We’re in a rather unforgiving Mortgage Loan Approval environment.
During this fragile period of time between when the House Buyer and Seller reach agreement (Bind a Contract) and the closing, inattention to detail and/or silly mistakes can provide the gust of wind that razes the house of cards (kills the deal).
This agonizing happening occurs more often than most people could even imagine.
It leaves the Seller in the unfortunate circumstance of having to go back on the market to find a different Buyer . . .
and it leaves an eager Buyer “HouseLess” and facing the possibility of no longer being able to buy ANY house or less house and most significantly THAT house which they loved so much and in which they invested so much time, energy, money, and emotion.
The tragedy of it is that many of these deals die unnecessarily. Most loan related deal killing scenarios emerge from carelessness (Inattention to detail) and lack of understanding of the “rules” and process.
The stakes are HIGH because the process is unforgivingly RIGID with few options to turn back time to clean things up . . . There are few “2nd chances,” so the burden is on all the players to get things right the FIRST time.
Below are 10 things that I have witnessed just in the last 2 months all of which effectively murdered otherwise healthy real estate transactions.
- Be sure Lender actually ordered it
- Be sure the Appraiser actually showed up
- If you’re the Seller (or Seller’s Agent), be sure to meet the appraiser at the property with paperwork and details of improvements made by Seller
- Follow up to be sure the appraisal value was acceptable, and there are no required repairs
- Proof of funds
- Is down-payment money in the bank and appropriately “Seasoned?”
- If it’s borrowed, do you have the required “Gift Letter?”
- Is the Gifter a qualified Gifter in the eyes of the lender?
- Can the gifter provide a paper trail of where the money came from?
- Have you made arrangements for this money to make it to the closing on time? (Wire it to the Title Company)
- Cloudy Title
- Has the property been subdivided while owned by the Seller? If yes – Document that it was recorded properly
- Are there any surprise easements or encroachments?
- Any known assessments by Home Owner Association or governmental Authority?
- Does the person selling the property own the property and/or have legal authority to sell it?
- Credit Score Plunge
- Lender will do a final underwriting “Credit Pull” the day before closing – Will it be as good or better than the pull they did at the beginning of the process?
- Has Buyer missed any Credit card payments since making loan application?
- Have any credit card balances increased significantly since making loan application?
- Has Buyer opened any new lines of credit (Credit Cards) since making application?
- Has Buyer been shopping for furniture, cars, appliances and had multiple recent credit pulls?
- Other “Owners” previously unknown
- Do either Buyers or Sellers have any “Ex’s” recent or past who may still be named on accounts and/or deeds?
- Are there Heirs we don’t know about?
- Have any of the parties “Co-Signed” on loans for children or friends and tied those loans to the property
- Surprise Liens
- Have a title company pull the title and review it thoroughly prior to listing it for sale
- Look for – Materialman’s Liens and judgements for other debts (Medical)
- Are Buyer and Seller on good terms with the IRS? Any tax liens?
- It’s very possible for liens which have already been satisfied still to be present on the Title – They take time to make go away, so learn about these EARLY
- House Condition Issues
- Be sure Buyer completes all home inspections in a timely manner per the due diligence periods provided in the Purchase and Sale Agreement
- Complete resolution of discovered condition issues in a timely manner and document with a CLEAR, WRITTEN Repair/Replace Contract AMENDMENT
- Define a day prior to the scheduled closing (7 days prior) for completion of the required repairs/Replacements
- Have Buyer do 2 Walk-throughs – first is day after the required completion date above to be sure they were completed satisfactorily – 2nd is day before or day of closing as a final check.
- FHA/VA requirements
- If in a PUD or condominium, what’s the ratio of owner occupants:Non owner occupants? This matters to lenders
- If the financing is FHA/VA, be VERY proactive about finding out if there are required repairs (VC Sheet)
- Repair any/all indicated items IMMEDIATELY!
- Do not play games by cutting corners – Each time the appraiser has to return to the property to check is a charge
- Be sure the appraiser approves the repairs as early before the closing date as possible
- Job Change
- Things happen – Buyer might get a better job or lose the current job . . . This can stop the Loan Train on a dime if not handled appropriately
- Get documentation from new boss that pay will as much or more than prior job
- Be prepared to satisfy the underwriter that the new job is “in the same line of work” as the old job
- If you don’t tell the underwriter, and the underwriter discovers the job change, it’s gonna be a rough ride to the end
- Other owned properties
- Some Buyers “Conveniently forget” to tell the lenders they have other owned properties (other mortgages that may not show on the credit report)
- Failing to disclose these matters is fraudulent.
- Lenders have rules as to how many mortgages a person can have
Every single one of the bullets above resulted in a dead deal at some point in my 20+ years of selling houses . . . and they are ALL avoidable.
My secret weapon is commonly known as “First 10 Last 10”
With every single transaction, I am hyper-vigilant and attentive to the details of the process (and all of the above items) for the first 10 days after reaching binding agreement.
My goal is to complete ALL of it in those 10 days (Yes, it’s possible)
During those 10 days, I am in daily contact with everyone involved in the transaction with a consistent and persistent and very intentionally focused and diligent pursuit of getting it ALL done right the first time.
10 days prior to the scheduled closing, I’m back at it . . . every day making contact with everyone involved (Clients, agents, title companies, lenders, appraisers etc).
It’s THIS level of intensity that gets happy House Buyers and Sellers to the closing table with smiles on their faces
This is how we roll at Pareto Realty – Connect with us when you’re in the mood for a move 🙂