Here's a good idea that even the best agent might overlook

Education & Training with Real Estate Expert Witness Support

We just ran across something that we overlooked on a recent transaction.  It especially bothers me since I am somewhat of a fanactic on anticipating problems and trying to eliminate them before they happen. 

Here is what happened.  We got this near perfect offer on our listing ....buyer had 20%+ downpayment,  and buyer was pre-approved by a large bank.  Unbeknownst to us,  the buyer decided to change lenders,  thus the appraisal and paperwork was delayed.  And,  we did not find this out until it was almost time to remove contingencies.  The seller was in a tough place. They were packed and ready to move.  They could probably kick the buyer out for non-performance,   but how would that support the Seller's goals.  It doesn't.

So,  on pre-approved buyers,  we will be countering that Buyer agrees to use the pre-approved lender



Posted by


Guy Berry

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Comments (15)

Grace Keng
Keller Williams Realty Cupertino - Cupertino, CA
CRS, CDPE (408) 799-8887


I have a suitation that buyer want to renegotiate the purchase price after the inpection in probate transcation. I told the buyer's agent is difficult for seller to notify everyone to approve it.

Grace K

Jun 11, 2009 06:32 PM
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Guy:  Yes... it's not fun when you find out something like this long after the fact.  What you might do is stay in touch with the lender that was mentioned on the pre-approval letter as the transaction goes on.  That way... you'll know right away if the buyer either switches lenders, or if something bad happens.  Just my two cents.

Jun 11, 2009 06:40 PM
Bob & Carolin Benjamin
Benjamin Realty LLC - Gold Canyon, AZ
East Phoenix Arizona Homes

That sort of things can definitely put a wrinkle into the process.

Jun 11, 2009 06:50 PM
David Ethridge
Sea Lion Real Estate - Long Beach, CA

I've seen some cases of seller's writing into the contract that the buyer must use the lender who provided the pre-approval. But also, in today's market delays to closings are commonplace so the seller shouldn't have been "packed and ready to move" until a little closer to the actual closing date.

Jun 11, 2009 07:35 PM
Richard Dolbeare, R(B)
eXp Realty - Wailuku, HI
R(B), ABR, CRS...Hawaii Multi-Island Specialist

Now that's an interesting thought.  It may make your buyers give more thought to who does the pre-approval.

Jun 11, 2009 07:39 PM
Fernando Herboso - Broker for Maxus Realty Group
Maxus Realty Group - Broker 301-246-0001 - Gaithersburg, MD
301-246-0001 Serving Maryland, DC and Northern VA

That is a good suggestion. . .that will deter buyers to continue shop for rates to the last minute.

Jun 11, 2009 08:47 PM
Guy Berry
Real Estate Expert Witness Support - San Jose, CA
Real Estate Broker and Legal Expert

Kate,  it depends on what the contract says.  Even on Probate and AS IS, most agents do not understand that the contract does not say that the buyer can negotiate.  But,  if the contact allows the buyer to inspect,  they have a right to come back with a cancellation that makes it contingent upon the Seller refusing to make certain repairs

Jun 11, 2009 08:59 PM
Jim Hale
Eugene Oregon's Best Home Search Website

This is a great contract language suggestion.


No offer is ever a deal until repair (and any other serious contingency) has been handled.

Jun 11, 2009 09:33 PM
Lenn Harley
Lenn Harley,, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

My question would be, did the agent, when reviewing the Contract of Sale with the buyer, explain fully the matter of using a secondary lender??? 

I don't believe that a buyer should be bound by contract to use a specific lender because if the lender screws up, it may be in the buyer's interest to change.  However, there are simply ways to protect the buyer if this happens. 

Binding the buyer to a lender is too Draconian for me. 

Jun 11, 2009 10:10 PM
Harry F. D'Elia III
RentVest - Phoenix, AZ
Investor , Mentor, GRI, Radio, CIPS, REOs, ABR

I always make sure the buyer is working with two different lenders during the home inspection period if they are concerned about rates. I had a buyer switch lenders at the last minute because of .25 point difference.

Jun 11, 2009 11:09 PM
Guy Berry
Real Estate Expert Witness Support - San Jose, CA
Real Estate Broker and Legal Expert

You need to understand that my comment was a way to protect the Seller.  A buyer can do any stupid thing they want and this puts sellers in a bad position.  And,  with the market like it is,  most buyers would not accept a counter that if they close late,  they have to pay the buyer PITI

Jun 11, 2009 11:15 PM
Jim Valentine
RE/MAX Realty Affiliates - Gardnerville, NV

Things happen and the buyer should have flexibility with their lender.  They could get a better rate, change programs, etc.  It shouldn't extend the escrow, however, they need to be active in the beginning of the escrow period to get their loan and lender situated right.  One idea to alleviate the seller's worry of packing without a closing is to have them rentback for a week or so after the close.  We do this freqeuntly.  If it isn't in the initial negotiation you might include it when a buyer that is changing lenders and extending the close asks for the extension.  Everybody wins.

Jun 14, 2009 03:44 AM
Wendy Rulnick
Rulnick Realty, Inc. - Destin, FL
"It's Wendy... It's Sold!"

Guy - Our contracts say to use "best efforts" to obtain financing...  and "time is of the essence"... and that "seller" can obtain status on financing during the contract process.  I am sure this is common nationally. So if the first lender doesn't work out, the buyer has to move fast to get approval from another... 

Jun 15, 2009 02:32 PM
Richard Weeks
Dallas, TX
REALTOR®, Broker

If I represented a buyer and received a counter which attempted to bind a buyer to a particular mortgage company I would have to suggest they see a real estate attorney prior to agreeing to that condition.

Jun 17, 2009 03:50 AM