Mother & Daughter Blog

For those that out looking to purchase a home that was recently purchased and is now being resold -- this is called a flip.  There are rules that are associated with this type of resale if the buyer is a FHA buyer.  The investor or flipper cannot sell the property to buyer if it is less than 90 days of the last sale date of the property.   For buyers this is frustrating to see a property they like and find out it is cannot be sold to them because they are FHA approved-- especially when the property is in good condition and will pass FHA financing otherwise. 

The FHA 90 Day rule is especially important to: (not necessarily in this order)

1.  Agents/Brokerage

2.  House flippers (investors)

3.  Buyers that are FHA approved

This rule is probably one of the most important rules to a house flipper and really should be understood prior to purchase, upgrading and listing a flipped property.  If you are a buyer, your agent will let you know that the property is not FHA approved due to the 90 day rule.  This information is usally found in the agent confidential remarks of the MLS listing.  This rule is not limited to just foreclosure properties it can be short sale, traditional sale -- its when an investor purchases a home, upgrades it and put it right back on the market.

In essence:

• Time restrictions on re-sales - start counting from the date of last purchased date to the date of the execution of a new intent to purchase.
• A property is ineligible to be sold to an FHA buyer within the first 90 days after the most recent purchase.  It would be eligible on the 91^st day.      
• The price that the flipped is being listed to sale at:  Most investors want to get the most from the property and will do a few upgrades and then price the property for double the amount they purchased the property for.  There is nothing wrong with this and it is the name of the game.  However, it may mean that if you sell the property FHA there will need to be extra valuations of the property before it can close.  A second appraisal and documentation.
• Prior to 90 days - this would actually be the 91st day after the flipper was last purchased.
• If sold between 91 to 180 days: If property is sold after the 91st day of last purchase, the property is generally eligible for FHA mortgage insurance.  However, HUD will require that the mortgagee

Additionally, while not a formal requirement by the FHA, many FHA underwriters will stipulate that the 90 days doesn't start the day the seller purchased the property, but instead, on the day the Warranty Deed was recorded. And in many places, the closing attorney legally has at least 60-90 days to send the Warranty Deed to the records office, and it can take a week or two after that before the deed actually gets recorded; therefore, it could be 90 days or more after the property is purchased before the FHA 90 day clock even starts ticking! Meaning it could be up to 6 months before you can sell the property to an FHA buyer!

While not all FHA underwriters will require the 90-day seasoning to start after the Warranty Deed is recorded, keep in mind that some will. A good flipper will control his/her deal from the outset, and part of controlling the deal is to control the lending process; make sure you know the rules that your buyer's lender will be following to get the deal done, and if those rules don't meet your basic requirements, insist that your buyers use a lender that you are willing to work with (and who is willing to work with you).

So whether you are the buyer or the flipper (investor), check out the rules and regulations to the FHA 90-day rule.  It is showing up more and more on the MLS.

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Check it, jot it down now or run the risk of being blamed later!

With so many of the escrow transactions being foreclosed properties that are sold as is - where is - and if you the buyer is lucky there are some minimum repairs that the seller agreed to do.  As agents we have to be right on top of our responsibilities and inspect and make notations that will be in the records at the time of the transaction as well as for later on - when we get that call of complaint about something not functioning in house!  Department of Real Estate has a form that you need to fill out for this protection - use it!

This is the inspection you take the buyer with you and you "walk thru the property" and jot down what you see.  It doesn't take that much time and can be so valuable for you to have on file.  You complete the report and give it to the buyer to sign off on it.  Or you can rest assured you will hear from this buyer again!

New construction walk thru is much different from a foreclosure (as is - where is) transaction. Foreclosed you expect it to not in next to mint condition, however, a new construction you expect it to be damage free and all fixtures and structure to be in complete working condition, with nothing missing.

