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As most of us know, bidding wars in most markets have become the new normal. There are simply more active homebuyers looking than there are homes for sale. Inventory issues have certainly provided challenges for new buyers, as well as frustration to say the least when getting outbid. In our market, we’re seeing homes sell for tens of thousands over asking with multiple offers in mere minutes after the home is listed. Nearly half the offers in some areas are even cash and people are going to great lengths to get in that first position for the sellers.
My concern has been with how offers are being presented to these sellers through the listing agent. I strategically call the listing agent on most offers my clients make to ensure they are clear on their qualifications and details around their transaction so they can accurately communicate with the seller. The problem is that many of the listing agents I speak with I get the impression they don’t know how to actively filter buyers who are pre-approved or utilizing financing providing the questions they ask.
Some often ask if the buyers are contract employees. My response is asking if they mean are they self-employed? Neither is relevant, as you could have a wage-earner non-self-employed borrower with lower reserves and higher debt ratios, than a self-employed buyer and vice-versa. How is this relevant without knowing the profile? You could also have someone putting 10 percent down, but they might have the capability of putting 90 percent down if they wanted to. Again, a simple pre-approval letter will not expose this, so what are listing agents telling their selling clients when looking at similar non-cash offers where financing is involved? There are just too many variables internally.
This is where a call by the originator certainly can help, as well as a letter from the buyers to the sellers. We just hope that the listing agents are presenting all offers and are in compliance. We have unfortunately seen listing agents giving inaccurate and discriminatory advice to sellers by boycotting veteran buyers, even when a stronger offer assuming their financing is more challenging when it is not. The same might be said for FHA loans over conventional loans, and higher downpayments versus lower downpayments, but there is more to it than that. The details matter, and I believe they should seek them from the lender before presenting advice to a client selling their home.
What are you seeing out there? I know there are many stories around this topic as I have many myself. Please share your stories on these bidding wars for next edition by sending me an e-mail or posting on our Facebook Group.
Are you an originator? Send your stories! To have topics considered in future editions, please e-mail me with “OrigiNation” in the Subject Line at AHarris@VantageMortgageGroup.com. These can be confidential or your name and company can be referenced if you wish. You can also join the Facebook Group by searching for “OrigiNation.”
Andy W. Harris, CRMS is president and owner of Lake Oswego, Ore.-based Vantage Mortgage Group Inc. and past president of the Oregon Association of Mortgage Professionals. He may be reached by phone at (877) 496-0431, e-mail AHarris@VantageMortgageGroup.com or visit VantageMortgageGroup.com.
This article originally appeared in the May 2016 print edition of National Mortgage Professional Magazine.