KAREN  FUNK, Realtor Elk Grove Sacramento Seller Buyer Investor (1st Choice Realty & Associates)

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Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
The right Charlotte REALTOR!

If the buyers knew they were going FHA and presented as a conventional buyers AND the lender 'lied' for them, the seller should keep the EMD.

The lender should be reported as well.

Nov 05, 2020 07:05 PM
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Kat Palmiotti
406-270-3667, kat@thehousekat.com, Broker, Blackstone Realty Group - brokered by eXp Realty - Kalispell, MT
The House Kat

So you checked with the lender and the lender confirmed it was conventional? But it hadn't been? Geez.  Maybe one of our mortgage ActiveRainers can weigh in.

Nov 05, 2020 04:03 PM
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Joseph Domino 480-390-6011
HomeSmart - Scottsdale, AZ
Real Estate Made Easy

This just goes to show you why a good lender is imperative. This lender's error, whether deliberate or accidental, cost the client their EM. Perhaps their chance to become a homeowner. This lender must be held accountable.

In Arizona we require a pre-qual that is signed by the loan officer and the buyer. If the loan program changed the Buyer should have notified the seller. This mistake should never happen.

Nov 05, 2020 07:50 PM
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Rocky Dickerson
Realty One Group - Las Vegas, NV
Superior Service!

In my opinion if the buyer and lender deceived the seller by saying this is Conventional when in fact it was FHA, they are lucky to only lose Earnest Money Deposit. I could be wrong but with fraudulent intent a possibility of lawsuit for additional damages could be a possibility.

Nov 05, 2020 05:36 PM
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Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate

How does one prevent deception and dishonesty?  

More information, please? 

Are you the listing agent or did you represent the buyer? 

Nov 05, 2020 03:54 PM
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Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets
Big Block Realty 858.232.8722 - La Jolla, CA
& Host of Postcards From Success Podcast

Fraud is fraud. If they lied what could you have done? Keeping the EMD was the right move, they were dishonest.

The only thing I think would have tipped you off sooner was the appraiser.

When you speak to the appraiser always confirm that they are conventional, FHA or VA.

Nov 05, 2020 04:47 PM
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Brian England
Vacasa - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

It sounds fair that the seller kept the ED since the buyer was deceptive and did not perform according to the contract, am I missing something?  You were the listing agent?  If the buyer is unable to perform, then they are unable to perform, how could you do anything to prevent that?

Nov 06, 2020 03:54 AM
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John Juarez
The Medford Real Estate Team - Fremont, CA
ePRO, SRES, GRI, PMN

"What else could I have done to prevent this?"   How about some basic honesty on the part of the buyer and agent and honesty or competency on the part of the lender.

I totally agree with Debe Maxwell, CRS 

and...

You do not succeed by deception. Dishonesty by the agent needs to be punished. Buyer loses EMD and what happens to the agent? I think there is also an ethics issue that could be pursued. 

Nov 05, 2020 08:09 PM
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Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

The terms of the contract dictate! Seller keeps earnest money and may have other legal rights against the buyer and lender.

Nov 06, 2020 03:31 AM
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Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams Fox Cities - Stevens Point, WI
Forestland Experts! 715-204-9671

Keep the deposit for sure, may go beyond with a complaint to the lenders boss.

Nov 06, 2020 01:50 AM
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Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Fascinating at what can go wrong even for the experienced....

Nov 05, 2020 06:01 PM
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Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Follow the terms of the contract.

Nov 05, 2020 04:52 PM
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Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Here's a question....if you knew it was FHA, would your sellers have passed on the offer?  If the answer is no, I think the wind up to the docs condition is irrelevant.

Nov 05, 2020 04:17 PM
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Alan May
Jameson Sotheby's International Realty - Evanston, IL
There's no place like home.

I always call the buyer's lender to confirm details on their preapproval.  If I'd done that... would the lender have told me it was FHA?

Nov 06, 2020 06:28 AM
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Annette Lawrence , Palm Harbor, FL 727-420-4041
ReMax Realtec Group - Palm Harbor, FL
Making FLORIDA Real Estate EZ

Your question is 'What else could I have done to prevent this."
So, no need to comment of Fraud and misrepresentation.
My Practice has always been to talk to the lender and confirm type of loan, qualification of buyer and if assistance is REQUIRED as opposed to desired.
YOU DID THAT. 
Any change after that is 'buyer preference' and puts their deposit at risk.
What remained for you was better co-operation with the other agent.
I have often encountered the agent, buyer and lender all telling a different story and taking the initiative to talk to the lender can get the buyer side folks in an uproar. "I don't want you talking to my lender!!!"
Once that is heard, move to the next buyer.
I do not know that you could have done more.......except, when you took the listing, bring on board a lender who  has the ability to close fast. That gives you the option of, "If your lender can't do it try mine."

Nov 06, 2020 06:10 AM
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Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg Real Estate

well, I think the lender had the biggest hand in that. The BA must have been in on it also. I do a lot of FHA in my area & what condition couldn't the buyer come up with?

Smells fishy .....

Nov 06, 2020 05:34 AM
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Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy

Karen,

You have great answers.  Honesty is still the best policy. A

Nov 06, 2020 07:53 AM
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Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

If the deal was written conventional, and could not close as CV, Sellers should retain the EM.   However, this may differ in each State.    In CO, buyers can terminate if not happy with the loan, but if it is different than written, out of luck.

