4 Things Agents Can Do To Save Their FHA Buyers Money and Time

Fellow Appraiser Tom Horn shared this great article on 4 Things Agents Can Do To Save Their FHA Buyers Money And Time

May 3, 2018 By Tom Horn

Do You Want To Save Your FHA Buyers Money and Time?

This week I had a situation with an FHA appraisal assignment that I wanted to share with you. The thing that makes this one different from the others is that if it had been handled differently it would have saved the buyers money on a final inspection and they probably could have closed their loan faster.

Appraisals done for FHA financing are typically more strict than for conventional loans. Issues that arise usually fall into 3 categories which are safety, soundness, and security. Safety refers to the health, habitability, and sanitary conditions of the property. Any item that would threaten the occupant’s health is included here, such as peeling paint, frayed wiring, or missing handrails.

The second ‘S’ is for soundness, which relates to the structure and structural components of the home. Examples of these include items such as foundation problems or roof leaks. The last ‘S’ is for security. We’re not talking about whether the house is locked up and secure but whether the property will be good collateral for the loan. Is it worth at least what the buyer is borrowing?

Things that can affect whether it will be good collateral usually have to do with its marketability. Some of the things that can affect marketability include whether the home is near high voltage power lines, near railroad tracks, or some other negative influence. If it is then this may keep people from wanting to buy it from the bank if it went into foreclosure.

In my 28+ years as an appraiser I’ve seen all kinds of issues with homes but today I’ll share with you the top 4 things agents can do to save their FHA buyers money and time.
4 Key Areas To Focus On:

1) Windows– The biggest issue I see with windows is whether they can be easily opened if it is necessary to exit to the outside. This is the perfect example of a safety issue. If there was a fire in the home and the only way to get outside was through a window could it be opened?

Windows in older homes are usually the ones that are hardest to open because most of the time they are painted shut. I did, however, see something this week I had never seen and that was windows that were nailed shut.

They were impossible to open up and I made it a requirement for the nails to be removed so the windows could open and close. For safety’s sake, they should be able to be opened by a small child in case of an emergency.

2) Paint– I’ve written previous posts on the proper way to address peeling paint in FHA loans so I won’t cover that here except to emphasize that if a house has peeling paint it should be removed and repainted. Over the years I have slowly seen conventional loan requirements also require this, so its a good bet that no matter what loan type a borrower chooses the peeling paint will need to be corrected so why not do it before the home goes on the market? Putting it off until the last minute will only result in the borrower paying more and delaying the loan.

3) Appliances– I get questions from agents about appliances frequently. They are concerned that the home may not pass the FHA appraisal guidelines if an appliance is missing.

One of the main things to keep in mind is that an appliance does not have to be present to pass FHA guidelines. If an appliance is missing, however, there cannot be any exposed wiring or uncapped gas pipes.

If an appliance is present it must work properly. A stove that has burners that do not work or a microwave that will not turn on will either have to be removed or replaced.

4) Utilities– As you might expect, all utilities must be turned on for the appraisal observation. Electricity must be on for the appraiser to check the operation of all of the appliances as well as the heating and cooling system.

If the home has gas it must also be turned on to check things such as the heater, water heater, and the stove if it is gas. The water must be on so that the faucets can be turned on and the toilet can be checked as well.

So to recap, agents can save their clients both time and money by making sure that windows open and close, no peeling paint is present, appliances work if they are present, and that all utilities are on. This will ensure that the appraiser does not have to revisit the property, which extends closing time and increases cost for the additional inspection.

Thanks Tom for sharing this great information I hope this information helps you get to the closing table quicker. If you are a homeowner taking care of these repair items before you get ready to list your home will help things go much smoother. If you have any questions or comments contact us or post below.

So, what does the real estate market look like going into 2018 for St. Tammany Parish?

St. Tammany Parish Market Analysis

The only way to possibly see what may be happening in the St. Tammany Parish Real Estate market in 2018 is to look back at 2017 and over the last ten years. I have been appraising residential real estate in this region for 24 years and what I have witnessed in this parish has truly been remarkable. As everyone knows Louisiana typically goes in the opposite direction when it comes to housing and the economy, but St. Tammany Parish has basically held its own and appears to be growing each year. So, let’s look at some data using graphs and charts that will make it a bit easier to understand then I will give my final comments.

FYI All Data has been compiled using data from the Gulf South Real Estate Network/Matrix MLS only. For sale by owners’ data is not included in the data and charts below.

Total Active listings

The data is indicating that the number of active listings have now stabilized and are increasing slightly.

average list price

Average list prices have stabilized in St. Tammany Parish over the last 3 years.

Average DOM

Average days on market was increasing since the beginning of the 4th Quarter of 2017 but is still well within a short marketing time for the region.

Average sold price

Average sold price for the parish has increased each year since the housing market began recovering in 2013

Total number of sales 2017

The number of sales per month is declining; however, part of this is due to the available inventory at this time.

Sold Volume

Total Sales Volume over the last 10 years has experienced an increase in volume each year and 2018 is expected to see a slight increase as well.


 

There is another factor that we must review and that is the current atmosphere of available financing. We have been experiencing the lowest mortgage rates in history for the last ten years and as the economy begins to heat up so will the interest rates.

