I'd like to know when it became OK to discriminate against Buyers who use an FHA 3.5% down payment loan program. I recently submitted an offer for a newly engaged couple who had amazing credit, substantial savings, and enough liquidity to put 20% down. They chose a foreclosed home that was owned by Freddie Mac. A great home that was move-in ready. They made a strategic decision to take advantage of an FHA program that allowed for 3.5% down. They were going to invest the remaining 16.5% in updating the property to ensure they will earn a substantial gain on their investment.
We were in a competing offer situation. My clients put in a full price offer and waived their Inspection condition. I was told our offer was not successful. It was implied by the Seller's agent that our offer needed to show a "stronger commitment" on the part of the Buyers. EXCUSE ME!!!!
The Seller actually felt my client's offer was not strong enough at full price and no inspection condition???? It is my opinion that Sellers feel anyone who is not bringing 20% down is a weak Buyer. I'm sorry....since when did the value of money change based on where and how it came to be? $400,000 is $400,000 whether it's cash, a Conventional Loan, VA Loan, or FHA loan.
I believe there can be a case made that a Seller who discards a Buyer because they made a choice to use an FHA loan is border line discrimination. I'd like Freddie Mac to tell my client, who is an Active 20yr Navy soldier and his Fiance who is a consultant for the Dept of Defense, that they aren't committed to buy their dream home because their choice to use FHA (which comprises nearly 40% of all purchase loans in 2009) is weak.
Where has this market implosion taken us????
Chris M. Vinci, Owner, CRS, CLHMS, CMAS
Voted "2011 BEST OF.." by Mountain Connection readers
da Vinci Realty in Downtown Evergreen, Colorado
303-679-0360
Chris, has the transaction closed yet? If it has, what was the selling price and were there any give backs from the seller to the buyer. Sounds to me that there is more involved here than what you are being told. I would follow this transaction to the close very diligently.
Boulder City Steve
As you say, it was a competing situation. Did they have a "stronger" offer in hand? If they did, then its not discrimination, its competition.
As a seller, that's what I'd want.
I agree with you Mike and Steve. Competition is competition. I will be monitoring this transaction and will be curious to see what it closes at. Since the agent stated Freddie Mac will look at the loan to value as a determining factor, I'm convinced the other offer was for less money but with more down payment. Hence my issue with Sellers assuming a Buyer's "committment" to purchase is weakened by putting less money down. If a Seller gets more money from a Buyer who puts less down, what do they care where a Buyer gets a loan as long as they can show a strong ability to close on the transaction. If my Buyer was willing and able to pay more for the house than the other Buyer, how is that not a stronger offer or commitment? Time will tell what they sold for. Will update when I hear.
Thanks for the comments.
Chris,
Definitely follow this one through if for no other reason then your own sanity. I have to agree that this appears to be bit "shaky", if i were the seller in this cast i would have been impressed with your clients plan of action. Sounds like they are intelligent, smart clients. Good luck with this
FHA loans tend to have alot more conditions when it comes to the appraisal than Cash or Conventional sales. Highest and Best doesn't always mean highest net. We have seen banks accept an offer lower than sales price when they had a multiple offer situation (offers were significantly more) specifically based on the financing type.
I've known of banks taking lesser all cash offers or larger percentage cash even at a discount to the asking price. As they say, cash talks.