Sometimes escrows can get so drawn out that we just want the transaction to close and may think that it is OK to skip the final inspection because you have been out to the property so many times and you know what condition it is in.  NO good!  Put it on paper! Protect yourself. You must continue your agent buyer - protection all the way to the end of the transaction (or you may find yourself being blamed for something that does not work.... Or something that you forgot to Walk Thru with the buyer and check prior to close).

This is why the rules are set in place to do a Final Walk Thru on all escrow transactions.  Make a list of items that you will need to take a look at and make notation of the condition.

This applies even if there were no repairs done on the property and it was indeed sold as is, where is.  Final Walk thru is still a part of the transaction.

Questions to know

Were there any repairs that the seller agreed to repair?   You, the agent should have checked these where they were completed and yes, you will need to re-check with your buyer just prior to close of escrow.

Is there anything missing or damaged that was not there during first walk thru?  With all the vandalism going on around the country - check to see if someone came in and took any items since your buyer did the first inspection.  If yes, you will need to note the missing item - with the foreclosures if something is missing it is probably not the seller that took it.  Vandalism of some nature is probably to blame. Police report is required if vandalism is involved.

Once you confirm these items are intact, you should jot down all that you notice in the house.  Buyers sometimes will see you making these notations or hear you mention something and will want to revisit that item. 

Remember to keep your inspection simple if you are selling as is and the item of concern is not something that agreed upon to be repaired and it is not a safety issue.  Buyers want to get as much done as they can (understandable) - and if you know you will not be able to get the seller to do the repair or fix, please don't make promises to that buyer.  Repeat the Sold as is to them, but just make notation of the item of concern.

Start out in the front yard, back yard and do a complete walk thru the house.  Check doors, windows, locks, floors, walls, fixtures, AC, Heater, outlets, garage door opener, toilets, lights, trash out (this includes trash from side of the house), check the pool to be sure the pump works.  New homes structures: would include making sure it was built as promised, options are included, floors are meeting the walls correctly and all other items are in complete working order.  In a new building you will need to count the outlets too!

Note: New constructions you may have a better chance of negotiations with the seller, but be sure you get any agreement to make it right BEFORE close of escrow. If it is a foreclosure and there was no agreed upon repairs, it might a little hard to negotiate this late in the transaction, but it never hurts to ask and always be sure to write down the issue - document, document. And always document.

Happy Final Walk-thru and happy closing.

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Low List  vs  Property Value  vs Reality plus the waiting game is what a short sale is all about?

Let me just let you know that agents usually list short sale properties - low - in order to get some attention to that property.  They do not list low necessarily because there is something wrong with the property and it is not worth more.

Agents have been known to list low in order to get the attention focus on the property, in order to get the offer, in order to get short sale negotiations with the bank.  In some cases, even with a low offer the agent is able to get a counter back from the bank on what they will consider to get the short sale moving  -- but sometimes it backfire and they just denied the low offer.

Also, agents rarely have any idea of whether or not the bank will take the offered price (that is the list price) and cooperate by selling the home for less than what is owed on it.  Short sales are not automatic.  It is not "ask and ye shall receive" an approval type situation!

What they do know is that they must have an offer and the borrower/homeowner must have a hardship to show that they can no longer afford the property.

Low list is not the market value.  The bank will probably not settle for less than or at least much less than what the home is worth.  Also note: Banks do not use what the listing agent serve to them as market value of the property ~~ they will go and get a third party opinion (either BPO or appraisal) from another agent that is not associated with this property.

Low List vs Property Value vs Reality plus the waiting game is what a short sale is all about:

Low list: check the properties in the radius of (at least ¼ mile) and see if it is listed low.  If listed low: is it to get attention to the listing or is there something wrong with the property?

Property value: recent sales in the area (1-3 months), Average sales price per square footage.  Is the property of the same kind (comparable); is it short sale or foreclosure.

Reality: Will the bank entertain a short payoff on this property? Is the offer with the property value?  Will the buyer hold on to "the waiting game timeframe"? And is the borrower/homeowner really in a hardship and cannot afford to pay for the property?

Waiting Game: Will buyer hang on and in some cases will the borrower/homeowner hang on for the ride of waiting on the bank to decide?