So as the 10-year bond market hits 2.72 that is a signal that interest rates may rise. While they have been at historic lows and may not rise very much when homebuyers hear interest rates are going up it tends to force those on the fence to decide and those that were thinking about buying to have second thoughts.

rates

Six things to keep in mind about rising rates and values

1) Rising interest rates can affect the ability of buyers to afford higher prices because mortgages become more expensive. Unless there is another factor to help prop values up, rising rates can naturally lead to softer values, but rates are not the only driving factor to make the value go up or down in real estate.

2) Demand is strong enough: Rising rates can certainly impact affordability, but the interesting part to consider is we have a slight shortage of housing inventory. This means there is room for some buyers to completely leave the market (or be priced out) because there would still be enough buyers left to afford higher prices. I am very skeptical of articles that say rising rates will not impact buyers at all because it does impact buyers. We do have to entertain the reality of demand being strong enough to a certain extent to deal with some rate increases without much value change (assuming modest increases of course).

3) The squeeze on lower-end buyers: In a market with rising rates, it’s buyers with less money that will be impacted the most because some buyers are on the brink of struggling to afford the market already. Thus, an increase in interest rates that makes a $100 or $200 difference in a mortgage payment can be a very big deal for someone on a tight budget. Moreover, buyers with larger down payments simply have more power when making offers, negotiating, paying beyond appraised value, etc

4) Lenders will get creative: When rates rise it can put pressure on lenders to get more “creative” in their financing so more buyers can keep making loans. In other words, lenders can help buyers afford higher prices with newer and looser loan programs that compensate for higher rates. On a realistic level though, the lending market probably could loosen up a bit in a healthy sense since the regulation pendulum swung very far after the “bubble” burst. For anyone who has tried to get a loan recently, you know how rigorous and stressful it is. Simply put, getting a loan is not as easy as pushing a “rocket” button on a smartphone app. I hope I have made it clear that you understand the value in using local lenders, appraisers, title, and inspection services.

5) Pressure to buy “before it’s too late”: Many buyers feel pressure to get into the market before rates get too much higher, and that’s a dynamic likely to persist throughout this year as discussions about rate increases ensue. It’s as if buyers feel like they have a small window of time to act before they are forever doomed and shut out of the housing market.

6) Now is the time to refinance that home loan if you have not done so and are at least 1.5% higher than current interest rates.

 


 

So, what does the real estate market look like going into 2018 for St. Tammany Parish?

Well, if we had a crystal ball that could tell us for a fact what was going to happen we would all be very wealthy; however, looking at the available data it appears that 2018 will be another good year for St. Tammany Parish. Although it appears that some areas are experiencing a bit of a slow down there is a lot of new construction happening throughout the entire parish and existing inventory if priced right is moving within 60-75 days.

What does that mean for buyers and sellers?

  • Housing inventory levels in St. Tammany Parish have been decreasing over the last number of years this would indicate that you can be aggressive when pricing your home to sell but confirm that you are not overpricing your home for the market and location. Over 85% of buyers’ research on the internet for homes that they are interested in buying; however, many of those resources do not give a realistic value so knowing what a home is worth based on the knowledge of a local real estate appraiser expert will give you the edge when buying or selling.
  • Knowing what is happening in your neighborhood will give you the right knowledge to price your home at a competitive market price so that your home does not sit on the market giving the perception that something must be wrong with that house because it has been on the market for an extended period of time. Knowing the supply and demand will also let you know what your home will be competing in the market.
  • Existing inventory of good quality homes and good locations are scarce. So it is important that you utilize all tools to make you successful in finding your home such as using a real estate agent that is familiar with the market that you are considering. Using a local lender that understands your housing needs, finances and can meet with you face to face to address any issues during the loan process. Use an appraiser that also familiar with the market that the home is located and understands the dynamics of the market that you are about to invest in while buying or selling your real estate.

I hope that the information provided is helpful to you. If you need to know the value of a specific piece of real estate a real estate appraisal completed by a certified real estate appraiser may be your best decision. Joseph Mier & Associates is a full-service real estate appraisal firm located on the Northshore. We serve the Northshore including Tangipahoa, St. Tammany, Livingston, Portions of St. Helena and Washington Parishes. If you have a question or would like to order an appraisal, please contact my office or me for assistance. You can find more information at www.jmappraisers.com

Disclaimer: All information deemed reliable but not guaranteed. The information is meant entirely for educational purposes and casual reading only and is NOT intended for any other use.  This information is NOT intended to support an opinion of value for your appraisal needs or to be used for any decisions on investing.

 

The Blog Begins

Thanks for joining me! The plan is to share information about the appraisal process.

Just a bit of background on my experience. I have been in the real estate appraisal profession for 24 years and have appraised many properties large and small, rural, suburban and urban. My team and I specialize in real estate appraisals on the Northshore covering the following areas: St. Tammany, Tangipahoa, Livingston, portions of St. Helena and parts of Washington Parish.

One thing I have learned is that everyone has different taste in housing like a good gumbo it may look a little different from mine, but like your gumbo when I taste my gumbo it’s the BEST! So let’s make this exciting and share your comments and questions, and at the end of the day, we may learn a little something from each other.

Joe

Buying and Selling Real Estate is exciting and intimidating at the same time

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