Why Aren’t Some Sellers Accepting FHA Loans?

Real Estate Broker/Owner with Cam Realty and Property Management

Why Aren’t Some Sellers Accepting FHA Loans?

For buyers with low downpayment as well as credit scores, FHA loans are great option and most do get to closing table with no challenges, however, it is important to understand the difference with FHA and Conventional loans.

Some sellers may not understand the product and reject it without even understanding. Some don’t accept FHA for valid reasons.

-Home may not pass FHA inspections(home without appliances, in need of repairs etc)
-Home will not qualify for an FHA loan(some condo/townhome complexes)
-Sellers might have received other offers without any contingencies

I’ve represented buyers with FHA loans who had no challenges, also had sellers who did accept FHA loans and sold their homes without any challenges.

This truly becomes an issue in a multiple offer situation where the seller has cash offers to close within couple of weeks without any contingencies. How can a buyer with an FHA loan compete with that?

So what is a buyer to do?

-Present a clean offer. Don’t make too many demands from the seller. These include seller concessions, repairs, appraisal. If the home you’re looking to purchase needs repairs, ask your lender about FHA 203k rehab loans where the borrower is able to borrow money to fix the home.
-Have your Realtor educate you on the market. Know what is selling, average days on market, availability and prepare your offer with all that in mind.
-Try to find out seller’s motivation. Sometimes the terms of the offer carry a heavier weight than the price. Perhaps the seller would like to have a 90 day closing or really keep the light fixtures that mean a lot.
-Look at homes that are within your budget. If you are qualified for $200,000, do not look at homes that are listed for $280,000 hoping the sellers will come down on the price unless the home is grossly overpriced.
-Save money to have a larger down payment and go conventional rather than FHA.

There are many sellers who are accepting FHA loans, however, there are some homes that will NOT qualify for FHA. Have your Realtor speak with the listing agent on available financing prior to previewing the home. If the MLS clearly states no FHA, well..that’s pretty clear to me.

Don’t be discouraged, with persistence and assistance from your Realtor and lender, you will find your dream home and a seller who will accept an FHA loan.

If you’re looking to buy a home in Clermont, Minneola, Winter Garden FL areas, I would love the opportunity to speak with you. Call or text me at 407-929-1852, email bethatalay@gmail.com or visit www.WhereToLiveInOrlando.com

Why Aren’t Some Sellers Accepting FHA Loans?



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Kat Palmiotti
Grand Lux Realty, Monroe NY, 914-419-0270, kat@thehousekat.com - Monroe, NY
The House Kat

Looking at homes within the budget is a great idea for any buyers! Nice list of items a buyer should consider.

Mar 28, 2016 03:52 AM #1
Noah Seidenberg
Coldwell Banker - Evanston, IL
Chicagoland and Suburbs (800) 858-7917

Hi Beth, I have done a bunch of deals with FHA, in the 60's there were very popular. There is no good reason anyone should not accept an FHA loan.

Mar 28, 2016 03:56 AM #2
Ed Silva
RE/MAX Professionals, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

For many buyers an FHA mortgage is the only viable option they have, and often on an occupied home it will work well.  For an REO it is only viable if it is with the 203K rehab option

Mar 28, 2016 04:57 AM #3
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hi Beth --- it's not always easy for buyers in a competitive real estate market. This statement in your post sums it up well:

Don’t be discouraged, with persistence and assistance from your Realtor and lender, you will find your dream home and a seller who will accept an FHA loan.

Mar 28, 2016 05:01 AM #4
Sandy Padula and Norm Padula, JD, GRI
Realty National & Geneva Financial, Llc. - Carlsbad, CA
Presence, Persistence & Perseverance

Beth Atalay Super post. We have had several home buyers who have indicated they would be using conventional only to change to an FHA after the purchase offer becomes a contract, and vice versa. Never have there been any problems with either sellers, nor  the closings, so your post is a surprise to us.

