Recently we represented a party in the sale of her one family residential home in Westchester County, New York. Despite the delay on behalf of the purchasers in executing the contract, much to my surprise, this deal took approximately 90 days to close title from start to finish.
One of the main factors is because the purchasers applied for a FHA (Federal Housing Authority) loan. FHA loans are very attractive to potential home buyers because they only have to place 5% down upon contract signing, thereby financing 95% percent of the sale price.
When applying for a FHA loan, aside from the bank wanting to know where your last penny comes from, they can also demand specific conditions to close the loan and if you don’t adhere to their demands, you can be assured the bank is not giving clearance to close the deal. Of the last several real estate transactions, the majority of the loans were FHA. The writer of this blog recently refinanced their home mortgage and shortly after closing, they received notification that the original lender sold their mortgage to FHA.
Even though the standard contract calls for a conventional loan, you can rebut the purchaser(s) FHA loan, but one has to ask themselves, how bad do you want to sell your home? You are perplexed because after your home has been on the market for a long period of time, without any real interested parties, now you have a potential purchaser. Do you decline the FHA loan or sit back and wait for another potential purchaser to come along with the hopes of a conventional loan?
In this particular recent real estate transaction, on the eve of the purchasers’ mortgage commitment expiring, the bank demanded that a two car detached garage be painted. If this was not performed, they would not give clearance to close the loan. So at the last moment, the garage was painted. What this had to do with the value of the home baffles me. No matter what the condition may be, you have no choice but to correct the condition. FHA can require the seller to make aesthetic changes on the home.
Further, another issue arose. The purchasers’ used a mortgage broker to aide them with their mortgage. The lender which was chosen by the broker, no longer offers a wholesale loan. So all the loans had to be closed immediately or the commitment would be recalled. Needless to say, beside all the parties to this transaction scrambling to rearrange their respective calendars to accommodate the last minute closing date, the loan officer assigned to this specific deal was losing her job and wasn’t rushing to approve the documents after execution. As I understand from the bank attorney, approval of the documents is given within a very short period of time. Without the loan officer’s approval, the funds were not clear. This approval was received after five hours of the parties waiting at the closing. Once again, we were at the mercy of the bank.
So if you are in a rush to sell/purchase a home, you may want to consider dealing directly with a bank’s lending officer so to avoid any future problems with placing your mortgage with FHA.
If you, or someone you know, are planning on selling or buying property, we request that you contact our office so that we can help take you through all of the necessary steps required to close on that property. You can reach us at (914) 288-0800. We look forward to helping you through this frustrating time and prevent you from becoming overwhelmed in the process.