We are seeing a number of Pre-Approved buyers who placed offers losing out to competition. Here are the some of the tactics that buyers and agents were considering when placing an offer.
1) Conventional Loans are more appealing than FHA ► This is not the case. The house is either in good shape or it is not, and sellers are more concerned with the cash needed to close.
2) Large down payments must be an advantage ► This may be percived to be true, but a 20% down payment from a buyer only offering to put $100 up for the Earnest Money Deposit (EMD) smells funny to me.
3) Pre-Approval detailing they can qualify for more than the offer price ► This also is not advantageous considering it only takes about 5 minutes to get a pre-approval letter from a loan officer.
Offer price is the most important piece to the seller and listing agent. The buyer’s credibility and seriousness can be clearly stated by the EMD they put up with the offer.
For example, let us look at two offers on a home.
1) $180,000 offer with a conventional loan, 5% down payment and $1,000 EMD.
2) $180,000 offer with a FHA loan, 3.5% down payment and $6000 EMD.Offer 2 indicates a much more serious buyer with the higher EMD and cash needed to close will be less of a concern.
We’d love to hear your thoughts on this so PLEASE comment below!
Posts tagged OFFER
Larger EMD = Offer Accepted!
PA Fallout? We can help!
The chief economist for NAR has recently sighted that contract failure rates have hit a staggering 33%, up from 18% the prior month. NAR claims the main reason for this is due to declined mortgage applications and appraised values.
This is not making any sense to us as lending guidelines continue to open up making it easier for buyers to qualify for home loans.
- Down Payment requirement down to 20% for Jumbo Loans
- Down Payment requirement down to 3% for Conventional Loans
- Credit Score requirements lowered to 620
- Many conventional loans only require a Drive-By Appraisal
- Purchase Transactions have priority and are flying through Underwriting
This is great news heading into 2012 with expanding loan options. Purchase Agreements are falling apart for a number of different reasons. Call us if we can help your buyer understand what needs to be done to get their loan clear to close. Or call us if we can help you understand what the lender is telling your buyer.
Do you agree with NAR’s findings? Comment below, we would love to hear your thoughts!
Here it is: Offer Accepted?
Despite all the buzz around refinancing and the HARP revisions, people are still out there buying houses in Michigan.
- Purchase inventory in Metro Detroit is down 28% compared to this same time last year
- MBA numbers show purchase applications have hit a 15 yr LOW!
- Multiple offers are becoming more common and are received right away
- Sellers are typically not counter-offering and are accepting the best offer
The key thing for buyers to remember in this market is that Less Is More. A restrictive purchase agreement that draws too much attention to the appraisal, issues with the inspection before they actually come up, or requesting too many personal property items are all things that can get an offer dismissed.
You will have plenty of time to address these items after the inspection is done and you have the sellers undivided attention. Let the appraiser or the inspector be the bad guy, not the buyer.
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