This is the second in a series of blogs that I am writing to FIRST TIME HOMEBUYERS in Crescent City, Del Norte County, California.
I recently had the pleasure of helping a couple find their first home and, in this market where houses go under contract within a few days, it was very instructive. So let me present the scenario because, chances are, this is what you will be faced with as well.
1. Couple is pre-approved for only enough loan to purchase a lower end bank owned (REO) or Short Sale home. (Pre-approval is a MUST before looking at homes - ask me what that entails.)
3. REALTOR(R) sets up showing of homes that appeal to the buyer from photos on the listings. In this price category and if it is a REO, the homes will be vacant and a lockbox on the door which the REALTOR(R) can open. If it is a SHORT SALE, in many cases the owner still lives there or has tenants. In this case, the REALTOR(R) has to make arrangements to get in.
4. OFF YOU GO TO VIEW THE HOME WITH YOUR REALTOR(R). At no time are you, the buyer allowed to go into a home by yourself. If someone urges you to do so, you will be trespassing. If the REALTOR(R) gives you the passcode to get in THE REALTOR(R) IS ALSO BREAKING THE CODE OF ETHICS, AND PROBABLY THE LAW.
5. If the REALTOR(R) has not been in the house before, she will be inspecting the home to look for potential problems - and point these out to you, the potential buyer. Here are some of the things that could prevent you from purchasing the home (or at least, the appraiser will stop your lender from giving you the loan):
A. There is unfinished construction in the home. This is something I have seen a lot here in Crescent City, Del Norte County, California. In many cases, this kills the deal unless the construction is finished before your lender agrees to fund your loan. You may be out several hundred dollars worth of appraisal fees.
B. There are added-on additions that have most probably been done since the original house was built. Had the owner gotten permits? Is this legal construction? You see, if you buy a REO home, the bank/owner will not give you any warranties or make property disclosures. You, the buyer, won't find out what the deal is until an appraisal is done WHICH YOU, THE BUYER PAYS FOR. That means, if your lender won't fund the loan because of this construction, you are out several hundred dollars in appraisal fees.
C. Dry rot: This is a big deal here in Crescent City as well. It's harder to spot if the owner has covered up the spots with paint, or it's in the walls and you can't see evidence of it under normal circumstances. But there are tell tale signs, and your REALTOR(R) should be able to spot them. Dry rot also can mean mold, mildew and other problems. Again, without this advice, you might be out several hundred dollars worth of appraisal fees.
D. Other problems: Here is a blog I wrote about "10 things I don't want to see during a showing." MUST READ!!!
OTHER ADVICE THAT THE REALTOR(R) CAN SUPPLY:
Because we watch the market so closely, we see certain properties COME BACK ON THE MARKET. If this happens, you want to know WHY. Was it because:
1. The buyer could not get the loan - that had nothing to do with the home he is buying? In which case, it does not "stigmatize" the home.
2. The buyer could not get the loan - because the appraisal came back :
A. TOO LOW: The house is priced TOO HIGH.
B. REPAIRS that needed to be done or corrected and the lender/seller is not willing to do them.
THIS HOUSE IS TROUBLE.
But if you, the buyer, have your heart set on this home, there are certain things that I, your REALTOR(R) can request on your behalf. Sometimes it works, sometimes it doesn't. So far, I've had a good track record of:
1. Getting the lender to lower the price.
2. Getting the lender/seller to make repairs.
3. BUT THERE ARE NO GUARANTEES. THE THE REO OWNER OR THE SHORT SALE LENDER/SELLER CANNOT BE FORCED TO DO ANYTHING. BUT I HAVE A GOOD TRACK RECORD.
SO YOU THOUGHT BUYING A LOW PRICED HOME WAS EASY? MAYBE. LET ME HELP YOU THROUGH THE PROCESS.