A call I received from a client a short while back literally left me speechless. As my 6-year-old granddaughter would say, "there was nothin' but crickets" ...
My client had questions regarding their mortgage (already in process). There was nothing alarming about our exchange ... that is, right up to the point where I mentioned it was the time in their processing to order their Appraisal.
That's when my client said ...
"We need to hold off on doing the Appraisal, per my Agent".
Uh oh ...
Of course I asked, "Why?" Their reply ...
"Well, I've been doing some updating on the tile and flooring in the house. Plus some drywalling ... and some other remodeling too. I want to get everything done before we Close and move in".
Now admittedly, this clients' transaction had some "unusual" elements in it right from the start. Some of what made this transaction (and its subsequent mortgage process) a bit different from the ordinary was:
The Listing Agent and the Buyer's Agent were one and the same on this deal. There was a Dual Agency Agreement in place. (Certainly this occurs, but not very often in our area.)
The original Contract on the property was written in August, 2016
The Contract was revised in September, 2016
The Revisions made in September added a clause to the original Contract.
The Revision's Clause read that the Contract was "Subject to" a successful rezoning of the Subject Property being completed
The rezoning was to include: A division of a larger acreage parcel downward into 2 smaller parcels (5 acres and 7 acres, each of which would meet the minimum lot size requirements of the County Ordinance).
Now it's important to note here ...
All parties involved in the transaction (Buyer, Seller, Agent/Agency, Attorney) had been informed and fully advised that the Appraisal needed for my Borrower's financing would not be ordered until the rezoning/division of the property was approved and completed by the County in jurisdicition. That Rezoning/Division took the County almost 4 full months to approve and complete.
It's easy to understand why any Buyer might grow anxious and a bit frustrated during that amount of time's passing. Every Buyer is eager to move into their new home. They're eager to personalize it to their tastes and make it their own. They also want to get started on any improvements or remodeling that might need to be done.
My Borrowers ... by taking the actions they did ... had put themselves at risk, both financially and legally. They'd spent time conducting improvements on a property they didn't yet own.
They had extended themselves financially by purchasing construction and remodeling materials for the property. They'd grown their outstanding debt. The Sellers had also taken a risk by allowing it.
All this was done with no formal or legal agreement addressing possible (negative) outcomes having been proactively signed by the parties involved at the time of Contract or prior to the work starting. That remained the case throughout.
Prior to entering the property and beginning the home improvements and remodeling, my Borrowers had received only a verbal "okay" and go ahead from the Agent involved in the transaction. They were told the permission was granted (via the Agent) on the Seller's behalf.
I learned all this after the fact. After my clients had begun work and made expenditures on the property. During previous conversations and communications, neither my clients ... or the Agent ... had mentioned their intentions to take or allow these actions.
I'd never encountered this situation as an LO before. I'd never had a client assume this type of risk prior to their legal ownership of a property or without a proper legal agreement in place. I'd never had an agent suggest they take this action.
These actions (by all parties) defied logic and common sense ...
What would happen if something went wrong? If one of the parties decided to back out? What would be the fallout from their decision? Would the home have to be returned to its original state? What would happen legally at that point? Or financially?
This situation raised so many questions ... so many possibilities ... and problems ...
The division and rezoning of the property was approved and successfully completed by the County at the time of my clients' call, so we had arrived at the point in the mortgage process where the property should have been appraised. But unfortunately, the property and remodeling was then in what my clients referred to as an "in-between stage" of completion.
Tear-outs of old and additions of new had begun, but not yet been completed. As a result, (and with no Agreement of any kind in place), the Appraisal had to be placed on hold until the work was fully completed. Until the work was done, we all waited and the Closing was held up even longer.
Of course, the Seller then began to get "anxious and nervous" about the transaction and the length of time it was taking to come to fruition. They began pressuring the Buyers, the Agent, and me.
They wanted to know: Were the Buyers fully-approved? Had they received a "Clear to Close"? They wanted a projected Closing Date. Unfortunately, under the circumstances ... circumstances they had put in motion ... those answers couldn't be provided quickly or easily.
The resulting issues faced could have been circumvented if a signed legal Agreement had been in place. Something could (and should) have been worked out between the parties involved during the negotiation or Contract phase of this transaction. Something that would have addressed all potential concerns, issues, and outcomes.
But the situation that resulted? It was created by an utter lack of common sense. It completely defied logic.
Do you hear crickets too??
When in need of mortgage information, guidance, and service in New Lenox, Will County, and elsewhere in Chicagoland/IL and WI ... please contact me. I'll be happy to put my 40+ years of experience and expertise hard to work on your behalf.
I'm easily found at:
Mortgage Originator - NMLS #216987 - IL Lic. #031.0006220 - WI Licensed