It’s a buyer’s market, they say. Wrong! It’s the LENDER’S market. If you haven’t sold a property retail lately, you may not know that the banks remain in control. Yes, their policies worked SO well in prior years, they’ve decided to become bigger jerks. Just yesterday local rehabbers told us they’ve decided not to accept offers from buyers who will borrow from one of two large U.S. banks.
But as with any monster, you can sort of control them by working with smart people and anticipating a few things. Though people often crack jokes about real estate agents (you won’t hear that from us, though) a dumb mortgage broker in the chain will screw up a deal faster than anything else. In fact, in a recent deal, it was the real estate agents who saved the day….with experience and actual thought.
Many buyer’s agents are getting too cute with over-inspections. On a recent deal a couple hired a property inspector, a roof inspector, an a/c inspector, a termite inspector and a general contractor. Over $1,500 in inspections! ” But,” their agent cooed, “think of the reductions we can get from the seller!” Of course, most of the items on the various reports were just plain wrong or easy to fix. But the agent and buyers insisted on credits in an addendum that the seller had to sign. Both parties worked amicably toward what little needed to be resolved, as usually happens, and everyone was happy. By the way, the borrowers were ‘golden’ and the appraisal was excellent with one exception.
The mortgage broker was a ‘friend’ of the buyer’s which is usually a problem. He hadn’t read the lender’s website where it says, plainly, that if seller has owned less than a year, two appraisals are required. Lenders can make their own rules and a smart mortgage broker knows and follows them. So, two days before closing, the underwriter says “where’s the 2nd appraisal?” Delay and chaos ensued as the buyer had scheduled movers. Being the buyer’s friend, the dumb mortgage broker had to pay the cancel fee for the movers. But the 2nd appraisal wasn’t a problem and usually isn’t if the seller has done his homework and the mortgage broker advises all in advance.
But here’s the real blunder the day before closing: the lender got hold of the addendum listing the perceived faults of the property justifying the small credit. How did they get it? Well, the blame lay on the title agent. But everyone else was at fault, too; especially the buyer’s agent because she nearly lost a deal. Now we cannot criticize the lender for being curious and making some demands about the repairs being completed or escrowed.
But here’s where a lender (underwriter) can be, and often is, a jerk: not by asking for receipts, but asking an appraiser to take a photo of a switch. A day later asking the appraiser to look at the roof (what the heck does an appraiser know about a roof? There was a roof inspection!) A day later asking the same appraiser to go back and take a picture of flooring. Usually, this means the loan won’t close. The mortgage broker repeatedly pleaded for mercy to get his file closed and the underwriter seemed to delight in more felonious delays. But, again, the borrowers were golden with a large down payment and the house appraised fine. It was then that a seasoned real estate broker in the transaction got the underwriter’s supervisor on the phone.
We’d love to know what was said. But within two hours of that call the lender wired funds to the title agent and the file closed. Where was the mortgage broker? Boarding a plane for vacation having given up.
Here are few the morals of this very recent retail tale:
- Seller, don’t let a buyer’s agent get too cute with addenda. Stay involved with the transaction and take care of things. Stay legal and get everyone happy before going forward.
- Buyer’s agents, you can screw up your own transaction. Be smart, look after the buyer AND the seller, and make a commission!
- Try to avoid buyer’s using “friends” as mortgage brokers. Get someone on your team to refer a competent professional. We heard on the news recently that many transactions are “blowing up” at the end. Sloppy loan applications and incompetent mortgage brokers can bite you in the end. The details matter every time.
- Lenders are people too (ha! ha!) But given they’re in control, know their rules or work with those who know their rules. Most underwriters don’t want to be jerks but tomfoolery brings it out in all of us, no?
- If you know that the details matter and you know your market, rehabbing and retailing can be fun and very rewarding!