Two Wrongs Don’t Make it Right
I work with a lot of first time homebuyers. I am always surprised at what many of them do not know about the homebuying process by the time they come to talk to me and it is certainly not due to lack of effort on their part. Now I’m not talking about people who woke up that morning and decided, “I think I will go buy a house today” and who haven’t done any research at all. I am talking about buyers who, in some cases, have been looking for months.
These are smart, educated (those two don’t always go hand-in-hand), responsible, web-savvy people. They have read books, done online research and in some cases been pre-approved by a lender and been out to see houses with a real estate agent or two. There are two issues that I encounter over and over with many of these buyers.
The first one has to do with something called the “Massachusetts Consumer Relationship Disclosure”. This is the form that talks about the different types of Agency Relationships available in Massachusetts and the rights each consumer has to representation. Massachusetts law says this form is supposed to be presented to the consumer at the first meeting to discuss a particular property. The most important thing for buyers to know about the disclosure form, is that by signing it, they are NOT entering into a contract with that agent. They are simply acknowledging that they have been given the information. EACH AGENT they meet with is supposed to have them sign this form. I have met with buyers who have previously been out to see properties with 2 Realtors and they have never seen this. Time after time I am the first agent to introduce it to them. You have to wonder, if those agents are not following this first, basic rule, what else are they not doing correctly?
The other thing that comes up a lot has to do with FHA financing. An FHA backed mortgage is one that is insured by the Federal Housing Administration. This type of financing is popular with first time buyers because of its 3.5% down-payment requirement. Many first timers are in the $150,000 to $300,000 price range and with the FHA requirement of 3.5% down, they need somewhere between $5,250 and $10,500. The rules for using an FHA loan for a condo or townhouse are different than for financing a single-family property. One of the biggest things that comes into play is that the FHA has to approve a condo project and put it on their approved list before you can buy it if the borrower is using an FHA loan. And the rules say that FHA will not approve anything with less than 4 units. A lot of multi-family properties in Massachusetts started out as a duplex or with 3 or 4 apartments in them. They are renovated and then go through a condo conversion, which is the process of turning the rental units into individually owned units.
If buyers are not talking to the right lenders and right agents and being given the right information, they may spend precious time looking at properties that will just not qualify for FHA financing. It used to be that an individual project could be reviewed using something called a “Spot Approval” and perhaps be given the green light to use FHA financing. As of this post, Spot Approvals are “pretty much a thing of the past”, according to one mortgage expert I work with.
I really like working with first time buyers and helping to educate them through the maze of buying a home. And I like working with knowledgeable, reliable professionals that I can refer those buyers to so I know they will be given the correct information from the start. In order to give the right guidance to our clients, we need to get the right answers to the right questions, so we don’t send them off in the wrong direction.
Beth is a practicing Realtor and Interactive Marketing Manager at Barrett & Company Real Estate in Concord, Massachusetts. She spends her days coaching home buyers and sellers through the intricacies of buying and selling property and training her fellow agents on the importance of and benefits to an online presence, most recently on Google+! Read more of her work on the Barrett Massachusetts real estate blog.