Nov 06, 2020 06:49 AM
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Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of the Manchester NH's area Leading Agents

I always check with the lender before we accept that it is a conventional deal. Even so, it doesnt keep people from not telling the truth. But checking, can heed off 99% of it

Nov 06, 2020 05:47 AM
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Doug Dawes
Keller Williams Realty - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

The first thing that popped into my head is FRAUD! It needs to be reported! We should have no tolerance for fraud. AND I agree with Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets 

Nov 06, 2020 04:36 PM
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Raymond Henson, SRES, GRI
eXp Realty of California, Inc. (lic. #01878277) - Elk Grove, CA
Realtor

Hi Karen!  You always do everything correctly.

Was it a low down payment?  If so, maybe a more aggressive questioning of the lender and the buyer's agent prior to accepting the offer followed up by an email confirming what they said.  That kind of thinking is so much easier after the fact, though.  I am finding that getting any kind of communication lately is almost impossible. 

Good luck with getting back into contract quickly with an great buyer!

Nov 06, 2020 01:53 PM
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Anna Banana Kruchten CRS CRB, Phoenix Broker
HomeSmart Real Estate BR030809000 - Phoenix, AZ
602-380-4886

Karen what position were you?  LA or BA?  As a broker I have more questions before I'd give my opinion.

Nov 06, 2020 09:08 AM
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Candice A. Donofrio
Next Wave RE Investments LLC Bullhead City AZ Commercial RE Broker - Fort Mohave, AZ
928-201-4BHC (4242) call/text

I would report that lender to the banking commission, and then have them committed to the loony bin. In what parallel universe would this NOT be detected? Sad for the buyer if they were complicit, they lose earnest money and whatever due diligence costs and karma. 

In AZ, we have a Loan Status Update where the lender updates us on every step of the process. I thought yall had similar in Cali . . . 

I thought we were done with crooked lenders!

Nov 06, 2020 08:02 AM
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Mitch Tempo
Keller Williams Realty Maui - Kihei, HI
Mitch Tempo

We have FHA addendums and disclosures that need to be signed when doing FHA transactions.  (mostly common stuff like appraisals will stick, earnest money is returned, condition of home etc etc).   Not really sure what other documents couldn't be met, but if we know it's an FHA loan then most times we'll know what could possibly be issues to explain to seller before we accept the deal. (ie Condition of home, or non-FHA approved condos, appraisals are the big 3 here).  It's a little different if it was conventional financing and something happend during escrow that forced the lender to switch to fha for some reason.  However this usually involves having a discussion, and ammending the contract to allow for it.  

Nov 06, 2020 08:23 PM
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Don Baker
Lane Realty - Eatonton, GA

who's side where you on? As a buyer's agent I try to have the correct offer although sometimes people switch.  But as a seller's agent I call the lender to confirm the contract is accurate with the lender in the first few days.  

Hi Mr. Lender, are you currently processing a loan for 123 street for mr and mrs. buyer?  Well that's my listing so I just wanted to touch base and confirm they have applied for an 80% conventional loal within 3 days of binding agreement like the contract said.  Has the appraisal been ordered? Did you have my contact info for access appointment?  Please give me an email so you can keep me in the loop so I can keep my sellers informed of how the process is going.  Thanks.

Nov 06, 2020 02:44 PM
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Caroline Gerardo
Sun West Mortgage Corporation - Newport Beach, CA
C. G. Barbeau the Loan Lady nmls 324982

When appraisal was ordered you as listing agent could have asked what type of appraisal was being completed.  The FHA appraisal sticks on the house for a while, subsequent buyer's lenders will see the case number and appraisal. This could harm seller if it came in low. Lender gave you a pre-approved loan as conventional and always intended to do FHA? I feel this is dishonest, BUT MAYBE if I try and believe it's an accident or their back end ratio was too high to get DU or LP approval or income verified came back lower, like they got hours cut or no more bonus on VOE maybe on day two lender realized the deal couldn't go conventional. Debt to income ratio is really the only reason why they would switch during an active contract. Did lender have the responsibility to inform you? YES. Seller might have to pay more fees or tighter appraisal constrictions. What is the reason lender and seller agent gave you for the switcheroo?  Don't work with buyer agent or lender again, write a bad review on a public site, ask lender's Regional Manager to kick in $500 moving costs to seller who was harmed by the lying delay

Nov 10, 2020 02:37 PM
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Mimi Foster
Falcon Property Solutions - Colorado Springs, CO
Voted Colorado Springs Best Realtor

I don't understand for what possible reason this would have "honestly" happened. Were they trying to be deceptive? Was it intentional that they misled you?

Nov 07, 2020 07:24 PM
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Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

Buyer would have been in violation of the Agreement of Sale in PA

Nov 07, 2020 07:50 AM
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Tony Lewis
RE/MAX of Valencia (Hall of Fame) 30 year Valencia Resident - Valencia, CA
Summit Real Estate Santa Clarita & OC Laguna Nigel

Don't ever remove all of the contingencies until they are met and the other agent demands it.

Nov 06, 2020 08:49 PM