You Didn't Know You Had a Foreclosure in Your Past? Really?

You Didn't Know You Had a Foreclosure in Your Past? Really?

I have very patient sellers.  Their Addison, Texas condo is for sale and a buyer with a pre-approval letter made an offer.  After some negotiations through her agent, the details were firmed up, we went under contract, got through inspections and had an appraisal.  Smooth sailing towards closing, right? Wrong!

Although the pre-approving loan officer ran a credit check, she did not search public records.  With six years of great rental history and an ok credit score, the buyer looked good on paper. But the underwriter dug deeper .... and uncovered a deed in lieu from 6 years ago, plus foreclosure proceedings by this buyer's former homeowners association.  Ouch!

So the loan officer decided to try to switch this buyer from a conventional loan to an FHA loan. By now, the financing period had run out, the closing was delayed, and the sellers cancelled their plans for the moving truck.

Switching from a conventional to an FHA loan proved problematic. The condo complex is no longer on the FHA approved list, although the association recently submitted all the required paperwork and was waiting for the results. The loan officer was going to try DELRAP (which sounds a lot like an FHA spot approval, but isn't - or so I was told).

The buyer's agent submitted an amendment to extend the closing date and the sellers agreed.  Against my advice, they did not ask for additional non-refundable earnest money.  We were supposed to close -again- today.  It's not going to happen. So now it's time to get another amendment signed, extending the closing date yet again while the loan officer tries to sort this out. The sellers did ask for more earnest money this time around.

But we got the bad news today. The condo complex is not yet back on the FHA approved list.  The DELRAP procedure uses the same criteria as FHA, so that's not going to work either.  The buyer is going to have to terminate. The property will be back on the market.

If you know anyone looking for a fabulous 2 bedroom, 2 bath condo just north of Addison Circle, let me know.  My sellers probably won't be quite so patient the next buyer, though.

This whole saga could have been avoided.  How could you NOT KNOW you had a foreclosure in your past? You can't hide it! Someone is going to find out. Meanwhile, you've wasted your money (appraisals, inspections, earnest money) and the sellers' time.