I had a closing yesterday for a great upscale Lancaster City townhome. Everything went smooth even though the lender was coming out of California (no reflection on my home state). Our title guru, Jim, had arranged things so that the package was here with time to spare. The buyers had availed themselves of an incredible deal offered by the lender (nationally-known) - the lender paid all the closing fees and still had a competitive rate. Very nice! Our in-house mortgage rep reviewed it and couldn't match it. Hmm...where's the catch? Come on, there's got to be a catch? Aren't they making $$$ on the back end? Maybe so, but all the terms looked clean.
At the settlement table things got interesting. The seller was a single lady who was leaving the area. When her
agent arrived he questioned the payoff amount immediately, and asked the see the payoff letter. Oops! Turns out the seller had refinanced last summer and the new loan contained a huge prepayment penalty! She was livid. The agent was both embarrased and frustrated for her (or would that be "with her"?). The buyers and I looked on during all this commotion. The seller claimed that the Loan Officer had not told her this, and that she had told him she might sell soon. This mistake cost her almost $6,000 right off the top. Talk about a rude surprise!
Well, my buyers got their turn. Buried in the buyer loan docs was a single piece of paper regarding a "buyer protection plan" that went along with the loan. Whoa now! Jim (title rep) asked the buyers if they were aware of this and of course they were not...the bank was giving them the first year "free" and the monthly fee would be $37 for the life of the loan! That's almost $4,000! We were naturally concerned that the great deal on closing fees was predicated on the buyers signing this document.
Thankfully, after Jim got the lender on the phone they agreed to let the buyers waive this "protection plan". My immdiate thought was "how many bonehead title people just make the buyers sign this because they don't understand it" and "how many buyers don't actually read the stack of loan docs and would sign this?" My folks, happily, managed to avoid it and have a great home at a great price. The seller, on the other hand, did not do so well at the settlement table.
What's the moral of this story?
- If you're a buyer, ask your loan rep if there's any fine print - make sure nothing new is inserted at the settlement table.
- If you're a seller, ask your lender if you have a prepayment or other fee should you sell now.
- If you're a listing agent - ask your seller if they've asked the lender yet!
- If you're the buyers agent be ready for all eventualities, and communicate with the title rep.
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