What your lender & agent know…or don’t know & how it can help…or hurt you

by | Mar 9, 2015 | Real Estate | 0 comments

Upcoming free (& non-promotional) Home Buyer Education Classes:

Thursday, 3/12 /15, from 5pm-8pm
Marshall Community Center, upstairs conference room
1009 E McLoughlin Blvd, Vancouver Wa (kitty corner from Clark College)

Saturday, 3/21 /15, from 11am-2pm  
Vancouver YMCA, conference room
11324 NE 51st Circle, Vancouver WA

…if these dates/times don’t work for you, we have others. Check out the website for more class dates, times, and locations. PLEASE always check  the website  www.freehomebuyerclasses.com  for any changes regarding the classes!

Remember…with reservation…we will throw in lunch, or dinner!  🙂
~~~~~~~~~
Happy Monday!

I really hope you got outside today and this weekend and enjoyed this truly scrumptious weather.  Seriously….does it get any better than spring in the northwest??

This weekend was pretty busy…on Friday night I met up with one of my clients/friends to list her home for sale since it is now town for her to sell her first home, and buy her next home.   We talked about the process of selling her home, and what she could expect.  We also talked about how long her home might be on the market, and what she could expect with showings.  Her home is adorable, in a great area, with a brand new roof, and priced in that low $200,000’s.  We discussed when she wanted me to put her home on the market as an active home.  With the gorgeous weather, we agreed that getting it on the market for this weekend would be good so I entered her home into the rmls Friday night at midnight and ordered the ‘for sale’ sign from the sign company.  I warned her to be prepared for agents calling to show it Saturday morning.

Saturday morning rolls around, and I had the privilege to teach the free, community home buyer education class at Marshall Center from 9am-12pm-ish (that went over).  My first text from my client was 9:30am…”we have a showing scheduled!)  Next call was 10:05am…”another showing scheduled!)….10:12am…”OMG…another showing!”  In total we had 5 showings on Saturday…not that it matters.  Why didn’t it matter?  Because I received my first text from another agent at 12:08pm…”do you have any offers yet?  Me:  “not yet’…other agent says, “we want to write an offer.  I will get it to you this afternoon.  Are you going to wait, or present all offers as they come in?”  At a little after 2pm, I received another text from a different agent, “we are sending you an offer.  Do you have other offers?”  Me…”yes.  I had another client tell me they were sending in an offer”  Other agent responds with, “we will send you our highest and best.  Are you presenting all offers today or are you going to wait for more?”

So, let me explain what is happening here.  We are NOT priced low.  We actually listed her towards the top of her market range (each home has a different market range) because her home is in excellent condition, has a new roof, and is in a very desirable area with very few homes for sale in it.  This is why two offers in the first day on the market.  Three things sell a home….condition, location, and price.

What did the agents mean about waiting or presenting all offers though?  Well, in some cases, if a home has a lot of action and offers right away the sellers and/or seller agent choose to wait X amount of days on the market to encourage multiple offers.  Banks do this as banks will not look at any offer until the home has been on the market for 3 days.  I don’t agree with this plan.  Multiple offers are tough because someone has to lose, and sometimes it drives the home price up too much.   I told both agents that my client (in this case, the seller) and I would meet up early Sunday morning (she already had plans for Saturday night) to go over both offers.  This is where it starts getting hairy though….

So, two offers, and I want you to put yourself in the sellers shoes here…..

First offer is for listing price and buyers are requesting 3.5% of closing costs to be paid for by the seller.  They are using a FHA loan with a NHF grant for the downpayment of 3.5% with an interest rate of 4.25%, and buyers putting .5% down.  Closing would be 4/7, and buyer has no other home to sell first.  Standard contingencies of Inspection, Financing, Utilities, Homeowners Insurance, & Optional Clauses.  Buyers agent has sent in the buyers pre-approval letter with their offer as expected.

the first offer is actually a great offer except for a couple of things….ALL of the financing information is WRONG!  What do I mean?

The buyer is using a down payment grant for their down payment so it is a zero down loan.  It is a great program, and the buyers agent knows that I work a LOT with home buyers.  The buyers agent is a real estate friend so she knows that I also co-teach the free community home buyer education classes where we go over these programs.  The buyers agent is a GREAT agent, but she doesn’t work a lot with these types of programs so she is getting her information from the buyers lender.  The buyers lender works for the buyer, so she is assuming he knows what he is doing.  Both the buyers, and the buyers agent are trusting that the LENDER is providing them correct information.  Sadly, in this case, both the buyer and the buyers agent assumed incorrectly.  The lender doesn’t have a clue…or he does and is charging extra to make more money for himself…..  let me break it down, and see what you think…

The NHF grant is a down payment grant which is ‘free money’ to the buyer that does not have to be paid back at any time.  The first loan is a standard FHA loan.  The NHF Grant has two options:
**The 3% option covers most of the buyers fees.  The buyer would still be bringing in their earnest money, paying for their home inspection, and their appraisal.  The buyer may also have to bring in between $500-$1000 at closing (which is about
45-50 days after the offer)  Interest rate for this loan is 4.00%  (per Chris Berg at the class on Saturday)
**The 5% option covers ALL of the buyers fees.  The buyer would still be bringing in their earnest money, paying for the home inspection, and for their appraisal….but the buyer would receive the earnest money, and the appraisal fee back after closing, and no money would be brought in at closing.  The interest rate for this loan is 4.5% (If I remember correctly from the class on Saturday).
***Both loans have an additional origination fee of 1.5% (it’s how they get paid)
****Both loans have a MAX allowance of 3% of seller paid closing costs

Now do you see the issue from the offer?
-Both loans are zero down loans so where is that .5% down payment coming from?

-There is NO NHF loan of 3.5%….it is either the 3% or the 5%
-The seller can’t contribute 3.5% towards closing costs….it isn’t allowed by the program.

