San Jose, CA · Member since 2016 · 13 posts · 1 vote
Hello!
My husband and I are first time buyers and new to the area (San Jose). We met with a realtor who I found on zillow with high ratings and she instructed us that because the housing market is so competitive here, it is important to have all of our underwriting completed and our contingencies as small as possible. She explained that she has a close working relationship with a mortgage consultant at WellsFargo who underwrites for all her clients and gives them priority. I have been researching first time home buying and read that its important to speak toh multiple lenders, however she made it sound as if he handles all her clients and in order for the process to go smoothly we needed to go through him as well. Is this normal? After speaking with him he said to expect a 4.2-4.5% interest rate on a conventional loan with 5% down. What are your thoughts?
Everyone who has posted has given you good advice. The "personal gain" for your Realtor in introducing you to a preferred lending partner is likely to be limited to transaction comfort and accessibility as well as referrals to other buyers/sellers. Anything more than that is not legal or ethical. With 5% down, it sounds like you'll probably be limited to FHA financing or a portfolio loan (one the lender keeps and doesn't sell to Fannie or Freddie). Rates and fees will likely be similar for FHA. Porfolio loans may be different. In our market, the ability to DO the loan is huge. When I have my listing agent hat on, who has given the pre-approval for a potential buyer's loan makes a difference in my recommendations to my seller when responding to offers. We want to see direct lenders. Wells Fargo is one of those.
The most important thing when you are purchasing a home or other property is that you can trust the people you put on your team. You're going to be sharing incredibly personal information with your lender and agent. If you have doubts about their integrity, call them on it. It could simply be that red flags for you is just how we do business here. BUT, it could be something else is triggering your doubts. Ask questions. What type of relationship do you want with your team? Business only? Ongoing friendship? Those things can make a difference, especially when the going gets rough or there are transactional hurdles. As far as your loan goes, contact your credit union, visit the bank where you keep your money, and ask friends and coworkers for their recommendations.
If you decide you no longer want to work with any of your team members, tell them sooner rather than later. At the end of the day, this is YOUR life, YOUR home and YOUR money. Don't let anyone make decisions for you or push you into anything. YOU need to be comfortable and understand what you're doing.
Good job reaching out for a reality check and best wishes for finding your new home.
I was thinking along the lines of inspections which is a negotiable contingency. A open statement like that from a realtor would leave me wondering who they are working for, since contingencies are there to protect me.
Inspections is a negotiable contingency. Negotiations do not stop because you are in contract, however.
If you write with an 8 day inspection contingency, and your inspector identifies issues requiring the services of say a foundation expert, and that can't be found until day 10... extend it, tell the seller side why.
It may be different in the Bay Area. Here, all the negotiating power is on the seller's side... until you're in contract, at which point the balance shifts a bit to the buyer.
This isn't any sort of bait and switch, PROVIDED that you as a buyer had no way to know that there might be foundation issues. If they disclosed it upfront and you say you need to extend at the last minute, then you're being shifty (and/or lazy for not reading the disclosures). If they did not disclose it, and you discover it, then it's absolutely normal to say "Hey, I wrote 8 days in good faith based on what YOU disclosed. You didn't disclose this, and I discovered it. I'm going to need to extend until I am satisfied about this thing that you either didn't know about, or pretended not to know about."
BTW as a lender, I don't want to know about any of this foundation stuff (or whatever) in writing (this includes in any contract addenda). Tell me on the phone if you want, but don't email it to me, and don't have "foundation is a mess" in addendum #2 if there's going to be an addendum #3 that changes the price (if there's a #3, underwriting will want to see #1 and #2, along with any referenced inspection reports, and now we've opened a rat's nest).
