Lisa Spencer, Broker Associate, CRS, GRI

Jeannie:

This is a problem we have been facing lately and unfortunately there are not a lot of options. You and the buyers will have to work from the number that was established by the appraiser. I have had second appraisals done, but often the lender forces you to use an average between the two, or could simply force you to use the first appraisal.

Buyers are willing, because they realize we are in a market of opportunity for them, but the lenders are tough. Unless you have a cash buyer, you have to play by the lender's rules. You didn't mention your sale price. 6% is the maximum amount for closing costs and pre-paids for an FHA loan. If the loan is at the high end of compliance (low 300,000) you are looking at a seller contribution of 18,000. Closing costs on a $300,000 home should not even come close to that number. Sounds like everyone needs to sharpen their pencils and compromise.

Jeannie, don't throw away a serious and qualified buyer. You will only be in the same situation with a new lender. The days of easy money and generous appraisals are gone. If you want to gamble that a new buyer will come along before all of the foreclosures and short sales lower the comparables even more, it is up to you. My money would be on working this out even if it means taking a loss.

Before you think I am all doom and gloom... I want to remind you that you are one of the blessed sellers with a contract on your home... if you can close this, you will move on with your life and possibly take advantage of the buyer's market when you purchase your new home...Lisa - Sat May 10 2008, 18:48

Naomi:

I'm going to try to answer your question as thoroughly as possible, but each home sale has its own personality and challenges, so my best advice is to seek the advice of an area real estate professional. There is a BIG difference between a house that is in the foreclosure process (short sale, pre-foreclosure) and an REO (Real Estate Owned) property. An REO "foreclosed" property has already been taken over by the bank. The process will be longer than a traditional sale and it will require an AS-IS contract. The bank will make no seller's disclosure and has a "Let the buyer beware" attitude. Take the extra time to complete your due diligence through inspections and record searches before entering into a contract, but for the most part an REO properties close as significant savings to the buyer. Now the other type... Short Sale or Pre-Foreclosure properties have so many "players" involved it is hard to know "who's on first!"

There is a glut of "short sale" properties on the market. Some of those properties don't "qualify" to be a short sale (primary residence, hardship, seller with no money) some properties marketed as short sales are so-called "investors" looking for the bank to bail them out of a bad investment. Some are people who are just "bored" with their home and want to sell it, but it's not worth what they paid. And, the most notorious group sellers that have the means to use their own money to fix the situation but don't want to use it, so they hide their money.... Now you are starting to see why there are a thousand nightmare stories about pre-foreclosure and short sales. The banks are getting wise to all three of these groups and are making the process more difficult while at the same time cutting back on the number of employees they assign to handle these cases... all of this means you need to have time, patience, and a willingness to "work with" the bank. When I say "work with" the bank that means they sometimes even negotiate UP from the sale price offered because the agent was too aggressive in undercutting the current market value. This isn't because anyone is trying to be deceptive, but everyone (Bank, agent, and you the buyer) is trying to do a "good" thing and help the seller.

I realize the current media frenzy promotes "Short Sales" and "Foreclosures" as the opportunity of a lifetime, but just open your mind up to all opportunities in your market place and find the BEST value for your money. It is a GREAT time to buy because these distressed properties are going into the appraisal pool and lowering the value of all of the real estate in the area. Why not buy a home that someone has cared for and loved and properly maintained at an equally discounted value?

I hope this information was at least helpful enough for you to ask the right questions before getting involved in a process that may leave you bitter. Education is power, so please spend some time learning more about the process before you jump. - Fri Apr 18 2008, 11:31

If your real estate agent and mortgage company are discouraging you it is time to get new real estate and mortgage professionals. Be sure you have your eligibility certificate from the VA before you look for a home. If you have used your VA benefit before the "funding" fee increases each time and sometimes when that is worked into the loan the actual percentage rate comes out higher than a conventional loan. Both mortgage and real estate professionals need to wrap their brain around these loans as VA may be one of the last truly 100% financing options available. I have been a USAA agent and have closed VA loans for years (even when the market was hot) Veterans deserve this benefit and when properly explained an informed seller is willing to work with you. Be sure you investigate all of your options and do what is best for you and your family... Best Wishes - Sat Mar 29 2008, 18:23

The important thing to remember is that real estate is a "performance based" compensation career. There is no base salary and the start up costs can be shocking for some. There is never a perfect time to start, but starting in a challenging market will make you have to master your skill and will show you what you are made of. You should have at least a 6 months to 1 year reserves. You will need to bring patience and perserverence to be successful. You must build your business one referral at a time and never forget that if someone has a good experience in working with you they will tell 5 people and if they have a bad one they will tell 25. I have been a Realtor for 13 years and I have seen many very nice people come and go, mostly because the really great Realtors make it look so easy, when in fact, it is a lot of hard work if you do it right? If you follow the golden rule and serve the public with a view that you are a professional that will never give up integrity to make a sale, you will go far in the real estate business. - Mon Mar 24 2008, 12:46

Dear Sheri:
Your post does not discuss a time line so it is hard to answer your question... My best advice is to consult a licensed Florida Real Estate Attorney. You may have several options for canceling the contract and getting your earnest money back, but please consult an attorney for assistance. The Florida FAR-9 contract used for re-sales has an insurance addendum that I would suggest anyone purchasing a home include; most builders use their own contract which is designed to favor them. I would think that if the insurance rate is high enough it would impact your ratios on your mortgage and most contracts (even a builders contract) allow for a cancellation for the inability to obtain a mortgage commitment? I do not work as an advocate for attorneys, but I started my real estate career in New Jersey where "Attorney Review" is required by law. I brought that custom with me for my own personal real estate transactions here in Florida and have found my attorney fees to be well worth the investment. You may also have a "loophole" regarding community documents, but without a review of your specific contract it is hard to say. It is distressing to hear your complaint, but the "purchase paperwork" you signed was a CONTRACT and builders are not inclined to just let people out of contracts these days. I hope that you can employ some legal assistance on your behalf, it sounds like you have some things in your favor. Much success to you!....Lisa - Sun Mar 16 2008, 18:31