FHA Loan Buyers Facing Obstacles in the Current Market

Last May, I wrote a blog "Bidding Wars are Back" and since then, the competition has only gotten more fierce.  Not only are there other home buyers to compete with, but now out-of-state and international investors have hit the Metro Atlanta Market and are literally devouring the inventory. At the time of this blog, there is roughly a four-month supply of homes on the market by my estimation.  This is GREAT news for property values and upside-down sellers looking for a way to get out of their current homes to take advantage of the market.  This is troubling news to home buyers that are using FHA financing to obtain a home because the requirements that come along with an FHA loan are a major turn off to sellers and their agents alike. Here are the three biggest hurdles you face when using an FHA loan.
      The first hurdle with FHA loans is that the house must meet a certain condition requirement in order to pass an FHA appraisal be deemed eligible.  Most banks only sell properties "AS-IS" with no repairs and cash strapped sellers are not looking to do any repairs on a money pit. Most sellers would rather take an all cash offer for less money if it means they can unload the home in it's current condition.
      The second hurdle is the time it takes the loan to close. With the average lender quoting 30-45 days, this is not attractive to a seller. A cash deal can close in as fast as a week and conventional loans in under 30 days.  The bright spot here is that the time it takes an FHA loan to close does vary from lender to lender. All of the lenders I close loans with have the ability to (and actually have and still can) close an FHA loan in 18-21 days.  I have a list of the lenders I work with on my website.
      The third hurdle is the FHA appraisal. This appraisal is a double-edged sword. On one side, the appraiser is allowed to morph into a home inspector and note repairs that they feel are necessary to make the home liveable. On the other side, whatever the home appraises at (whether higher or lower than the list price of the home) the home is stuck with that value for 6 months. So let's say the house appraises for less than the contract price, the seller isn't willing to reduce the price and the deal falls through.  Even if another FHA buyer comes along and is willing to pay more, their lender will not allow them to obtain a loan for more than the current FHA appraisal.  So now the seller can only sell the property to a cash buyer or a buyer using conventional financing.
      If you are unable to save up more down payment to go conventional and you must use an FHA loan, all is not lost!  You must be EXTREMELY aggressive when making bids and willing to hunt alongside your real estate agent for listings, and be prepared to see homes the same day you find them.  Put out multiple offers and hope one sticks; even put in a blind bid if that's what the situation calls for.  The current Metro Atlanta real estate market will not wait on you to make a decision, you need to already have your mind made up before you start looking for a property!