In writing, all I want to know is how the timeline is changing, not why. :P
This is assuming you even get an acceptance with an 8 day inspection contingency. As a seller I always favor the buyer with no contingency, or if a buyer gives an 8-10 day inspection period I always counter with a lower period. The seller doesn't want to sit waiting for 8 days for the buyer to decide if they want to move forward. If there's a competitive offer situation, I would probably take a grand or two off the purchase price(1% maybe) for someone that's pre-approved with no inspection contingency versus someone with an 8 day period. Otherwise you'll be stuck in 10 days relisting the house, or have a laundry list of repairs from the buyer that'll cost you more than that.
As an investor buyer, I'm always cash with no contingencies. For an investor buyer I really don't understand the mind set of writing an offer and THEN figuring out whether or not it's really worth that amount. It seems like it wastes time for both parties.
@Mike Hurney I have 40 years at this... and your dead wrong.. the best we do for each other is pick up lunch.. or a bottle of wine etc. no kick backs at least with professionals.
Your go-to lender gets food AND booze out of you? I clearly need to work on my realtor game. :P
EDIT: Wait, no. I gotta take that back super bowl party is likely to have both food and booze. So I'm in on the big evil massive kickback scheme.
How do you make an offer? Do you just give them a contract to sign? Anybody have a good example of a contract?
Thanks.
Michael C. Gregory
Remedy Investments, LLC
Hello and welcome to BP! A realor is like any Team member that you should trust. If you do not, just go on to somebody else. They should be experienced and trustworthy. Good luck!
How do you make an offer? Do you just give them a contract to sign? Anybody have a good example of a contract?
Thanks.
Michael C. Gregory
Remedy Investments, LLC
Hello and welcome to BP! A realor is like any Team member that you should trust. If you do not, just go on to somebody else. They should be experienced and trustworthy. Good luck! Have a contract ready but see what the owner expects. They may have one allready.
This is a very interesting discussion for me as a Realtor and an investor^^
As a Realtor in the city of SF, yes arguably the "craziest" market in the US at the moment, I have to admit that having a proven lender in your team and reducing-if not removing- contingencies are the the most important things I need to work on when working with buyers. I know it's not in buyer's immediate interest if we have to make a non-contingent offer, but it's for their ultimate best interest because otherwise buyers will never "win" a property which may become 15% more expensive in the next 12 months. And many times, buyers end up paying more if they have contingencies, to win against other cash or non-contingent offers, so I often wonder whether I am actually helping my clients by adding contingencies in this market...
I try to disclose as much as possible and explain why we need competent lenders and no contingencies, but I can see that many buyers esp first time buyer are skeptical until they lose a couple of properties they loved over non-contingent offers...
And there's no monetary compensation received from my lender whatsoever. The only reason I would refer my lender is because I trust him that he will do a good job and actually close the deal!
On the other hand, as an investor, I do sometimes question the things my agent or lender say when purchasing a property for myself, so I understand it's only natural to be cautious as a buyer^^
Helping you connect with other professionals is what your realtor is supposed to do for you. If you don't trust him or her, however, move on. Good luck.
This is a very interesting discussion for me as a Realtor and an investor^^
As a Realtor in the city of SF, yes arguably the "craziest" market in the US at the moment, I have to admit that having a proven lender in your team and reducing-if not removing- contingencies are the the most important things I need to work on when working with buyers. I know it's not in buyer's immediate interest if we have to make a non-contingent offer, but it's for their ultimate best interest because otherwise buyers will never "win" a property which may become 15% more expensive in the next 12 months. And many times, buyers end up paying more if they have contingencies, to win against other cash or non-contingent offers, so I often wonder whether I am actually helping my clients by adding contingencies in this market...
I try to disclose as much as possible and explain why we need competent lenders and no contingencies, but I can see that many buyers esp first time buyer are skeptical until they lose a couple of properties they loved over non-contingent offers...
And there's no monetary compensation received from my lender whatsoever. The only reason I would refer my lender is because I trust him that he will do a good job and actually close the deal!
