Buyer loves the home but needs closing cost assistance. There are many facets that need to be addressed before the offer is executed to protect both buyer and seller.
Smart questions to obtain answers on the front end to head off disaster.
•1. Is the amount reflected for the buyer's closing cost on the contract conform to the guideline limitations for the type of loan that is acquired?
•2. Do you have in place a lender's pre-approval for the loan amount and terms of the contract? Listing agents, be reminded to validate that the letter is current and visit with the loan consultant to get a comfort level as to the professionalism if you do not know the parties involved. If you have some concerns with the lender choice, make it a stipulation that the buyer will have to be overviewed by your trusted lender source. We all know of the fly by night companies that hand out pre-approval letters like candy that are not worth the paper written on. Be comfortable of the buyer's ability to purchase the home. The best gift you can give yourself and your client.
•3. Does the contract exceed the list price of the property? This can be a red flag. If the home has been on the market at the same price for a long period of time, no appraiser is going to value over the list price unless there is some condition improvement or very valid reason. (Stacking closing cost is not a valid reason).
•4. Will the home appraise for value? Be proactive in doing your homework to see if the value is supported in the market place. If you feel there may be an issue because your home is superior in finish to some of the recent sales then do research and get the information together regarding the points of difference of the properties. Make sure the appraiser is given your comparable sales prior to the appointment or meet the appraiser at the home to hand it personally to him/her. Make sure you provide meaningful comparables and have sources to note issues on the other properties that you may be aware. For example a sale may have smoke odor. Place a notation on the sale regarding the odor issue and cite the listing agent for verification.
•5. Make sure the home has not had a FHA appraisal on it within the past 6 months (home may have been under contract and it fell out). If it had validated that the appraised value is for your contract price or higher. A FHA appraisal remains with the home for 6 months. The only reason it would be reconsidered is there is a condition change or some very valid reason.
•6. Be aware if there are repairs that are needed on the home and the buyer has gone to the limit of their assistance amount then there will be no room for seller picking up some closing costs in lieu of repairs. Another method to negotiate this issue will need to be explored.
Buyer closing costs are a reality in this market. By being proactive on the front end can pave the road to a smooth transaction and a CLOSED SALE!!