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Trust Your Gut

I received multiple offers on one of my listings and my homeowners were ecstatic. One of the offers came in at full price and the other was $5,000 below the other one. My owners wanted to whip out their pens and to sign off acceptance. I recommended to them to hit the pause button. Some questions needed to be asked.

As I read through the full price offer I noted the following:

•· The agent verbally had told me his clients were pre-approved. They had been on contract for another home but it fell out because the condo complex they were trying to purchase a unit was not FHA approved and that is the financing type they were obtaining.

•· The buyer was putting 20% down on FHA financing.

I called the agent and inquired - if the buyers have 20% to put down, why are they not obtaining a conventional loan? The agent stated that they had a little credit challenges and their score was below the conventional standard. I asked when the lender had given the approval. The agent was not sure as he had did not represented his client on the previous transaction. Who is the lending institution? The agent was not sure. Then the agent said, my client is putting 20% down and that buys a lot of forgiveness. They will be able to purchase this home. I said that 20% was impressive and I certainly agree it will make them look stronger for their financing but I still wanted to have a letter from the lender regarding their ability to purchase this home. I asked the other agent if he by chance knew what their credit score might be as the guideline had just changed for FHA and just wanted to make sure they were still qualified. The agent again said that they had 20% down and that should qualify them for the loan. I again agreed that this was a very nice amount but as a professional duty of mine, I needed to review the pre-approval letter.

The next day I received a call from the agent. His client needed to withdraw his offer. It seems that they no longer would be able to qualify for a home purchase. The agent paused and said they have a ways to go before they will be purchasing a home. My clients went forward to accept the second offer.

Dig below the surface, ask pointed questions, be immune to tap dance answers and seek answers and validation. If your antenna goes up, trust what your gut.

Posted by Connie Goodrich, CRS (McKinney Realtor) Texas on 03/26/2009 10:13 PM

Comments (22)

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22 Comments on Trust Your Gut

MAR

Hi Connie,

Good thing your sellers had you! As for the other agent saying "putting 20% down...buys a lot of forgiveness..." Not today!

Nice post. We all need to do a little more due diligence in these challenging times.

Very nice Gut Instinct Columbo !!!!!!!

Well Done !

.. many in your position would have RACED in to get the sellers to sign away without doing the proper due diligence, and in the process you may have lost the second offer.

Good for you Connie ! - $5,000 less is a small concession for a more solid buyer on the plate !

Yay for Connie !!!!

Cheers !

Sheldon

Lynda - you are absolutely right. If the shoe doesn't fit you can't just cram it in anymore.

Michael- the other agent was a little put out with me as I pressed for the validation. Tale between legs the next day he did apologize and said he should have done research first. Too busy being a taxi driver to notice I guess, oh but wait, a Taxi driver gets paid.

Sheldon - I do so appreciate your kind words and Cheers! Questions on the front end keep you from finding yourself red faced and upset clients. Well worth the extra effort to make for a smooth transaction. Even when you have an anxious client and irritated co-op agent.

GREAT JOB! I am sure your Seller is well pleased! In the market we are in today that pre approval letter is even more critical than ever before. The red flag of FHA with 20% down was a good call on your part. It is stories like these that refresh our minds to pay closer attention to the details. Thanks!

MAR

Good job -- always get a signed Loan Status Report from a lender before accepting an offer -- if one is not forthcoming there is usually a reason.

I require a approval letter on all offers in today's topsy turvey finance market. Don't have one give me a minute!

Debbie - you just have to get to the bottom of things. Unfortunately some Realtors don't do a good job of screening their clients.

Bob, Carolin- I always require a loan letter, verification of cash if a cash buyer. I also will call the lender. I pay attention to the contents of the pre-approval letter too, must have a loan amount equal or higher than offer's loan amount, interest rate, terms spelled out because the contract also has this as an exit if the buyer cannot obtain the terms they set forth.

Laura- I'll not turn in a signed page of the contract until we have an acceptable letter or put language in the contract that buyer must provide letter within a time frame and seller to review and can terminate on their part if an acceptable letter is not provided.

Great Job Connie.

Wendy - thanks, I can use a pat on the back sometimes rather than a harsh word from the other agent. In the end he saw the light bulb go off about why I pushed for validation.

Sounds like we have to be investigators some times, doesn't it? It's when we see red flags that we have to represent our clients the best!

Connie,

Good instincts. Been there done that. Early in my career I nearly got into some serious hot water in a similar situation. I did get a lender letter and the lender even came to see me personally. It was one of those situations where the little hairs on the back of your neck are standing up but you don't know why. Turns out (I found out later) this lender had a reputation for "stretching the truth" Based on his letter and personal assurance we did a pre-settlement occupancy. My seller had a job transfer and was paying for an empty house so it looked like a perfect solution. The buyers paid rent to the proposed date of settlement. The settlement got extended and then, no more rent. Then I finally heard about some problems with the loan. The next assurance I got was that we were on the third investor and the loan officer was sure it would work this time. So here's the scene. I have my seller in town pounding on the door demanding the buyers get out. Two sheriff's cruisers in the parking lot and the other agent and myself. I tried to explain to the deputy that our agreement clearly stated that the buyer did not have tenants rights. He replied he didn't care what our contract said, the buyers were inside and the seller was not. It was all I could do to keep her from being arrested. We did finally settle but it cost both agents the lions share of our commissions to clear up bad debt of the buyers to keep from getting sued. ALWAYS TRUST YOUR INSTINCTS!!!

Yikes! I had the buyers once when the listing agent had to tell us that the listing was withdrawn AFTER our full price offer, because Mr. Seller never intended to sell it in the first place. He was just wanting an offer in order to get the divorse court to compel his soon-to-be ex-wife to sell it to him as a certain price. You can imagine the angst of that very seasoned and respected listing agent when he had to make that call to me after a couple days of monkey business trying to get the offer signed. My buyers were upset, but not nearly as much as he was!

Larry - Wow, unfortunately those horror stories do happen and good for you stepping up to prevent a lawsuit. I always examine the risks of an offer and investigate any hunches of discomfort. We are all wiser from such stories as you shared. Good luck for great success to come.

COnnie, another great example of trusting your gut! You go girl! You are quite the professional!

Kristen - I try to be and more importantly watch out for my clients!

HI CONNIE! This is how all detectives crack the case! On a serious note - it is so important to slow down and take the time to review terms and investigate before making quick decisions. It's why we give Buyers and Sellers time to make decisions! Good job! And congratulations! -- Gabrielle

Another example of why hiring a top notch professional like yourself who knows the intricacies of the dance will save sellers in the end. Good work Ms.GOODrich!

Karen- funny, I never thought on the play on the last name with the GOOD ... I just might have to play with that idea, thanks

MAR

ToulaRosebrock.com Hi Connie:

Great story. Always go with your gut feeling!

Sellers tend to just see the numbers. Doing the ground work helped keep the other offer on the table...

Janna -what a terrible ordeal and shame on that seller. Unfortunately I have heard a similar story and my heart does go out to the hard working listing agent. I certainly hope he can recoup his costs. In Texas we actually can sue if there is a full price offer but I imagine that is a too drawn out process and the lawyers end up winning anyway. Thanks for the story, too bad for all!

Gabrielle - You are so right. Too many agents are off to the races to choke an offer down. Not that you should drag the feet but when you suspect something a little time investigating saves a whole lot of time and grief! Thanks for the visit!!

Toula - That is where we really earn our money - not paper shoving but using our heads to keep a thoughtful watch for the proper process.

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