It is unknown how quickly Congress will move to reinstate this federal program when they return to Washington on April 12^th.  As such, we are facing a minimum of a 2 week gap in the availability of this important federal program.

Buyer Tip: check to see in there is any effect on the funding of your loan with your lender prior to removing the financing contingency.  Otherwise you may up a creek without a paddle or a boat.

In the past, an appraiser would note in his/her appraisal that any personal property included in the purchase does not materially affect the property’s value and the loan would fund.  However, some lenders have recently changed this practice.

Personal property becomes part of the contract in Paragraph 4 of the PRDS Real Estate Purchase Contract.  The most common type of personal property asked for is kitchen appliances that are not built-in (ie. refrigerator, washer, dryer).  

The result of this recent change is that it creates a catch-22 for the buyer as well as an unwanted issue for the seller just prior to close of escrow  The buyer should include personal property in the contract, but by writing it into paragraph 4 of the contract, a Lender may not fund the loan.  How does a buyer retain the personal property and get the loan to fund?

In short, the best course of action is to check with your lender about any potential red flags prior to writing the purchase contract.

Note:  I am not an attorney nor do I play one on T.V.  Should you need specific legal counsel on your individual situation, see someone who is an attorney specializing in real estate law.

Articles in the San Jose Mercury News and the Seattle Post Intelligencer have explained some of the problems of the HVCC.   Appraisals are becoming more expensive for the consumer while the appraiser is paid less because the Appraisal Management Companies (AMC’s) are taking a part of the appraisal fee to process the order.

In addition, some AMC appraisers aren’t necessarily knowledgeable about the subject property’s local market.  Just yesterday, an appraiser gave me her card which claimed that she specialized in Alameda, Monterey, San Benito, San Mateo, and Santa Clara counties.  Huh, what…that’s five counties and several thousand properties.  Wow, she must be a quick study with a photographic memory and reliable car!  As a consumer, what can one do?

The system should become more efficient as time goes by.  In the meantime, expect delays and budget for higher costs.  It might make sense to have a back up lender in place should the first one not be able to perform.   If possible, you might consider longer periods for financing contingencies and/or longer escrow periods.

KNOW the values (condition, size, purchase price) of comparable homes in the immediate neighborhood BEFORE you ratify a purchase offer.  Have your agent pull up the recently sold properties (within the last 3 months) as well as those that are currently under contract.  Try to get the purchase details of the homes under contract from the listing agent (some may discuss this, others won’t).

The premise of the HVCC is excellent, but it will need some more tweaking if it hopes to eliminate the current problems it has created for the appraisal industry and ultimately the consumer.

Note: the most recent update of the HVCC’s frequently asked questions FAQ’s (July 2009) can be found here.   The update clarifies two points.  First, it states that lenders should use appraisers who have clear experience in the geographic area of the subject property.  Second, it clarifies that appraisers are not prohibited from talking to real estate agents.

Interesting side-note, a size-able portion of the solicitations came from lenders out of the San Diego area.  Maybe I should contact Jeff Brown of Bawldguy Talking Blog fame or Kris Berg of San Diego Home Blog fame to get the scoop on why San Diego lenders are soliciting loans in Northern California. 

Some solicitations came in standard business envelopes with no return address.  Big red flag!  These must be junk mail.  Remember, I’m a Realtor.  Earlier in my real estate career, I got a PHD in junk mail solicitation.  I probably threw away a dozen or so of these.  Others came in envelopes with over-sized print indicating the contents were “confidential” and were not to be opened by anyone except the addressee.  Very important!  Still others came in non business sized envelopes and were hand written.  Personalized, but misleading.  I thought they were Christmas cards from friends and family.  I wasn’t too happy when I opened them up and found a solicitation for a loan.  Lastly, there were the notices sent in perforated envelopes with large “Personal and Confidential” and/or “Secured Document” and/or “Final Notice” printed on the outside.  I guess the larger the print, the more important the contents.  On the cover of one, written in bright red letters, was “Warning: $2,000 fine, 5 years imprisonment, or both for any person interfering or obstructing with delivery of this letter U.S. mail…” 

Oh by the way, I really hate perforated letters.  They take too much time to open because you can’t just tear it open, you must bend each side at the perforation and then tear along the crease.  Half the time it doesn’t work and I end up tearing the contents.  I digress. 

A good portion of these solicitations gave the appearance they were my current mortgage holder and if I just authorize them, they would restructure my loan.  Deceptive, straight to the trash.  I prefered the straight forward approach like “This is to inform you that your loan will be adjusting as of January 1, 2008″ or “This letter is to inform you that your mortgage loan terms are adjusting next month.”  

Some lenders appeared nicer than others.  ”After reviewing your loan information, we are providing you with this courtesy notice…”  ”We are cordially informing you…”  Courtesy and cordial are such nice words.  They must want to be my friends! 

One letter took a more serious tone.  “A recent audit of your loan…” I did not know I was being audited.  Note to self, talk to accountant.

Most requested that I call a convenient 800 phone number and ask to speak with an Adjustable Rate Mortgage Specialist or Loan Review Department or Loan Servicing Department, and a few actually included a name of a real live person.  FYI, I like speaking to a live people.

When I examined all the solicitations, the one I decided to work with recently wrote me a nice follow up letter.  Let me read the first few sentences; Congratulations, your real estate loan has been paid in full.  It has been our pleasure to service your financial needs.  Please retain this letter for your records.  This is one letter I’ll keep!

For future reference.  If you want my business, don’t play games.  I don’t have time for them.  Let me do the analysis I want.  Lastly, by giving me information that is relevant and timely, you will earn my business.