I have a young couple that are purchasing their first home. The couple have been tenants of mine for a year, paying rent at $850 a month. The payment on their new home will be $605, a big monthly savings for them. The young man is in the military and she is employed at a local bank and expecting their first child in June.
We found a nice REO listing that they liked and made an offer on 1/24/2010. Usually the REO's are priced slightly below market, but not this one, it was priced at the high end, but the kids liked it and wrote the offer for asking to improve their chances. In the offer I wrote "COE to be on or before 3/17/2010.
In order to submit an offer we had to also sign the listings agent "Before Writing an Offer" document that included this verbage:
"Make sure lender has enough time to close the loan without delay. There is a per diem charge for not closing on time"
Our young buyers are getting a VA loan for a portion and assistance from our local Rural Housing Authority for an interest free 2nd with NO closing costs. Both of these loans take extra time which is why we asked for 7 weeks, the USDA loan adds 10 days to the process alone.
The offer was accepted and on 1/28 we received the bank's addendum with the COE changed to 3/12 (upped 5 calendar days). The buyers signed the addendum on 1/29, returned it and received the seller signed addendum on 2/1. Without the signed addendum, it is not wise to move forward with an appraisal, inspections etc. So, begining on 2/1, we now have 6 weeks to close the property. We immediately order the appraisal, inspections etc. trying to meet the new deadline imposed.
On 3/9, our lender discovers the listing agent didn't and the bank forgot to sign some documents, so we take care of that and lose a few days.
March 17th arrives and we do not have final loan approval and need an extension. (Keep in mind the bank moved the COE up from what we asked for.)
This is direct quote from lisitng agent:
Sandra,
The seller never closes the last 3 working days of the month. Included is the sellers response.
Seller does not agree to the extension request from the buyer for 3/30. I can agree to 3/26 at the latest date, per diem charges apply & earnest money is non-refundable. Please inform, the buyers revise the addendum & send back to me.
My experience in the past has been the lender has participated in the per deim charges when it is their delay. Also, remember this escrow is in Las Vegas and they want all the docs from the lender sent to them, then they arrange with you for a mobile notary to have the buyers sign. The closing time is longer than normal and they are slow. You have to keep on them.
REO properties are different than purchasing from a homeowner and we are sorry this is such a bother or problem for you.
First time we have been told the lender doesn't close the last 3 days of the month. And look at what we are told about the title company...."the closing time is longer than normal and they are slow. You have to keep on them". WHAT? You took a week out of our contrct, then stick us with a $100 late fee, and tell us the title company is slow?
When we are finally ready to sign the buyers and get this closed on 3/26, we are told this by the title company:
I have two notaries that I use up there. Once I have the loan documents then I will need 24 hours to set up the file and get the notary set up.
And a few minutes later this from the title company:
The addendum clearly states until close. We cannot close on this one today. This is a mail away signing and then I have to receive the documents back, process the file, get the HUD approved by the seller. Then we will be clear to close as I have stated earlier.
All total, the bank added $1200 in late fees to the tab for these kids. It is one thing to charge a fee when there is a delay, but to change the COE, KNOWING that (1) the title company is slow and you have to keep after them (2) the bank doesn't do closings the last 3 days of the month and (3) there is a 3 day turn around time once the title company receives the documents to record. The buyers signed on 3/26, but it won't record until 3/31 and they charged the $100 for those days.
I have had similiar experiences and it seems the bank and title company hold the buyers and buyer's agent hostage and tries to get the late fees and excessive title charges paid by the buyers agent and/or lender.
REO homes may not be such a good deal for your buyer.
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