Dance With The Boy That Brung Ya

As the member of our team that "manages the process from contract to closing" I've become increasingly frustrated with the financing process that involves, for the most part, mortgage brokers. Now, I don't want this to be construed as a slam on mortgage brokers. I've got some great friends with that title on their business cards, but there's a process that seems to be a catch 22 for sellers and listing agents that seems to be "unprotectable."

Here's the scenario - Buyer makes an offer on your listing. Buyer's Realtor® sends over the offer, signed property disclosures and pre-approval letter. If they don't have a pre-approval, you let them know that seller will not accept an offer without it, and it must be the right kind. You know, the one that says we've checked their credit and verified everything about them, we just need a house to check out. So you get the pre-approval and negotiate a deal based on specific terms including the closing date. Back when we had multiple offers, closing date was sometimes the determining factor.

So you go to contract and find that you are not dealing directly with the lender but a mortgage broker but all is progressing otherwise. Inspections are scheduled and completed, repairs made, the survey gets done, all the little tasks are getting checked off the list. Then you get the dreaded call from your title company telling you they haven't gotten a response from the lender in days, no one's make a request for title commitment or some other red flag that says nobody's home on the financing end of your transaction. Turns out, mortgage broker has been shopping the deal since the day you went to contract and we're now starting over with a new lender 8 days before the scheduled closing. I know plenty of lenders who say they can close on 14 days or other such feats of speed but generally, not when it comes to B or C or other such alphabetical paper. Naturally the week of the closing arrives and title company still doesn't have figures or a package because new lender needs some more info from the borrowers. And now, buyer's agent is mentioning the word "extension."  Yikes! For how long? "just a couple of days." Two weeks, a month later when you close, you try to look back at how you might have avoided it. How can you protect your seller?

We once had buyers who made an offer on a home owned by Fannie Mae and in the "big fat addendum" (BFA, for short) that you are required to sign, it included a clause that said (I'm paraphrasing) "We negotiated this contract based on among other things, your financing, and if you change lenders, we get to renegotiate the whole contract." Now that's all well and good if you are Fannie Mae and can afford to hold inventory and keep homes on the market for years if necessary. My sellers couldn't wait to move back to their home state and scheduled everything to vacate on the date of closing. We hadn't arranged for a mail away because they were going to sign and collect their check on the way out of town. Thank GOODNESS that they weren't waiting to close on their new home.

The sellers HAD to agree to the string of extensions because after all, the house was on the market for 4 months, they didn't want to let this buyer go. Just like we knew at the onset, when there was a broker involved, that there was a potential for this to happen but what could we do? They'd met every request up to that point. Nothing we could do but hope that they would stay the course with that lender or if they did change, close on time with the new one. The broker was just doing his job, trying to get the best deal for his clients, and in some cases ANY deal for his clients after the first lender decided that they weren't willing to risk it after all.

However, there is usually plenty of blame flying around (whether misdirected or not) and we try to absorb as much of that as we can for our clients, to make THEM comfortable and to ease THEIR feelings. Most often they appreciate our diligence in keeping them up to date and tend to blame the lender or the buyer for not having things in place before trying to buy the home. We try to diffuse that too because in most cases, you are still trying to make sure that they are WILLING to flexible in order to get it closed and the more ire they build up toward the "other side" just makes everything more difficult. But how can we avoid it altogether? We don't want to scare buyers away at the onset and ask for a BFA like Fannie Mae, not with so much to choose from on the market. But is there anyway to insure that buyers do what my mom always advised and "dance with the boy that brung ya?"