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TMI on a Contract May Cause Delays in Loan Approval!

By
Services for Real Estate Pros with Escrowcoord.com

TMI Too Much Information on a contract can create a nightmare for you and your clients. when trying to obtain loan approval. As I have mentioned before, things are different in real estate land today.

An example of this is the California Association of REALTORS® Seller Property Questionnaire Disclosure.

Underwriters (the person who reviews the loan package the buyer has submitted to the bank) are catching this when it's included in the contract, then requesting to see a copy. If they see any red flags on the disclosure, they'll make it a condition (an item that needs to be repaired/replaced, etc. prior to close OR prior to loan approval).

But if it is NOT negotiated in the contract, then the Underwriter will usually not ask for it!

Another example is the termite report.

If a termite report is negotiated into the contract or is being paid through escrow, many Underwriters will ask for a copy of the report then make a condition that repairs be completed prior to close or docs even though it's an "As Is" sale.

However, if the termite report is NOT negotiated in the contract, the underwriter most likely will never ask for a copy of the report!

The bank certainly has a right to add these two items as conditions for loan approval or close.  And the buyer and seller have a right to complete the disclosure and termite inspection even though it's not necessarily specified in the contract.

Be aware of additional terms you add to a contract that may create red flags to the bank and prepare your client for added conditions that may come up for loan approval.

Always check first with the buyer's loan officer to make sure you are creating a clean (no red flags!) contract to submit for loan approval

And the cat and mouse game continues....

 

 

Nicole Anderson
Lake Homes Realty - Pell City, AL
YOUR Community and Lake Expert

This little picture made me laugh! Great insight in this blog. It's sometimes a pin the tale on the donkey game. You just never know what's going to happen with underwriters. And, trying to protect the buyers at the same time can be a challenge.

Jul 16, 2010 07:08 AM
Diana Turnbloom
Escrowcoord.com - Martinez, CA
The Leading Expert in TC Services & Education

Hey Nichole-I thought the pix was perfect! This is a time to keep our ears open for trends on what the banks are looking for in a buyer and home so we don't waste time and money. Thanks for your comment!

Jul 16, 2010 07:11 AM
Rodney Mason, VP of Mtg Lending
Guaranteed Rate NMLS# 2611 - Atlanta, GA
AL,AR,AZ,CA,CO,FL,GA,IN,MI,MS,NC,NV,SC,TN,TX,VA,WA

For termite letters, we only require them on FHA 203K and VA loans.  We don't require a termite letter on any other loan program unless the sales contract calls for one or if the appraiser notates a potential issue.  Anything listed in the contract may very well need to be presented for an underwriting approval.  After all, its part of the sales contract.

Jul 16, 2010 02:02 PM