One house, nine offers in less than six hours. This was on a recent home I listed in Layton. It was not a surprise. In fact, when listing the home, I told my clients that the chances were vey high this would happen since the price point was in the first-time homebuyer range. It is more than competitive.
Most of the offers were similar in offer price. All the offers exceeded asking price. I had educated my clients on the fact that the highest offer isn’t always the best offer, since it does have to appraise for the amount that is offered or the buyer has to bring cash to the table for the difference between appraisal price and offer price. Most first-time homebuyers do not have that kind of cash, thus a reduction in price is often times the result if the appraisal comes in low. Occasionally, a buyer will offer to pay a certain amount above appraised value up to a specific cap. None of these offers included such a clause.
After reviewing all of the offers, calling the lenders to verify, talking to the buyer’s agents to be sure they are capable of carrying a deal all the way to the closing table, my clients chose an offer. That meant eight other buyers were about to have their bubble burst ... again.
I get it. I currently have buyers in this price range as well. Unfortunately, my buyers have one strike against them before they even come to the table with an offer, especially in a competitive situation. The challenge? Every offer we submit has the “F” word in it. That’s right ... the dreaded FHA. This is a type of financing that only requires a minimum amount down. In partnership with Utah Housing, it can make it possible for a buyer to obtain a zero down payment loan. With buyers paying their own closing costs, in most cases, the money saved can be used for that instead. However, in this market, FHA rarely wins over conventional. It is a great loan that really protects the buyer from purchasing a home that could have potential issues, but not every home can qualify for this type of financing, and not every seller wants to take that chance.
Not all appraisers can perform an FHA appraisal. HUD (the Department of Housing and Urban Development) must approve an appraiser to become FHA certified. This appraiser performs double duty, in a sense. They determine the value of a property as well as inspect the property. Important note to refrain from ignoring: This does not take the place of an inspection! The FHA appraiser not only must pull comparisons from a closer perimeter than a conventional appraiser, but they also must inspect the property for issues that include, but are not limited to: peeling paint, loose handrails, leaking roof, missing HVAC unit, cut electrical lines, dripping water heaters, lack of indoor plumbing, underground storage tanks and meth labs. One would think that these would be items no one could overlook, FHA or no FHA, but, alas, the standards of what are acceptable as the market continues to be this competitive have definitely declined.
This is no reason to concede defeat as an FHA buyer. Miracles happen everyday in this business. Over the weekend, I ran across a new listing that stated, “No FHA buyers due to 90-day flip rule.” This simply means that the home was purchased and remodeled in less than 90 days and FHA requires over 90 days after a purchase to back a loan. However, what few people know, including the selling agent, is that this rule can be overcome with a second appraisal. With a little education and research, my FHA clients’ offer was accepted, and they will soon be homeowners.
The “F” word has got nothing on us.