Now, the NHF down payment grant is still a relatively new program being offered and only about a dozen lenders can even do it….and from the looks of this….even less understand it.  Lenders don’t make very much profit from doing these types of loans…they are usually considered ‘loss leaders’, so is this guy using that extra .5 from the seller to pay himself?  Is he using that extra .5% from the loan to pay himself?  And what about that interest rate?  If it is a 3% NHF then the interest rate should only be 4%….where is that other .25% coming from?  So many questions, and no answers….

So, I know you are wondering how I caught it and not the buyers agent?  How did she not know this?  Please know that I admire the buyers agent in this case.  I really do think she is a great agent.  She does not, however, work with these types of programs like I do.  She, like the buyers, is trusting the lender to give them accurate information and the best information so that she can make a strong offer for her clients and get their offer accepted.  This is a crazy market, and we both know that…offers need to be strong to compete.  This particular lender did his clients, and their agents a disservice.  He killed their offer….  The truth of the matter is that even if my client had NO other offer, we wouldn’t have accepted their offer based on all the wrong information that was provided on their offer & on their pre-approval letter.  🙁

Now, the 2nd offer…

Full price, no closing costs, inspection contingency, optional clause contingency, utilities contingency, and no financing contingency…why? Cash buyer with one hiccup….it is contingent on the sale of the buyers home in Portland.  However, this buyer was smart…she already had an offer on her home, and it had already passed the home inspection.  Contingency offers are scary for sellers since it is contingent on the buyers selling their home before they can buy the sellers home.  I am seeing more buyers making offers on a home before they even have their home on the market.  I do understand where they are coming from, but at the same time….  if you want a seller to consider your offer you need to already have an offer on the home you currently own.

If you were the seller, which offer would you have taken?

So, last week, another client received two offers on his home.  Let’s see what you would do here….

1st offer…
$6,000 less than listing price, but no closing costs.  Standard contingencies, and strong financing of a conventional loan and the potential buyer is putting 27% down…..but it is contingent on selling their home in Portland that they just put on the market.

2nd offer….
$5500 less than listing price, and no closing costs.  Standard contingencies, using a VA loan so buyer is putting No money down.  VA also has stricter guidelines than a conventional loan does so there may be additional repairs and requirements.

Again…..which offer would you take if you were the seller?

As you know, I mainly work with buyers.  It is what I do, and what I love.  I list homes by mainly referral…friends, family, past clients (because they are my people and I am always here to help them with their next adventure…wherever it takes them), and my clients friends, and family.  I don’t go out and hunt listings like some agents do….so I don’t usually have a lot of listings.  I list homes for people I truly enjoy.  It just so happens that I had two cases here in the last couple of weeks that, as a buyer, I want YOU to think about.  Why?  Because whether you are buying, or selling, a home, you are trusting that the team you have hired to HELP you is really doing so.  Your lender & your real estate agent are part of your team.  Our job is to help you with the next step of your life….whether buying a home, or selling a home to get your next home.  Again…HELP!  Our job is to be knowledgeable so that we can assist you.

….Just so you know… I did call the agent for the first offer this weekend and explained to her the loan program, how it works, and where her offer & lender went wrong.  This is a great program (much better, in my opinion) than the other option out there, and I would hate to see people shy away from buying a home because they are afraid of it.  Luckily, she and I do have a good relationship because I didn’t want to come off as a ‘know it all’….she is a great agent, but working with a loan she doesn’t know anything about.  She did tell me that her clients wrote up an offer on a different home, and that offer was rejected by the seller….and there were no other offers on that home.  This is a shame…  I gave her Chris Berg’s information so that she can get more (accurate) information on these great programs out there.  Just so you know….  Chris Berg, Pinnacle Mortgage, 503-320-0925, cberg@pcmloan.com.

One last thing you need to remember is that a real estate agent is not a sales person.  It is not our job to ‘sell’ you anything.  We are assistants,  advisers , guidance, and help.  You should not feel as if your agent is trying to sell you a home, or anything else, our job should be to help you in getting the home you want.  This being said remember that you do not get T-Bone steaks for the price of hamburger…Look ONLY at homes within your budget.  ALWAYS ask questions, and expect answers without a lot of lingo.  I was always told that if you can’t explain something in a way that the other person can understand clearly, it is because you don’t understand it yourself.  🙂

Information is power, and I hope that I am able to help you.  Good luck, and as always…May the odds be ever in your favor out there….  If you are looking for a real estate agent, I would love to be able to help you.  
 
As always….this is just a quick overview…. please remember that your agent, and your lender work for YOU.  You drive the bus…we are merely GPS to help you get to your goals.  Like the classes, this weekly blog email is to help you with your homebuying adventure.  The goal is to be informative and non-promotional.  🙂  We are, however, hoping you will call and want us to help with your adventure.

If you have any questions about this, or something you have heard…or if you would like me to help you with your homebuying adventure, please call, email,  text, or facebook me anytime.  I am, as always, happy to help!

Thank you again for your business and your referrals!!  …and thank you for referring these classes to your friends, family, and co-workers.

. ..disclaimer…if you have already purchased a home, or would no longer like to receive these emails, please let me know and I will be happy to remove you from any further mailings…

Next Week:   “Hidden” Buyer fees when buying a home

 Last Week:   What are Closing Costs?
                     
Have a great day, and I will talk to you soon,
;-D

Tracie DeMars / Realtor

ReMax Equity Group
License# 81289
Vancouver, WA
360-903-3504

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