Some good news about short sales:  FHA, VA, CalHFA, NSP and other programs are not excluded from Short Sales.

  

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And the buyer says ..... can we go out looking EVERYDAY???

The market is so confusing right now that it is almost that you have to take the buyers out to view properties at least 2 times a week!  The properties are not staying on the market long, the offers are going way higher than the listed price and therefore the offers are in Pending before you can set up an appointment to go out and view it.  Is this a good thing? What about your other buyers and other things you have to do during the day?

It is a good thing for the seller and the listing agent, but it is unfortunate for anxious buyers if there is no time to get the offers submitted before they are gone.

Fannie Mae has changed the way of their listings:

• 3-5 days on market before they will consider the offers ** this include the NSP buyers (assisted)
• Offers up to 15 days will only be for the owner occupied buyers
• After 15 days investors offers will be considered

Although we don't agree with all of Fannie Mae rules, these are a few good changes.

FHA buyers have enough competition and restrictions to their purchase -- this change should help them get at least a chance at the listings.  FHA will not lend on flips that are younger than 90 days.

While it is almost impossible to take one buyer out EVERYDAY... it is wise to go often so your buyer does not miss the buying opportunity.

Need an agent?  Give us a call...

 

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So how can the Short Sale process change where it really will help? I will admit Short Sale Automation does sound good!!! I can't wait to see it work.

After reading that REOTrans has first changed their name and secondly and probably most important: they are taking on automating Short Sale process.  And then to hear that Bank of American is possibly that first bank to jump on the wagon.... well this brings about questions in my mind.

1.  How does this help the agent's job of producing a successful Short Sale

2.  Will REOtrans/Equator's involvement help or hender agents from getting the short sale listings?  Will the banks end up with a preferred agent list and thus leave out a large number of local agents from the listings?

3.  Will it cost the agent to have this new automation?

4.  How will this help or hinder the homeowner/borrower?  Will it indeed make the process simplier, smoothier, faster and without hassel the homeowners?  Will agents have to do more even though it is automated?

5.  When will it start?  How do we become involved?

6.  Or is it that the agent get the listings and then upload the information into the Equator system and manage the Short Sale request (if it is participating bank) through the system?

If the system is there for agent to upload their listings, request, documents and all with a timeline set to get the short sale approved and closed in a timely manner ---> this could be really good for all involved.  But it turns out to be a war of the agents to sit by the system and wait for short sale properties to pop up on Equator system (sort of like BPOs) then it could turn out to be a not so good an idea.

** RETrans.com has changed their name to Equator

 

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How to avoid Foreclosure Workshops - connect with your local community services and learn as much as you can about how to avoid foreclosure.  Make sure it is FREE and that you do not pay out of pocket for a FREE service!

There are still so many homeowners/borrowers that do not know what to do now that they are about to be in or are in pre-foreclosure.  My suggestion is to take advantage of all the FREE services that are out there that may be to offer you a solution to your situation.  Look for institutions that offer a FREE service and that have a good track record of doing it right way.

Here is a list of places that are sponsoring a FREE Foreclosure Workshop within the next couple of months.    ** these are ones for Northern California, but they are nationwide - look in your area.

• Citrus Heights
  • Sponsored By: Mayor James Shelby and NID Housing Counseling Agency - Event Details [PDF]
    Date: 11/13 & 11/14
• Modesto
  • Sponsored By: El Concilio-Modesto and The Alliance - Bilingual - Event Details [PDF]
    Dates: 04-24-10 · 10-23-10
• Oakland
  • Sponsored By: City of Oakland Mayor Ronald V. Dellums and NID HCA - Event Details [PDF]
    Date: 11-07-09
  • Sponsored By: NID Housing Counseling Agency - Event Details [PDF]
    Dates: 11-04-09 · 11-07-09 · 11-11-09 · 11-18-09 · 11-21-09 · 11-25-09 · 12-02-09 · 12-05-09 · 12-09-09 · 12-16-09 · 12-19-09 · 12-23-09 · 12-30-09
  • Sponsored By: The Unity Council - Event Details [PDF]
    Dates: 11-11-09 · 11-18-09 · 12-02-09

 There are many other resources that you can use (check with your local resources - community centers, etc).  Do a web search under Foreclosure, Short Sales, Loan Modification, Pre-foreclosure, Making Homes Affordable, HUD and your local city should have resources on their sites.

