The greater Seattle real estate market is hot. With the lack of inventory, some home buyers have found themselves in a position where they feel they need to waive their financing contingency or the appraisal. I see this strategy happen when home buyers have been competing with multiple and/or cash offers.
Waiving your financing contingency?
September 4, 2015 by Leave a Comment
What is an escrow holdback?
August 25, 2015 by 2 Comments
Sometimes an appraiser may call for repairs to be done on a home typically for safety reasons. In a seller’s market, like the greater Seattle area is experiencing, it’s not likely that the seller will agree to make the repairs. If the buyer has enough funds, they may be able to do an “escrow holdback”. An “escrow holdback” is when funds are heldback at closing to cover the estimated cost of the repairs. The buyer brings the amount of the holdback to escrow (or sometimes the lender) and the funds are held until after closing, when the work has been finished.
Avoid Delays with Appraisals
June 4, 2015 by 8 Comments
Washington State has a couple of regulations that require certain safety features are installed in a home before a buyer can purchase it. When these items are not installed in the home at the time of the appraisal, or if the appraiser cannot easily find them, then the appraiser or underwriter will require that these items be installed prior to closing. This can potentially delay the closing and/or increase cost if the appraiser has to go back to the property to re-inspect for the missing items.
You just “won” the highest bid on a hot Seattle home… now what?
May 2, 2015 by Leave a Comment
The Puget Sound Business Journal recently posted an article about a 1,100 square foot home in Ballard that sold $158,000 over list price. There is no denying that Seattle’s real estate market is hot largely due to lack of inventory and rising rents. (A’ hem…if you have been considering selling your Seattle area home, now could be the time).
How will Fannie Mae’s Collateral Underwriter (CU) impact appraisals?
April 15, 2015 by Leave a Comment
Over this weekend (April 18, 2015), Fannie Mae will be releasing the highly anticipated “Collateral Underwriter” (aka CU) to lenders. CU is intended to be a tool for lenders to use to help ensure the quality of appraisals on loans that originated as conventional/Fannie Mae. Fannie Mae’s tagline for CU is “Taking appraisal review to the next level”…many in the industry, from lenders, real estate brokers and appraisers, are a bit anxious over this new “tool”.
When an Appraisal Comes in Low: Seattle Real Estate Chat
November 24, 2013 by Leave a Comment
In the last episode of Seattle Real Estate Chat, Jim Reppond and I discuss what happens when an appraisal comes in low for a home purchase. Since appraised values are based on comps (recently closed homes), the data used to determine an appraised value is often “lagging” behind current home prices. Factor in bidding wars when prices may be escalated along with HVCC (regulations that do not allow lenders to select appraisers) and it’s not entirely uncommon to have an appraisal come in lower than the offer price.
HARP 2 and Appraisal Waivers
April 19, 2012 by 1 Comment
When the expanded guidelines of the Home Affordable Refinance Program (aka HARP 2) were released late last year, they announced that loan to value (LTV) restrictions were being removed. It all sounds very simple however, no big surprise here, there’s a little more to it.
HUD extends Waiver for “Anti-Flipping” Rule through 2012
December 28, 2011 by Leave a Comment
UPDATE: HUD HAS ANNOUNCED THIS WAIVER WILL BE EXTENDED THROUGH DECEMBER 2014.
HUD recently announced they will extend their anti-flipping waiver through December 2012. From HUD:
In an effort to continue stabilizing home values and improve conditions in communities experiencing high foreclosure activity…[HUD] will extend FHA’s temporary waiver of the anti-flipping regulations.
With certain exceptions, FHA regulations prohibit insuring a mortgage on a home owned by the seller for less than 90 days… The new extension will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. It will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.
The extension is effective through December 31, 2012, unless otherwise extended or withdrawn by FHA. All other terms of the existing Waiver will remain the same. The Waiver contains strict conditions and guidelines to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers. The Waiver continues to be limited to sales meeting the following conditions:
- All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
- In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the Waiver will only apply if the lender meets specific conditions and documents the justification for the increase in value.
- The Waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program. [Reverse Mortgages]
In addition to what HUD covered in their email on Friday, the waiver also specifies that:
- the sale must be by the owner of record
- the property may not have been a repeatedly “flipped” over the past year
- the property was marketed openly and fairly
When a home is being resold 20% or higher than what the seller purchased the property for in less than 90 days, often times a second appraisal will be required and the seller will need to show documentation to support the increased value in the home, such as receipts for the improvements made. A property inspection report will also be required by the lender to assure the quality of the improvements made to the property. Any health or safety issues disclosed by the property inspection will need to be corrected.
If a home has been re-sold withing 91-180 days at more at 100% or more than the seller’s acquisition cost, the same conditions will apply. If a second appraisal is required, the home buyer is not allowed to pay for it per HUD. Thanks to LO Comp, which the Fed passed in April, your friendly mortgage originator cannot use their commission to pay for this cost either.
Investors who are reselling in a short period of time for a much higher amount than their acquisition cost should be prepared for the cost of the second appraisal when the buyer is using FHA for financing. Folks should also retain detailed records of improvements (including all receipts) when they’re planning to quickly resale a home. The seller’s acquisition cost is the sales price of the home, plus the seller’s closing cost, including real estate commissions. It does not include any repairs.
If you are considering buying a home located anywhere in Washington State, I’m happy to help you! Click here for a mortgage rate quote for homes located anywhere in Washington. I’ve been originating home loans at Mortgage Master Service Corporation since April 2000, including FHA insured loans.
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