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Do FHA Buyers Cause Seller Headaches?

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Posted On: 06/23/2010

QUESTION: What are the cons to a seller when a prospective buyer is using FHA financing?

ANSWER: In the past there have been a number of arguments against the acceptance of FHA financing by sellers. Owners, it has been claimed, might face higher tougher appraisals or perhaps steeper closing costs. But how can one know that FHA mortgages are somehow more expensive for sellers than conventional financing? Each home sale is unique - with different sellers, buyers, financing, interest rates, market trends, negotiating skills, brokers, etc. It's difficult to say a sale would have been more or less expensive than the sale of the same property with different financing. After all, if the financing is different, maybe other things also would be different. Whatever the case in the past, the present is here. The big issue today is very simple: Homes are harder to sell in most metro areas, and FHA-insured loans are now a huge part of the marketplace. Do not accept FHA borrowers and you eliminate a very large percentage of all possible buyers. In a marketplace with a shortage of purchasers such a strategy seems self-defeating. The bottom line: Don't automatically reject a ready, willing and able buyer who wants to finance with an FHA-insured loan. Instead, look at your local market, get advice from your broker and consider that the next offer may not come quickly or be as good.

QUESTION: When will home prices start to rise?

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ANSWER: In the fourth quarter of 2009, says the National Association of Realtors, "67 out of 151 metropolitan statistical areas reported higher median existing single-family home prices in comparison with the fourth quarter of 2008." A year earlier, only 18 of 153 metro areas had shown price increases. Real estate is a localized commodity. Rather than looking at national or metro trends, the real question is what's happening to real estate in your neighborhood. For answers, speak with local brokers.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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