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 PURCHASE
Larger EMD = Offer Accepted!
Fannie/Freddie Industry Forecasts
For the 1st time in over a year, both Fannie Mae’s and Freddie Mac’s forecast are the same! Both predict that:
- Purchase activity will be similar to 2nd half of 2011 – Stable is good
- Property values are expected to hold steady for the year – No Declines!
- Rates will remain at very low levels for 1st half of 2012
- Refinances will consume 85%-90% of Mortgage applications through June
What this means to the Realtor Community:
- Put yourself first, if you have not refinanced – now is the time!
- Lenders will be consumed by administering all the HARP program changes
- Loan Originators will be fired up to write refinance loans
- Only 20% of Purchase leads have a chance to materialize into a closing due to limited inventory
- 40% of Refinance Leads turn into done deals
We also came across some local Realtor production numbers for 2011. Out of 2000 local area agents, we found:
- Average sale volume – $3.6 Million – 30 Transactions
- Median (middle) sale volume – $2.5 Million – 20 Transactions
Our Question to you – Do you believe 2012 will be better or equal to 2011?
PLEASE Comment below and share your thoughts as we love to hear from our business partners and learn valuable insight into our market.
2011 Recap: Larger Down Payments
While everyone is trying to refinance their mortgage with HARP 2.0 and rates at historic lows, we actually had 40% of our closed loan transactions were purchases in 2011. This is almost the exact same mark we saw in 2010.
2011 was good and bad for the housing market. The bad side including purchase activity in the Midwest declined 15% from 2010; down 30% for us personally. This is due to there no longer being a Home Buyer Tax Credit in 2011. This was huge as 70% of our purchase deals in 2010 were before the tax credit expired in May. Also, the consumer confidence after the tax credit expired was substantially lower than what we are seeing now. Buyers are also saying there are fewer homes on the market right now than they’d like to see.
The good news is that our average loan size increased for 2011 as well as buyers made larger down payments. 40% of our buyers put at least 20% down on their purchases. With loan amounts increasing on FHA and Conventional loans, this tells us that appraisal concerns continue to be less of an issue as we move forward which is great news.
Our predictions for 2012 can be stated with this fact: We received more purchase lead inquiries in December of 2011 than we did for the whole 1st Quarter of 2011. It feels like the consumers have more confidence and there is definitely a buzz in the housing market going into 2012.
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