January 1930 - There are two great dangers to the continuance of prosperity.  The first is the false idea that business is still governed by a cycle of boom and depression, and the second is that the leaders of business will think that the country is broke because some of their friends are.  And also there is the danger that many executives who have been playing the market instead of working will not know how to get back to real work.

       Samuel Crowther, The World's Work

The following news is old, a bit antique in the "live feed" internet world we live in.  Yet, it's vital for the loan du jour these days in a very different lending atmosphere. 

I've had two concerns with FHA Loans and those have been documented in writing.  Here they are:

      *Picking up so much funding slack (my guess is at record levels) because of conventional Pricing changes and the disappearance of the sub-prime market.  Mistake folks, big mistake.  I give you the "All Eggs..." analogy.

      *Subprime folks who penetrated the FHA product early on.  FHA is NOT subprime and certainly not a viable substitute. 

And to the news...

*  If it is a cash-out refinance over 85% of your home's worth, two appraisals need to be done.  I've seen (in my area) appraisals being done for anywhere from $375.00 to $400.00.  The positive spin on this is that your equity position probably won't be over-inflated.  The reality is that you are going to have to pay for two appraisals.  Make sure you have the cash-flow to do it.

*  Property Condition Issues - Peeling paint is a No-No.  GFCI outlets (those things that you plug stuff into) must be upgraded if they already aren't.  They must have a reset button, which is usually red. (This applies to kitchens and bathrooms or anywhere there is running water)...

*  The down payment has risen to 3.5% since the New Year.

*  620 may be the magic credit score.  Don't count on civilian credit checks to see what you may qualify for.   Of note, scores can be lower than 620... just make sure that right now... you know that credit scores mean a damn along the merry little way and may even mean more down the road.  Ironically, I wrote this post in "draft mode" before this other post came to be.

*  How about those DPA's:)  Down Payment Assistance Programs have received more scrutiny than Mr. T attending a Richard Simmon's Summer Home Pajama Party.   For me, it's another way for a seller to sell their house and the buyer to be able to buy it.  Done legitamately, it is a worthwhile product & amenity to Mortgage Financing.

* 203K loans are one of the only Rehab Loans I know of at this point.   You know, you find a property at a decent price that needs work but you don't have the cash to buy it and do the improvements yourself.  These loans must be owner-occupied (as all FHA loans stipulate) and it's a great example on how you can turn a dive into a palace.  Or, at least better your abode and respective neighborhood.

I've done a few more Conventional and even Hard Money Rehab Loans and most of the banks/lenders backed out of delivering the product. The FHA 203K Loans are alive and swinging.

December 2008 - People, especially Americans, started believing that they can live on other people's money.  And more and more so.  First other people's money in your own country.  And then savings rate comes down, and you start living on other people's money outside.  At first it was the Japanese.  Now the Chinese and the Middle Easterners.

We-the Chinese, the Middle Easterners, the Japanese-we can see too.  Okay, we'd love to support you guys-if it's sustainable.  But if it's not, why should we be doing this?  After we are gone, you cannot just go to the moon to get more money.

     Gao Xizing, president of China Investment

If you've stuck around this long, here's a song...

AS A BUYER'S AGENT, I ATTEND ALL INSPECTION ON A HOME UNDER CONTRACT FOR A BUYER.  When I say ALL, I mean ALL.  I attend the home inspection, the termite inspection, any other inspections or estimates for repairs.  As a buyer's agent, I'm not involved in the appraiser's visit.  That's reserved for the listing agent to protect their pricing. 

I have learned from experience that, if the buyer's agent is present for all inspections, their ability to represent their home buyer if defects, infestations, damages, etc. are found, we will have a better resolution for our buyer client.  Home Inspection Notices are easier to write if we have observed the defects found by the home inspector.  We might even need photos. 

HOUSE AND BARN.  Fortunately, the termite inspection performed on the property below on Thursday of this week revealed no termites or other wood boring insects.  Whew!  Since the property includes a barn, we included the barn in the termite inspection contingency.  Thankfully, all were clear.  Of course, our Contract of Sale requires that, while the buyer can have the termite inspection performed, any extermination and/or structural repairs will be made by the seller prior to settlement. 

