Missing: Common Sense and Logic

Mortgage and Lending with NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 IL Lic 031.0006220/WI


Missing: Common Sense and Logic


Some Home Buying Transactions Just Defy Logic ...
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".
My jaw literally dropped.   Chirp ... Chirp ... Chirp ...
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.
But ...
My Borrowers ... by taking the actions they did ... had put themse Talk to your LO. Don't put yourself at RISK!lves 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 LenoxWill 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:

Gene Mundt
Mortgage Originator  -  NMLS #216987  -  IL Lic. #031.0006220  -  WI Licensed
American Portfolio Mortgage Corp.
NMLS #175656
Office:  815.524.2280
Cell:  708.921.6331
eFax:  815.524.2281

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Gene Mundt

 Mortgage Originator  -  NMLS #216987    

                                 IL Lic. #031.0006220  -  WI License #216987                                                                                                    

NMLS #175656


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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
Home Buying
Illinois Will County New Lenox
Advice for Buyers
real estate contracts
real estate advice
home buying common sense
home buying in chicagoland

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Fred Griffin, on leave of absence from ActiveRain
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

 Everybody in that story (except you) must live in Bizzaro World.  My head is spinning just thinking about it.

Feb 15, 2017 04:02 PM #37
Jim Harper
Atlanta Communities Real Estate - Marietta, GA

Wow Gene. It's a wonder the Buyer didn't just move in! What a story. Hope it closed(?)

Feb 15, 2017 05:01 PM #38
Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy


Sorry, I missed this earlier.  You titled this post perfectly, common sense and logic were absent.  I am thinking that those two words are not common anymore.  A

Feb 15, 2017 05:30 PM #39
Chuck Carstensen
RE/MAX Results - Elk River, MN
Minnesota Real Estate Expert

This sounds super crazy and risky.  Hard to believe someone would do this.

Feb 15, 2017 06:32 PM #40
Melissa Spittel
Coldwell Banker Residential Brokerage - Westminster, MD
"Achieving Results Together "

Why on earth would a buyer begin improvements on a property they didn't yet own? And why on earth would a real estate agent allow it? Scratching my head while listening to crickets. 

Feb 15, 2017 07:07 PM #41
Dörte Engel
RE/MAX Leading Edge - Bowie, MD
ABC - Annapolis, Bowie, Crofton & rest of Maryland

Dear Gene,

Wow! That is definitely one for "do not try this yourself!" I advise my clients to only look. Do not touch. Until you are the lucky owner. Then knock yourself out.

Feb 15, 2017 07:11 PM #42
Amanda S. Davidson
Amanda Davidson Real Estate Group Brokered By eXp Realty - Alexandria, VA
Alexandria Virginia Homes For Sale

Gene, it's all crickets on this end after reading your post. Wow. One of many reasons I won't practice dual representation. Aside from that though you're right the common sense is missing. I cannot believe the agent allowed this and even worse nothing in writing.

Feb 16, 2017 06:58 AM #43
Sellstate Partners Realty - Cooper City, FL
Selling Broward County Homes with Passion!

Shocking! What a mess...hard to top this one!  Good post!

Feb 16, 2017 07:24 AM #44
Lauren Williams, CPO
Casual Uncluttering LLC - Woodinville, WA
Professional Organizer: Puget Sound homes

I once went to buy a home, started looking for insurance that would cover the property if/when I bought, standard procedure to get the mortgage. The insurer tried to insist I'd have to make improvements before they'd write a policy, i.e. before I owned the house!  ARRRGH.

Feb 16, 2017 07:51 AM #45
Sharon Tara
Sharon Tara Transformations - Portsmouth, NH
New Hampshire Home Stager

Unbelievable! I cannot imagine putting myself in that position....buyer or seller position! What a nightmare! Hope it works out for all involved.

Feb 16, 2017 08:05 AM #46
Stu Dye
Mortgage Network, Inc. NMLS #2668 - Portland, ME
Senior Loan Officer

The mortgage process is already a bit, challenging, to say the least.  And then you got this 'Oh, by the way...'  And then it was (no doubt) your fault for delaying the appraisal, which delayed a Closing.  

Glad it worked out.

Feb 16, 2017 10:17 AM #47
Paul McFadden
Paratex - Seattle, WA
Pest Control, Seattle, WA.

Interesting my friend. Time to walk away, huh?

Feb 17, 2017 09:18 AM #48
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Real Estate

Well, how did anyone's attorney allow this? Did anyone even have an attorney?

The agent is just as dumb.

Feb 17, 2017 11:46 AM #49
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

I am a great believer and follower of Ockham's Razor, the simpliest solution is normally the best, and this does not follow that path.

Feb 18, 2017 07:34 AM #50
Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

I'm just shaking my head.  Who advises that?  I'll be curious of how this one turns out.

Feb 18, 2017 02:45 PM #51
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of Manchester NH's Leading Agents

To put it simple, that is just crazy, that agent has done so many things wrong. In short, buyers should not be working on a house they do not own yet Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi 

Feb 20, 2017 03:08 PM #52
Jane Chaulklin-Schott
TEAMCONNECT REALTY - (407) 394-9766 - Orlando, FL
TeamConnect Luxury Homes - Orlando, Florida, 32836

Speechless is a good word, Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi. Red flags all over this. I am still waiting to catch my breath. What was the outcome? 

Feb 21, 2017 04:19 PM #53
Jan Green
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Holy hammertime!  I can't believe that this went that far without an agent considering this is not the way to "buy" a property!  A huge insurance risk, too.  Hope it works out.  

Feb 23, 2017 03:43 PM #54
Kasey & John Boles
Jon Gosche Real Estate, LLC - BoiseMeridianRealEstate.com - Boise, ID
Boise & Meridian, ID Ada/Canyon/Gem/Boise Counties

No, no, no, no, no!  Just reading this blog post gave me anxiety....-Kasey

Feb 27, 2017 12:55 PM #55
Mick Michaud
Distinctly Texas Lifestyle Properties, LLC Office:682/498-3107 - Granbury, TX
Your Texas Lifestyle is Here!

I actually had a very similar situation. A new construction house that didn't have the septic system installed.  The buyer agreed to front the money to have it installed so the financing could go through on a house that could be occupied.  My LO arranged for the buyer to pay for the septic system and it was recorded as a personal loan to the seller with supporting agreements and documentation and cleared at closing.  Since it was the LO and attorneys arranging this with full disclosure, I knew we were in good hands. 

Mar 16, 2017 05:24 AM #56
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