On the other hand, as an investor, I do sometimes question the things my agent or lender say when purchasing a property for myself, so I understand it's only natural to be cautious as a buyer^^
Good luck!
I'm going to have to push back a little bit.
There are too many things both your buyers and your lender have zero control over that could put the earnest money deposit at risk. I know that this is becoming more common, but you're playing with fire and it's a matter of time before someone loses an EMD. When it happens (not "if," but "when," assuming you do more than one deal a year), please don't post a rant on BP that there's no way you could have seen it coming and it's not your fault. It will in fact be your fault that someone just lost $45k for stupid paperwork reasons. That's great that your lender is promising you the world, I'm going to be the guy introducing reality.
- Identity theft while in escrow, causing the underwriter and I to get a zillion pings about new debt, throwing ratios way off. Yup, have had that happen. Took a few weeks to resolve, but the buyer had to invoke contingencies and back out of that particular purchase until we could gather documentation for each and every one of that zillion pings that each and every ping was incorrect and has been resolved (it wasn't literally a zillion. it was about 32...).
- IRS transcripts come back, revealing that there was a shady family member CPA committing tax fraud for years and the IRS said they owed several hundred thousand dollars. Have had this happen. I can and sometimes do order IRS transcripts upfront, but that means it'll take two weeks to get them out house hunting while we're waiting on the IRS, during which time your clients are going to walk into Wells Fargo for a 5 minute preapproval based on stated income, stated assets, and a credit pull.
- Listing agent for some ungodly reason allows the sellers to be present for the appraisal, and the listing agent ignored my friendly email saying to direct the appraiser to the buyer's agent should the appraiser contact you, and then the sellers say something stupid in the presence of the appraiser about $50k of deferred foundation maintenance. Yup, have had that happen.
- During that initial week of escrow that the buyers are rushing around getting things done, mom dies, and the buyers frankly do not have the emotional strength to go through with this at this moment. Yup, have had that happen. I've also had a family member die during the last week when all contingencies had been removed, but everything was basically done at that point.
- Some medical debt that no one had any idea about, or way of having any idea about, suddenly appears as a collection account on the credit report. Ping to me and underwriter, like above. Yup, have had this happen.
I'm still asking folks to keep contingencies in place. Me calling the listing agent does the trick just about as well as people taking silly risks with their earnest money deposit in my experience.
For those asking the question "How much should I trust my realtor?" this is part of it. This agent has been lied to and given false assurances by her go-to lender, probably repeatedly, and based on that she may very well be exposing first time homebuyer $45k earnest money deposits to a crap ton of unnecessary risk (She didn't say WHICH clients she was using the 'no contingencies' trick with, so that could be incorrect). We like to pretend we are wizards, but the fact is that even the best lender in the world is not capable of controlling when your mother will die or what stupid thing the listing agent will do or when unknown medical debt from 15 years ago will suddenly pop up. This is why first time homebuyers, for whom the EMD could be a significant chunk of their life savings, should use contingencies.
For you investor folks viewing this purely as a business transaction, who can afford to lose the home and your EMD without your entire financial life going into disarray (you shouldn't be risking what you cant afford to lose if it's business!), the 'no contingency' thing may be a calculated risk you want to take, but it's a bad idea for innocent first time homebuyers.
Good points! I do agree that anything that's beyond the control of the agents or lenders can happen, of course. And it's sweet of you to watch out for your clients and obviously having contingencies is important.
I am not trying to convince anyone and I certainly do not try to convince my clients to do anything. But I believe it's still my job to explain to my buyer clients about the market and what's really happening in real life. If a buyer really wants to buy a certain property, sometimes there's just no other option but to remove all contingencies unless they want to throw another 20k-30k into the purchase price to stand out. And on the flip side, I see a non-contingent offer with lesser price win over higher yet contingent offer. It is uncomfortable but it is what it is, and I am just sharing what I see and experience in the market, but certainly not trying to convince anyone to do anything. Hope it's clear;)
