This month Patricia Feager and Kathleen Daniels are hosting the March challenge titled "March to a Solution | ActiveRain March 2023 Challenge" Patricia and Kathleen are asking us to share issues we have encountered during our professional career in Real Estate, which may help others to avoid and resolve.
If there is one thing anyone in the Real Estate Industry or Lending Industry needs to get use to quickly once they become a part of either of these industries, is if something goes wrong it is always your fault no matter what. A few years ago I
Normally in the Lending Industry once a loan is conditionally approved it is just a matter of collecting a few documents which borrowers normally do not have at the time of the loan submission such as:
- Homeowner's insurance
- Appraisal
- Bank statement showing the earnest money clearing.
- Gift money documentation.
- Other similar documents like the one above.
If the Selling Realtor has done their job and priced the home correctly, and the Borrower has been truthful on their application, the loan will easily makes it to closing. Easy-peasy right? Wrong!
Let me provide an example of why what should be easy-peasy, is not always easy-peazy, by sharing a transaction I had a few years ago. This was a FSBO sale, so right there I knew it was not going to be easy-peasy. The Seller was the mother of one of the Borrowers, and was doing a gift of equity for the down payment, and also doing a Seller contribution for all of the closing costs. The mother was also a paralegal for the Attorney these Borrowers were using to represent them. Further more the two Borrowers were well educated, they were School Teachers. So no problem with money for down payment and closing costs. The Seller was the parent, so everything should be friendly. Seller is a paralegal for a Real Estate Attorney, so she should be very familiar with the whole closing process and what is required. This should be an easy-peasy transaction, but not so fast.
Right off the bat there were a number of issues before the loan was approved. The mother was involved in drawing up the sales contract with the Attorney, however, she did not sign any of the pages she needed to sign as the Seller. There were other obstacles along the way, but we finally got to the point a Clear to Close was expected within a few days.
When I did not receive an e-mail from the Closing Department saying we had a Clear-to-Close after the loan had been conditionally approved for a couple of weeks, I asked my Closer what was the issue. Her response was we had not received any of the additional documents requested on the conditional approval letter.
I called the Borrowers and the response I got was no one had told them they needed to provide any other documents. I want to re-state again, these are two school teachers, and the mother is a paralegal. It was very obvious non of them had read the conditional approval letter, or listen to me when I called them right after they received the conditional approval letter, and went over it with them. The remaining conditions were list in BIG CAPITALIZED WORDS at the top of the conditional approval letter.
When I went over the remaining conditions on the phone with them AGAIN. I pointed out to them AGAIN where on the Approval Letter the "Mortgagee Clause" was, and that the insurance agent would be asking for it. So who do I get a call from the next day? The insurance agent asking me for the "Mortgagee Clause". He also informed me he could not send us the insurance binder until the Borrowers signed the application he had sent them.
A couple of days went by and we still had not received the insurance binder. So I call the insurance agent and asked him why I had not received it yet? His response was that he still did not have the signed application back. So I call the Borrowers AGAIN and asked them when would they be sending the signed application to the insurance agent? You may have guessed by now, their response was NO ONE HAD TOLD THEM THEY NEEDED TO DO THAT!
We finally get the insurance binder, but still no sign disclosures from the mother. I call AGAIN and within an hour I get them attached to an e-mail with a message all in CAPS saying HERE!
Finally, everything we needed to provide a Clear-to-Close had been received, and all that remained to be done was to re-pull their credit report. GUESS WHAT??? They had a new credit inquiry on the Credit Report.
So once again I called them to find out what the new credit inquiry was for. It was for a NEW CAR. I reminded them about the conversation we had when they signed what I refer to as the "Stupid Disclosure". This is what I refer to a disclosure which tells the Borrowers not to do anything that would create a change to their credit, employment, or assets. In other words don't quit your job, make sure you don't reduce the money you have in the bank, AND don't make any major purchases. So DON'T PURCHASE A NEW CAR. Their response was I had not told them they could not purchase a car once the loan was approved. NO I told them once we close on the loan and they have the keys to the house in their hands, then and only then could they purchase a new car.
So now the Underwriter needed to document the new car purchase and the NEW CAR PAYMENT, to make sure they did not go over the debt-to-income ratios. Luckily they were OK.
Finally my Closer was able to notified them they had a Clear-To-Close. The response was good, but in a very snotty tone they stated "they hoped there were no more surprises". WHAT ..... we are the ones giving surprises???
It does not end there, after the closing I got an e-mail from the mother informing me I had stressed out her daughter, and I would be reading about what we put her daughter and husband through in the newspaper. OK Go Ahead Blame Me! Obviously all the surprises along the way were all my fault.
Lesson learned, don't assume just because a client is well educated, and the people involved in the loan know what they are doing AND listen!!! Just because everything has been explained, don't stop there. Explain everything over and over every chance you get. And OH yes, easy-peasy is not always easy-peasy.
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