I'm sure many people are aware that there are tons of loan programs and down payment assistance programs available to buyers. When a potential buyer has "decent" credit but "no" money, it often becomes a request for the seller to "contribute X% of the sales price towards buyers closing costs / pre-paids." Sometimes it is 6%, 3%, 2% or what ever amount you want to use but heres the deal.. Over the past few years, when the market was in over-drive, it was pretty easy to add the number to the sales price and have the buyer "finance" the costs. As we ALL know, underwriters are looking at values pretty closely these days and that scenario has changed quite a bit.
Now that FHA loans are coming back in a big way (at last in our market) I am seeing more AmeriDream type of loans. People that couldn't afford a home before are starting to look again and hopefully, that will be a good thing for the market. The problem can be when more assistance is "needed" vs. how much a seller is willing or able to contribute. With aggressive pricing being the key to getting offers, we sometimes find it to be more difficult to pay 6% in costs. So here is my problem...
Agents are asking me to raise the price in the MLS after they raise their offer to cover costs. This practice, to me, screams... Hey, come and take my real estate license! I have a feeling that, raising a price for the sole reason of trying to get a lender to hit a number is not something to be taken lightly.
When I have the discussion with my clients (mainly sellers), I have yet to have one disagree with me that one sale is not worth one "investigation." I do not try to call a buyer's agent fraudulent as most times they really don't think there is anything wrong with this practice and it can cause some interesting conversations. However, I prefer to address these things before they become a problem.
So, what do you think?? Is it ok to change the list price in the MLS AFTER a contract has been negotiated?
I don't see how the list price matters. The appraisal will determine whether they can get the loan done or not. The appraiser will look at closed properties. If the closed prices justify including the down payment then it should be fine.
You and your client decided on a price to market the property and I don't think that a third party should have any influence with you and your client especially under the circumstances. I believe that it is deceitful and manipulative and no I would not do it.
I like the reference to back dating docs from Kathy.
Jiggering with the MLS because of additional considerations doesn't just happen on AmeriDream assisted loans. We all know that the appraisal process ensures that properties are correctly valued. If the appraisal is being manipulated then there needs to be more independence brought to that process. Because there exists this opportunity for prices adjustments between real estate agents, the independent appraisal becomes that much more important to keep everyone honest. So, do want you, do you what you think is right, but at the end of the day, someone should be there to check your work...to protect everyone's interests.
I too am seeing a dramatic increase in the number of buyers using FHA along with a "down-payment assistance" program such as Nehemiah or AmeriDream, because they have no funds for a down-payment or closing costs.
A sales price 6% above the list price just won't work in MOST cases in the Charlotte Area, the properties just won't appraise. The only exceptions are dramatically undervalued properties that are occasionally available in our area. However, if the seller priced their property at 5% above their bottom dollar, then it may work out fine.
You just have to check the comps and give your client your best advice on the property's current market value, then hope that the appraiser agrees! If the appraisal doesn't come in then the buyer will have spent a good bit of cash that they won't get back, it's a bit of a gamble. Market value is determined by recent SALES of similar properties anyway, so the list price shouldn't matter.
I would definitely NOT change the list price for the purpose of defrauding the appraiser and lender!
Hi Cheryl.. Some excellent points. Even though we don't work for the lender or appraiser, we owe EVERYONE honesty. Thanks for stopping by!
Curtis, You are right. Most appraisers here have access to the history as well. Kinda hard to explain the "sudden change" in price. :-) And.. I'm with you, I don't like to be hungry. :-) Thanks!
To me to pass the smell test you need to be able to answer why, in an exceptable manner if questioned by anyone from your client to the real estate commission.
Nick,
Sorry I am late to this party. I do a lot of FHA with Ameridream loan packages. Having a selling agent raise the price in the MLS is wrong. On FHA transactions, the lender is not concerned with the list price anyhow. Their concern will be with the appraised value. If the price is raised to cover the extra expense, and the appraiser feels its worth the higher price, then there is not a problem on the lender side of the transaction. However, it sounds like you have been dealing with some un-educated selling agents that do not need to ask you to raise the price in the MLS. If I know you, the request is being denied. I am not sure if its illegal, but it sure sounds unethical.
Hi Julie, You rock.. :-) Thanks for coming back..
Mark, Thanks for stopping by Monopoly Man. :-)
The entire real estate, mortgage and banking business is nothing BUT fraud. All of these agents collude with each other to commit fraud against the buyer,unknowingly or not. From start to finish real estate agents are participating in the biggest thieving scam in history. Recently it was revealed on CNN that most banks don't even have the ability to establish the alleged fact that they own the property. They can't produce records.
ALL of you ggents are involved in fraud, period. And you sleep well at night after you get that big down payment of cash and kickbacks that go with it. A sleazy used car salesman has more integrity.
"Johnny".. I sure can appreciate your opinion. Unfortunately, your blanket statements do not even remotely compare to the truth. Obviously, there have been problems within the real estate, mortgage and banking business but to say entire industries are "nothing but fraud" is quite a stretch. Best of luck to you and thanks so much for stopping by..