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Home Selling Tip: Beware of Lender Deal-Killers

Home Selling Tip: Beware of Lender Deal-Killers
by Dan Weis, Cincinnati OH REALTOR®
Cincinnati OH Real Estate

The mortgage industry is currently in turmoil and going through a lot of changes right now, so be careful.

When you have your home on the market and receive an offer, it's not enough to assume that the buyer has been pre-approved. You need to make sure that you or your agent, if represented, requests a copy of their lender's pre-approval letter.

Next, you need to inquire about the legitimacy of the pre-approval letter. What steps did the mortgage loan officer take before providing you with the pre-approval letter? Did they pull the buyer's credit report and determine their middle credit score? Did they verify the buyer's employment history? Did they verify the source of funds for the downpayment? Did they have their underwriter pre-approve the file? Now, by law, they will not be able to share with you the buyer's personal information, but they can tell you what steps they have taken.

You also want to find out if there are any special conditions attached to the pre-approval letter that would allow the buyer to opt-out of the transaction. You want to make sure you understand the buyer's situation as best as possible. I've heard where buyers need to sell their home before closing on a new home, but it's not disclosed anywhere and then the lender denies their loan for that reason. THAT'S NOT RIGHT!

Because of the mortgage companies around the country that are closing or failing to fund loans for transactions that are already in process, you need to find out as much as is permissable by law about your buyer's loan status. Many mortgage lenders are also eliminating certain types of mortgages, such as "No Income Verification" loans and others. If buyers have credit scores that used to be "on the bubble" determining whether or not they could even get a certain type of loan, now acceptable credit scoring on many loans has been raised, so the same buyer, who could qualify for that loan 2 weeks ago, now may NOT qualify for the loan.

It's also important to find out to whom your mortgage lender is going to sell your loan. Some of the secondary market lenders that purchase loans in bundles have closed their doors. You want to make sure that you stay informed on if there's any problems with 'funding the loan'.

I don't believe in pestering a mortgage loan officer, but there should be a communication system in place that allows everyone involved to stay informed on at least a weekly or twice a week basis.

As a seller, you may want to have the buyer also pre-approved by a second lender or, at least, have a second lender on stand-by should something happen and the first lender can't approve and fund the buyer's loan for the closing.

Now, I'm sure some buyer's agents out there may object to this last strategy, but once this becomes more commonplace, hopefully the resistance to this idea will subside. I also work with buyers as well as sellers and I understand that it's better to be prepared than to have a transaction fall through at the last moment, because not everything was done to keep the transaction afloat. Buyers and sellers are ready to move and now they can't. We must all do our due diligence to prepare for all scenarios, so that doesn't fall apart when it could have been avoided in the first place.

What you as a seller need to do during this tumultous, but hopefully brief, window of time is make sure that you're kept in the communication loop during the sale of your home.

Finally, you should look to close on the sale of your property as soon as possible after receiving an offer. In many parts of the country, it can take up to 30 days or more to close a transaction, but there can be some 'dead space' in there that you could eliminate to speed up the closing. When you get an offer, find out from the lender, the home inspector, the insurance company, the appraiser, etc how long each of the timelines are to completing their actions in the process. The sooner you can close your transaction, the better chance you have of avoiding possible problems......OR if a problem arises and your sale falls through, then you haven't had your property off the market for too long.

Have an Awesome Day!

Dan Weis - Real Estate Consultant
Cincinnati OH Real Estate

Posted by Dan Weis - Cincinnati Real Estate on 08/07/2007 05:04 PM

Comments (7)

activerain, dan weis, home selling tip

Originally posted at: Dan's Cincinnati Ohio Real Estate Blog: Home Selling Tip: Beware of Lender Deal-Killers

This post has been included in Ohio Information

7 Comments on Home Selling Tip: Beware of Lender Deal-Killers

AUG

2007

"I don't believe in pestering a mortgage loan officer"

Dan, I do believe in pestering a loan officer. Heck, that's my job :-) I work for my clients, not the loan officer. I do understand there are some things they can't disclose, but they surely can tell me what the conditions are for full approval and IF the program is in jeopardy as far as they can see. I'm sure there are plenty of loan officers who have gnashed their teeth at getting another phone call from me, but that's ok, gnash away. It IS my job to look out for my clients and if that means frustrating a loan officer now and then I will do that before I let my client down by not being vigilant.

great info Dan, now it is as important than ever to have as much info as you can. i do agree with kris in that i will call on loan officers as much as needed.

Dan,

How true many of that is, the only concern i would say is that many of the buyers are pre approved based on a lot less info, infact many of those items that you talked about can't be done by the underwriter until the loan has been submitted.

Great points from both of you and I agree completely. However don't you think your loan officer should have a back up plan or be looking at a lender that's on solid ground if they are brokering the loan? We've had two major players in the wholesale business drop in the last week. I didn't personally have any loans with these banks but I know LO's who did and now they are scrambling. Sometimes lenders go under and leave us all in bad spots. I'm thankful I've made the right choices for my clients when brokering loans and have not ever had to deal with this.

And Kris I completely respect you looking out for your clients needs and I would suggest finding new partners if you have to pester them to get a loan update. I personally email out an update to all parties once per week. This saves my partner's time and energy they should be using building their business.

Great post Dan, in times of pull backs there are always difficult situations that come up. I applaud you for looking out for your sellers best interests.

Kris,

I do agree with you that if I NEED to Pester a loan officer, I will do it. But I've been fortunate to have some great loan officers over the years that give great service and follow-up. I also have my buyer clients pre-approved with as much as can be done prior to finding a property, so that there aren't any delays later.

Where I need to keep a close eye on is a buyer's loan officer, when I'm the seller's agent. If I've never heard of the company or when they don't call you back the same day you call, then I get lasered in continually trying to reach them until I do.

Dan,

Now if ever is communication between lenders and agents super important. It seems the mortgage marketplace is changing from week to week and loan programs are being eliminated and others get new, tougher guidelines. The exotic products are facing extinction, not the standard programs. And some lenders go under, too, as we experienced recently. Yet, there are still plenty of funds available for buyers to purchase homes. And it's a buyer's market.

Dan:

Many problems with the mortgage business is due to the implosion of the lenders. In Ohio add to it a hastily thrown together knee-jerk pandering bill albeit S.B.185. This bill is wreaking havoc throughout the mortgage business and related businesses in Ohio. Title companies, appraisers and mortgage companies are leaving Ohio and exacerbating the problem. The most recent estimated total of jobs lost due to S.B. 185 stands at 20,000. The total number of foreclosures due to S.B. 185 has not been tallied, however many are losing their homes and more will continue to lose their homes because they cannot refinance out of the ARMs they are in because of S.B.185.

Today, the best course of action is to meet all of the conditions of the committment as fast as possible. The programs are liteally changing overnight. Remember, a lender can still wiggle out of a committment. With many borrowers dragging their feet on bringing in their documents, I'm sure any loan officer would be more than happy to have you help expedite the process. I know I would.

I like your post regarding close as soon as possible. This is very true. Close as soon as there is a clear to close. Why wait for a program to change or a lender to go under or be bought out.

Get a good working relationship with a mortgage broker. Work as a team instead of playing the blame game. I have found that working as a team with realtors always made the transaction go much smoother.

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