Mar 28, 2016 05:14 AM #5
Joy Bender
Pacific Sotheby's - La Jolla, CA
#1 San Diego Luxury Real Estate Digital Marketer

Hi Beth great advice. And if searching for a condo beware it may not be HUD approved. 

Mar 28, 2016 06:03 AM #6
Jeffrey DiMuria 321.223.6253 Waves Realty
Waves Realty - Melbourne, FL
Florida Space Coast Homes

I find far less issues today then years ago...however some agents assume the buyer is going FHA because of credit challenges.

Mar 28, 2016 06:05 AM #7
Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

I rarely have a seller that will accept an FHA offer.  But I always do put it in the MLS.  Generally it's due to condition

Mar 28, 2016 06:07 AM #8
Belinda Spillman
Aspen Lane Real Estate Colorful Colorado - Aurora, CO
Colorado Living!

I think a lot of sellers are worried about the appraisals.  FHA appraisers are much more conservative than an appraiser that is doing a conventional with 20% down.

Mar 28, 2016 06:28 AM #9
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Beth we are in a Buyers Market here in CT so FHA mortgages are not much of an issue, but I can see where it would be a much different situation in a Sellers Market.

Mar 28, 2016 06:47 AM #10
Kathleen Daniels
KD Realty - 408.972.1822 - San Jose, CA
San Jose Homes for Sale-Probate & Trust Specialist

Beth,  I have added a clause that buyer will pay for repairs required by FHA, if any. That of course only works when the buyer has the funds to remedy and when it appears repairs are minimal.  

So many agents just fear FHA.  More education and necessary. 

Mar 28, 2016 07:18 AM #11
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi Beth - That's great advice. The only problem we've had with FHA loans - and it's a big one - is that they have been non-competitive in our very hot market, not only with cash but with conventional loans as well. Buyers have to write the best offer they can and hope that will be enough.

Mar 28, 2016 07:42 AM #12
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

These are excellent tips, Beth.  Though, for many buyers with low down-payment loans, this is a tough market for successful home purchases.  

Mar 28, 2016 08:59 PM #13
DEANNA EARLY - - ( NMLS # 268590 )
American National Bank & Trust - Smith Mountain Lake, VA
Highest Ranked Mortgage Loan Originator Virginia

I have a GRANT program now in Virginia that gives a buyer up to $ 8,000.00 of FREE MONEY toward their 3.5% down payment on an FHA loan !

Needless to say Beth Atalay , I am rolling in FHA loans right now and sellers are taking them left and right !

Mar 28, 2016 09:02 PM #14
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Anyone thinking of buying a home in your area should call you.

Mar 28, 2016 09:17 PM #15
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Beth, I have a VA buyer where I have written 13 or so offers, with the same issue.  They are offering $$ over appraised value, but still does not win the bid over cash and conventional offers with large down payments.

Mar 28, 2016 10:05 PM #16
Amanda S. Davidson
Amanda Davidson Real Estate Group - Alexandria, VA
Alexandria Virginia Homes For Sale

Beth, I used to see a lot of FHA loans but, not as much anymore. Even then sellers were reluctant and you're right it can go really smoothly or the opposite direction. Hiring an agent with your expertise is a must - you educate your buyers and guide them on structuring their offer to make it most appealing to the seller. Your expertise is priceless.

Mar 28, 2016 11:32 PM #17
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Hi Beth - there are many things for a buyer to consider.  Having a good agent and a plan will get them through it successfully.

Mar 29, 2016 01:03 AM #18
Wayne and Jean Marie Zuhl
Samsel & Associates - Clark, NJ
The Last Names You'll Ever Need in Real Estate

Hi Beth,

Excellent post filled with lots of great information!

Mar 29, 2016 05:26 AM #19
Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Beth, FHA has gotten a bad rep in these parts.  If you are the only offer on the table, especially if the house has been on the market for a while, you might be able to pull it off with FHA.  But in a bidding war?  Forget about it!

Apr 07, 2016 12:41 PM #20
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Beth Atalay

Cam Realty of Clermont FL
Sell or Buy Homes in Clermont FL
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