Ok, so it was lack of regulation that got us into this mess. Well now there is so much regulation that any ideas of closing a deal early are pretty much pipe dreams unless we’re talking about all cash buyers.
FHA loans have always been a bit of a pain, but now, we spoiled people in high-end markets like West Los Angeles actually have to deal with them. The loan limits for a FHA are $729,000. People can now actually buy a house or a condo in our area with these loan programs. What we’ve learned, through experience, is tha FHA appraisals are EXTREMELY specific. There are all kinds of conditions that need to be met. For instance, if there’s anything that’s non-permitted on a property it’s going to be an issue on a FHA appraisal. If there are any non-permitted garage conversions (which is like 50% of the homes in WLA) FHA will not consider it a garage nor will they consider it a room. It may need to be converted back to a regular old garage for parking or the property may get appraised as not having a garage at all. It’s something to be aware of if you’re buying or selling. We’re currently in a deal with a FHA buyer and they are making some minor repairs to the property before they close in order to get approval from the appraiser. It will close about a week late. Thankfully the sellers and the listing agent have been patient.
Other regulations in today’s market can be more frustrating because they make no sense!! In order to prevent fraud, nowadays when a buyer tries to obtain a mortgage there is a form called the 4506 that must be submitted to the IRS. The tax returns that the buyer submits to the mortgage lender must match the tax returns submitted to the IRS. The 4506 form is submitted electronically to the IRS. The form is often rejected without reason. There is a lot of room in the process for human error. If one number transcribed incorrectly, or if the borrower has moved and changed address the 4506 will be rejected and without an approved 4506 a buyer cannot obtain the loan. Protection against fraud is a good thing, but trying to deal with the IRS and find out why — now that takes PATIENCE! We have some buyers in that situation too. Hopefully we’ll know something more in a few days.
In short, even people who have great credit and plenty of money for a down payment need to be prepared to be scrutinized and take their patience pill before they start the process.
