't. I have often called ahead of time to speak with those Listing agents. Some are honest and others aren't.

Oct 31, 2012 03:44 AM #1
Brenda Mullen
RE/MAX Access - Schertz, TX
Your San Antonio TX Real Estate Agent!!

Some Realtors may not know...You can find the VA Minimum Property Requirements in the VA-Pam 26-7 Chapter 12 and can find the ones for FHA on the HUD website.  

VA and FHA can be somewhat strict, but it isn't impossible.  Now, if the home is falling off of the foundation, that is going to be tough :).  The seller is required to pay for the WDI inspection on a VA; however, it is still negotiable in the contract whether a buyer or seller pay for the treatment should anything be found.  

It may be hard to find a home that is FHA or VA eligible that is under $100,000, but they are out there.  Sometimes you have look and see though and unfortunately, since some listing agents may not know the different Loan requirements, just calling and asking may not be sufficient.  They may think that they are being honest...meaning they aren't trying to out right lie to you :).  

Good luck finding your buyer the perfect home!  I know you can do it :)!

Oct 31, 2012 04:17 AM #2
Cathy Criado
Criado Realty - San Antonio, TX
Making Real Estate Profitable

Hey Brenda, thanks for those links. The trick of the treat is that the buyer is using a COSA dpa which prevents the buyer paying for repairs and funds are running low so we no time for repairs. We found one so thanks for the vote of confidence. The funny thing is, it's a FSBO I found while driving the area. There is only one thing wrong that we can see, it needs GFCIs but.... Seller is going to change those outlets this week so by the time we go under contract, it will be done. Keeping my fingers crossed! She's a really sweet lady.

Oct 31, 2012 04:21 AM #3
Christine Smith
Buyers Brokers Only LLC - - Canton, MA
Exclusive Buyer Agent & Attorney, Canton, MA

Cathy....doesn't that drive you crazy?  I've been in that situation before looking with FHA buyers and I'd much rather have the listing agent be honest and up front and tell me it won't qualify.

Oct 31, 2012 04:54 AM #4
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of the Manchester NH's area Leading Agents

Good Evening Cathy, you are not alone having this problem. We have it hear to. Although some listing agents are telling everyone "no problem with fha" because they want more showings, some agents truly do not know what it takes to pass a fha appraisal/inspection. This is why sellers should choose an agent who is well experienced to offer the seller tips to get it to pass a fha inspection and be truthful with buyer brokers to get the Right type of buyer to avoid delays, pain and suffering for both the buyer and seller. Nice to see you posting again.  Have a great night and Happy Halloween

Oct 31, 2012 10:30 AM #5
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate

Cathy,  The real issue here is that there are so many ill-qualified agents in the business who don't know or don't care. It's unfortunate that so much time and energy is wasted on these properties for clients who will not be able to close on them.

Oct 31, 2012 01:49 PM #6
Doug Rogers
Bayou Properties - Alexandria, LA
Your Alexandria Louisiana Agent

There's nothing like driving 15 miles to a rural listing that the agent claims will "breeze through" FHA. Only to discover the home has unfinished rooms and no flooring.

Oct 31, 2012 08:54 PM #7
Cathy Criado
Criado Realty - San Antonio, TX
Making Real Estate Profitable

Kathleen -  That's exactly what I'm thinking. The McDonald's Brokering ideology causes this because they are focussed on number of agents over quality.  I am just now recruiting agents so one thing is for sure, I'll be reviewing their MLS listings to avoid being one of those kinds of companies. There should be a focus on making money, but a higher level of focus on integrity, honesty, and fiduciary.

Nov 01, 2012 12:03 AM #8
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

Hey Cathy, good to see you. I normally deal with a majority of very professional people...although finally just closed on a nightmare transaction. Not necessarily what you describe here, but certainly a lot of dishonesty and lack of communication from the listing team. Yes, team- three women who wouldn't even respond to repeated emails, texts and phone calls for information. It was bizzare.

Nov 02, 2012 12:30 AM #9
Erika Naegelin
LoansByErika - San Antonio, TX
See this regularly on the loan side, I have one right now that when I asked the listing agent if it was a flip she said yes and after 4 requests for info on this I finally had to tell both agents and the client go ahead and get me an extension due to me not getting the data I need. Why do we have to ask, it should be info we are given when we all know it's an issue. Additionally, more barriers to entry would help here too in your situation!
Nov 04, 2012 08:04 PM #10
Andrew Capelli
Hoover Elementary - Hazel Park, MI

Cathy: A well-researched, well-written post!  I would also comment that even in non-FHA or VA situations, because so many defects would be caught by a good home inspection, it's astounding to me how many seller disclosure shenanigans still abound in the real estate market.  Great article- Thank you for sharing!

Nov 06, 2012 05:49 AM #11
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Cathy Criado

Making Real Estate Profitable
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