          

     This gentleman is not shy about his job.               High tech inspection can detect bugs behind walls.

          

    The barn was covered by the inspection.                I like to get the inspection report quickly.

However, termite extermination treatments are expensive and often the seller resists this requirement to treat infestation and most will resist repairs from past infestation that should have been addresses before the house was even put on the market.  So, we attend the inspections, take photos if necessary, and make sure that the seller and the seller's agent understand the requirements of the contract.  That is Homefinders.com policy.  Would that it were that simple. 

SOME SELLERS JUST REFUSE THE ACCEPT THE OBVIOUS.  Have we had contracts fall apart following the discovery of termites, YES!  About two years ago, a termite report revealed not only a serious infestation, but also serious damage to the structure of the property.  However, the seller refused to cooperate and responded to the termite report with a "note" from their contractor that there were no damages to the structure.  Further, the seller refused to permit access to the property to a contractor for the buyer.  While they were willing to treat the infestation, the sellers were not willing to make repairs or compensate the buyers for repairs to be made following closing. 

"I DON'T WANT THIS HOUSE", said our buyer.  Finally, after about 4 back and forth letters between the buyer's attorney and the seller's attorney, the seller signed the RELEASE and the agent and buyer began a new search for the house. 

AGENTS MUST TAKE RESPONSIBILITY FOR THEIR ACTIONS.  The legal fee of $1,500 charged by the buyer's attorney was paid by the buyer's agent.  WHY?  BECAUSE THE BUYER'S AGENT DIDN'T ATTEND THE TERMITE INSPECTION.  Of course the agent knew that it was our policy to attend all inspections, including the termite inspection,  Therefore, the buyer had no witness to the inspection and the seller refused to accept the inspection estimate for repairs.  Once they received the termite inspection report, the sellers simply stonewalled every attempt to reinspect, estimate damages by a licensed contractor or further admittance by the buyer's agent.   Our buyer was released from the contract due because they wouldn't accept the remedies offered by the seller.  Anything less than full extermination and full repairs to the house was not going to satisfy either Lenn, as the buyer's broker nor the buyer.  Once I spoke with the termite inspector and he indicated that the sill plate was like confetti, my advice to our buyer was "we'll get you out of this contract.  Now, let's get busy finding you another home."  These were relocating home buyers and needed a home.  I don't know the final result of that property for sale, but it was removed from the MLS shortly following the release of our buyer.

SOMETIMES IT'S THE LITTLE THINGS.  Over the years, the only time that I can recall difficulty with termite clauses in the Contract of Sale were:

1.  A log house with termites but the seller didn't have any money to pay.  We removed the termite clause and got $6,500 closing costs for the buyer which the buyer used for the termite treatment and repairs following closing.

2.  Termite inspector missed serious infestation in house following a less than vigorous inspection.  Termites were discovered following closing.  Following a complaint by the buyer, the termite inspection company lost his license for a period of 3 months. 

3.  House found to have serious infestation which the seller refused to accept because he had a warranty.  After a bit of a hassle, the termite company did the treatment.  Of course they then tried to sell a termite warranty to the buyer.  HA!  I advise my buyers to have a termite inspection annually.  Warranties don't provide protection because the termites cannot read.

Normally the termite matter is routine.  The house is usually clear.  If an infestation is found, we simply give a copy to the seller's agent and the treatment and/or any repairs are done before settlement and a new termite inspection report provided to the lender. 

TIMES CHANGE but TERMITES HAVE NOT.  Many lenders are not requiring a termite inspection for conventional financing.  FHA and VA do and that's good.   Our buyers are advised that "there's a colony of termites under every house just looking for a damp piece of wood to serve up for dinner". 

Home Inspection Courtesy of BugPros Termite and Pest Control,

A Keith Black, Purcellville, Virginia, 540-338-6600 

I would not sell a home without a termite inspection. 

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988, E-mail.