Need an agent?  Need a short sale?  Give us a call!

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Finally!  Buyers have the choice of using a local escrow office to handle the transaction, thanks to the California Assembly Bill 957 - "The Buyers Choice Act".  This bill was signed on October 12, 2009 and is now a law in the state of California (only). 

I believe we will need to put our choice on the original contract just to be sure we get it for our buyer.  When the seller (bank) choses they usually chose a company that is located either back East or in Southern California.

If you don't ask..... you probably will not get the escrow office that you want.

UPDATE!

Updated news:  As it turns out this Bill may have holes in where the seller can still get it back to them getting the escrow company of their choice instead of the buyers, but either:

1.  Not choosing offers that ask for the choice of local escrow company or

2.  Bank countering back (on bank's addendum) with the name of their choice of escrow company - which means the buyer will either return the addendum signed and agree to all the terms or they may find that they will not get the property! 

Either way, its a loop hole that may not be to the advantage of the buyer.  This is a "stay tuned" possible improvement.  As it turns out.....The judgement/advantage is still out on this one....

 

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Did you know?

K12 Teachers, School Employees, Educators, Members of State Public Employee Pension System, Judges Pension System and Legislators Pension System are eligible for down payment assistance for the purchase of a new home.

And now with the Tax Credit getting the extension approved as well enhanced credit for all new buyers, plus the market situation -- it is well worth the above groups as well as non public service buyers to get up and get a move on in purchasing a new home.

Need an agent?  Give us a call!

 

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Fannie Mae offers - Deed for Lease Program instead of immediate foreclosure. this is another option rather than foreclosure or Short Sale.

If you do not qualify for a loan modification or have failed a loan modification plan you may be in luck to get in this Fannie Mae Deed for Lease Program.  If your property is a Fannie Mae property you may qualify for the Deed for Lease Program that Fannie Mae just announced.  This program can prove to be very useful and a stress reliever for homeowners that need more time to get their finances in order before completely moving out of their home.  It beats a foreclosure no matter how you look at it.

Borrower must be willing to transfer their property to the lender by completing a deed in lieu of foreclosure and then lease back the house at a market rate.

There are some guidelines that you must meet - here they are in a nutshell: In order to qualify you must meet these basic requirements:  If you answer yes to the questions below, contact your Fannie Mae representative to see if you can get started with this program to avoid foreclosure and evictions.

1.  Is this a Fannie Mae property - Don't know?  Go to: http://loanlookup.fanniemae.com/loanlookup/

2.  Are you living in your property and is it your primary resident?  ** TENANTS may qualify for this program as well

3.  Can you afford to pay a monthly rental that is no more than 31% of your gross income.  Also, that you are willing to take the commitment to pay the rental - on time.

4.  Do you have a second lien and are you able to get them to release you from any obligation of that loan?

Need more information on this program?  Go to www.efanniemae.com.  This is another avenue/option of options to avoid foreclosure? 

 

 

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I've been so busy working on the listing side, I have not been noticing the variety of Agent Confidential remarks that are popping up on the listings these days.

This one is one that is becoming more popular and annoying:

Buyer must be pre-approved with the "seller's sponsored mortgage company" - not required to use this lender, can use your own.  This requirement can delay a buyer from putting in an offer in time to be considered, the way properties are moving into Pending these days!  While the buyer is trying to get in touch with the bank's sponsored Mortgage consultant, the property is now in Pending!!!

It works better or faster when the seller require that the buyer is pre-approved by a direct lender -- doesn't it???  And I wonder when this will catch on with short sales too - or will it?

 

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