Join Brian and David Wickert as they guide you through homebuying news, tips and tricks.
This week’s highlights:
- Brian and David review why sellers and agents don’t really like FHA loans.
- Because of the pandemic, home sales are down year-over-year.
- COVID-19 has affected almost every industry—including home purchases.
Why don’t sellers and agents like FHA loans?
There are tons of mortgage loan options out there. Some tend to be better than others, but normally, it’s pretty case-dependent. FHA loans are a government-insured loan that are great for buyers with less-than-ideal credit scores. There are no income limits, they’re not limited to first-time buyers and you can use them for refinances, too…but sellers and agents don’t like them much.
Why? Well, because FHA loans are government-insured, the home condition requirements are slightly higher than normal. That means you need to make sure the property is up to code, and make plans to fix any issues before closing. This should happen anyway, but with FHA loans, there’s a bit more scrutiny.
In the minds of sellers or real estate agents, this could impede (or even cancel) the sale of a home. So, there’s some nervousness that comes with it.
Now, this shouldn’t stop you from getting an FHA loan—if the house is in good condition, the seller and agent have nothing to worry about. Besides, it’s better to sell to an FHA loan recipient than not at all!
Milwaukee County home sales (June 2020)
Before COVID-19, home sales were up year-over-year. But, in the new COVID-19 economy, we continue to see a decrease in monthly home sales, specifically in the Metro Milwaukee area.
|January 2020||↑ 6% year-over-year|
|February 2020||↑ 4% year-over-year|
|March 2020||↑ 14% year-over-year|
|April 2020||↓ 7.5% year-over-year|
|May 2020||↓ 25% year-over-year|
|June 2020||↓ 16% year-over-year|
Along with home sales, new listings have also taken a hit in recent months. In the 3-month period most affected by COVID-19, 6,864 homes were listed for sale…that’s a 39% decrease year-over-year. So, if you’re trying to buy a home right now, don’t be surprised to find limited inventory.
Buying a home during COVID-19
A lot of states have changed or modified homebuying laws in lieu of COVID-19 concerns. Namely, Wisconsin added a new addendum to the Offer to Purchase form that basically says, “If anyone involved in the purchase faces COVID-19 related health concerns, the deadline is automatically pushed back by 14 days.” Great, right? We think so too! But sometimes, it doesn’t quite work out.
We recently had clients get an accepted offer for a lake home in Winnebago County. Right before the home inspection was scheduled to take place, the sellers said they had been exposed to COVID-19, and needed to quarantine in the home for 14 days. This change in schedule means it would take, at minimum, 19 days to get a home inspection. Normally, home inspection contingencies need to take place within 15 days…and the sellers didn’t check the box to activate the new addendum. So, no 14-day grace period can be granted.
So, Brian took a look at the contract and noticed that the agent is a seller’s agent rather than a buyers agent. This means the agent always acts in the best interest of the seller. And, in this case, they did this by ignoring the COVID-19 addendum.
We connected the buyer with a real estate attorney to help resolve the situation, and they’re currently working on an amendment that will allow the home inspection to take place after the sellers’ quarantine.
Moral of the story: When buying a home, get a buyer’s agent, not a seller’s agent.
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