Aoibheann Cl…, Home Buyer in 91505

I heard that some sellers will not accept an FHA loan, why not?

Asked by Aoibheann Clarke, 91505 Sat Nov 14, 2009

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9
Ted Mackel’s answer
Aoibeann,

Bandele Gives a pretty thorough outline. Although I've seen the higher down payment non-FHA loans, property condition requirements vary from lender to lender. Also, FHA appraisers are not required to be selected through the HVCC process. That all changes as of the first of the year, but there still is some latitude in choosing your appraiser for FHA loan.

Another issue that comes up is the 90 day flip rule. Because the investor buyers have been out pretty aggressively over the last several months, we are seeing those properties fixed up and put back on the market in less than 90 days after they were purchased. FHA requires that a property be owned for minimum of 90 days before it will prove financing for new buyer.

We've been seeing that more than 70% of the loans are going out non-FHA, either high down payment or all-cash. This is also related to the price point.

Putting yourself in the shoes of the seller, sellers would like to get the escrow closed with the fewest conditions and obstacles possible.

The real battle here, Is that buyers with down payment money are out looking just as aggressively as those without a down payment warchest.

Here is the pecking order for strength offers:

1. All Cash
2. More than 20% down
3. At Least 10% down conventional
4. FHA 10% down
5. FHA 5% down
6 FHA 3.5%
7. VA
8. FHA 203K

http://homebuysblog.com/2009/06/16/hvcc-impacts-simi-valley-…
Web Reference: http://www.homebuysblog.com
1 vote Thank Flag Link Sun Nov 15, 2009
Most of the time is about property condition. Regular FHA has property standards.
In Minnesota on winter time, most if not all foreclosures has the water tuned off. That is a NO for regular FHA.

Chip windows, could be ok, complete broken windows, might not be ok. Peeling paint, home built before 1978, not OK.

Good reading:
http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4150.…
1 vote Thank Flag Link Sat Nov 14, 2009
Hi Aoibheann,

Another reason many sellers shy away from accepting FHA financing is due to the fact that if the buyer, at any point in the transaction, is unable to secure the loan, the seller must return the buyer's good faith deposit. This leaves the seller in a very vulnerable position.

Best of Luck,

Barbara Grandolfo
0 votes Thank Flag Link Tue Oct 23, 2012
Why would they when there are plenty of cash buyers in the san francisco bay area!!! 5-50 offers and half are CASH!!! FHA buyers have to get their heads out of the sand - look at houses that have been sitting on the market and make your dream home from one of them!!
0 votes Thank Flag Link Tue Oct 23, 2012
Most likely this is because of the condition of the property that they are selling. FHA is strict when it comes to safety, sometimes unpermitted additions etc. There are now 10% down conventional loans available.

Sara Mehrpouyan
Rodeo Realty
Woodland Hills Ca Real Estate
818-903-2040
0 votes Thank Flag Link Wed Jan 12, 2011
Some times sellers are afraid that they will have to pay "Junk Fees" when selling thier home and this will cost them more to sell. We now have changes regarding "Junk Fees" within the FHA guidelines that will protect a seller from suprise costs showing up on the closing statement.
The other factor can sometimes be that a house will not pass the FHA Appraisal guildlines when it has way too many repairs....and can only be sold "As Is".
Hope this helps.
Derek Merrill
0 votes Thank Flag Link Fri Nov 20, 2009
Thank you, I appreciate all your great responses.
0 votes Thank Flag Link Fri Nov 20, 2009
Hello Aoibheann:

I agree with Benito that the reason some seller's will not accept FHA loan is because of the property's condition which may not meet FHA/HUD's requirements. What this means for a buyer is that after the offer is accepted by the seller, an FHA appraiser will be sent to inspect the property. The FHA appraiser must ensure that many of the systems are in proper working condition, the pool must be functioning, many times a working stove must be in the property, a permanent heating source must be in the property, etc. The windows and doors cannot be broken (although I recently participated in a HUD conference call where we were told that a slight crack in the window is ok, but a broken window must be replaced); also any chipped paint will require the FHA appraiser to call for the affected areas to be repainted. All these conditions will cost the seller money and the seller usually does not want to spend more money to get the property sold. Another big issue is if the property is a condominium or town-home, the condo complex must be HUD approved. If the condo complex is not HUD approved, you cannot get an FHA loan. In the past, if a property was not already HUD approved, you could apply for a spot-approval; however more recently, spot approvals have been restricted. All these restrictions on FHA/HUD loans cause some seller's to reject buyers who require FHA loans in order to purchase the property. Unfortunately, if you have very little down payment (as little as 5.5%, FHA is a good loan for you unless you are a veteran and in that case you can have as little as 0% down). The irony is that even conventional loans (10% or more down-payment) will require that certain property conditions are met before the loan is funded such as the pool must be in working order; but conventional loan conditions are not as strict as FHA/HUD because conventional loans do not require HUD approval of the HOA, etc. Feel free to call me at 818-825-6996 or visit my website http://www.RealEstateAtBogunEnterprises.com.
0 votes Thank Flag Link Sun Nov 15, 2009
I like the links Benito offers. It could be zoning issues as well.
0 votes Thank Flag Link Sat Nov 14, 2009
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