Are Brentwood First Time Home Buyers being hurt by the hot market and low appraisals? 8/12

Are Brentwood First Time Home Buyers being hurt by the hot market and low appraisals?

Brentwood First Time Buyers face an up hill battle right now (August 2012) for a couple of reasons.

First off there are a lot of cash buyers in this market. Sellers want the easy sale and will go for good cash offers.

The second reason is a little more complex. When I talk about First Time Home Buyers what I am really talking about is FHA Buyers with a minimum down payment, VA Home Buyers with little or nothing down and anyone else with a minimal down payment.

Home price are rising and most reasonably priced homes sell for over asking price. Many buyers with low down payment could afford to pay more and even bid up the price; but the appraisals freeze them out. Lenders will not loan for more than a home appraises for.

Currently appraisers are very conservative due to government regulations and a lot of unfair blame for the current housing crises. They are also under a lot of pressure from the banks to not appraise high. There is no mechanism to allow for an up market or appreciation in the current rules.

When a home does not appraise for the amount of contract the contract either has to be renegotiated, canceled, or the buyer has to pay the difference out of pocket.

As an example: A home is listed for $200,000.00. The FHA Buyer with only 3.5% down bids $230,000.00 for the property. The property appraises for $210,000.00. The lender will only loan on a value of $210,000.00. The buyer will need to come up with $20,000.00 out of pocket. Most First Time Home Buyers do not have $20,000.00 extra to buy a home.

The really sad thing is that as soon as the Cash Buyer pays $230,000.00 or some with substantial cash pays the difference the other homes just like it will now appraise at that value.

So what is a First Time Home Buyer to do? Well there are a number of ways for an aggressive but financially limited First Time Home Buyer to get a home; even in an up market. However, those methods are for my clients to know. If I shared them with everyone they would not be as effective.

First Time Home Buyers should e-mail me or call 925-260-4321.

[idx-listings city=”Brentwood” propertytypes=”211,365,363,364,362,361″ orderby=”DateAdded” orderdir=”DESC” count=”50″ showlargerphotos=”true”]

 



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