If you are considering purchasing a piece of Boston Real Estate with a conforming loan, you may want to close before the spring. Come April 1, 2009, Fannie Mae will begin implementing some new rules. The first rule will require the appraiser to review the sales contract. This may seem like a given, but it has rarely been done in the past few years. Mortgage companies want to know exactly what they are getting into, and will be on the lookout for “cash back at closing” and “home repair” incentives. It has become almost commonplace for developers (as well as some individual sellers) to add huge incentives to the purchase price such as prepaid condo fees, kitchen upgrades and gym memberships in order to keep recorded sales prices high.
The second change will require appraisers to explain why they decided not to use homes in the same neighborhood as comparables.
The third change involves repair escrows, which is the practice of lending additional funds subject to repairs that will enhance the value of the home. For example, a buyer would get $400,000 toward the purchase and another $20,000 to repair the hardwood floors. This would be subject to reappraisal showing sufficient increase in value. This may do some serious damage to the sale of homes needing extensive work.