Is this property in a soft market? We are in America right?
Last time I wrote you all, I made reference to FHA not having any soft market adjustment. I received some questions about soft markets after the post and I wanted to clear a few things up.
First, while it may feel like it, the whole country is NOT a soft market right now. Answering the question of “is xyz county a soft market” can be tricky though. Let’s start with Fannie/Freddie guidelines since they generally set the tone that other will follow…and few will ever be “more liberal” than they are. When desktop underwriting findings are run, the findings will indicate if the county is a soft market. However, just because it doesn’t indicate soft market, doesn’t mean you are out of the woods.
The next step is confirming with the appraiser that they will not be indicating that the property is located in an area with values that are declining. In all circumstances except lenders that don’t care about declining markets (I currently only know of a few) and FHA, if the appraiser indicates that the values are declining, then soft market guidelines will kick in regardless of the underwriting findings.
So how does this impact you?
Well, for one thing, soft market properties are going to be harder for you to sell. Recent changes in guidelines now require that an additional 5% of equity is in place to cushion the lenders risk. That means that your buyer is now required to put 5% more down then before. If you are taking on a new listing and would like to set your sellers expectations appropriately, then this is an important point to discuss with them. This may also mean that in certain areas, an FHA bid may actually be better than a non FHA bid! Seems to me that if you have an FHA buyer, you may be able to get some leverage in a soft market area.
Certain lenders have released their own set of soft market counties and are adding and removing them all of the time. Fannie has not released its set mainly because they are changing it constantly, and they know that desktop underwriter must be run at some point anyway. If you want some feedback on a specific county or property, call either a local appraiser or call me and I will get you the answers you need. Also, please remember, just because you know that properties have gone down in value in your area it does not mean that it is recognized by lenders this way.
--Keith
http://www.eaglenationwide.com
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