Are you even trying to close this deal??
I recently entered escrow on an REO property (Foreclosure) representing the buyers. With any escrow you enter you want to make sure you have your ducks in a row, but when it comes to REO transactions make sure you read the fine print. Some include passive contingencies which mean that if you don’t pull contingencies in writing on the said date written in the contract, they will pull them for you. This runs the risk of potentially forfeiting your client’s good faith deposit, if for some reason you have to end up canceling the transaction.
I met these specific clients at an open house, so they already had been pre-approved with a loan agent. I typically like to work with a loan agent or mortgage broker I have worked with in the past because communication is the key element to closing a transaction successfully. This is especially true when writing on an REO property. There are too many potential problems you may run into and you don’t want to be in the middle of a transaction with someone who is not properly communicating. Although you may want to hear “no problem, I can close the loan in the 30 days and underwriting shouldn’t be a problem”. You need to hear, “this property appears to need a lot of work and we may have some issues with approving it through our underwriting guidelines”. The truth does sometimes hurt, but it will hurt a lot more when your clients lose their good faith deposit!
I always like to look at the positive side of things, however I knew the minute I first spoke to this loan agent, we would have miscommunication issues. I felt like I had to constantly remind this person that we are dealing with an REO property and we need to be on the same page in order to have a smooth transaction. It seemed like everyday the underwriting department would come up with a new condition to the loan. It wasn’t that the clients didn’t qualify, it was the property. The lender kept saying the loan was approved in writing, but everyday they added more and more conditions. It got to the point where we had already extended contingencies and we needed to either cancel the deal and move on to the next property or take a leap of faith and hope the lender wouldn’t add anything else at the end of the transaction. Because this was an REO property there was a lot of deferred maintenance as with many REO properties currently on the market. Although it wasn’t an FHA loan, the lender guidelines seemed to be more strict then FHA guidelines. They made it basically impossible to fund the loan. It was almost as if that is what they were trying to accomplish.
I couldn’t in good faith allow my clients to move forward with no safety nets and hope it would all end well. My clients decided to cancel the transaction before losing their deposit and move on to another property. From the start, it was a rocky escrow and by the time I drew up the cancellation agreement my clients had had enough! I am not saying it would have been any different had they used a loan agent or mortgage broker I generally use, but I do know that communication would have been set and I would have been told from the get go there could potentially be problems with the property qualifying and to write longer contingency periods and close of escrow date in order to have sufficient time to make informed decisions.
Moral of the story is.. well I guess there are a few but to narrow it down, when deciding to purchase or sell a home, choose a strong team behind you. This ensures your transaction runs smoothly (not to say there aren’t the occasional bumps in the road), but when you have a strong team behind you they know how to successfully smooth out those bumps. Julie Cleland recently posted a blog on this site relating to this topic you may want to check out. The other is, lender’s guidelines are becoming tighter when it comes to deferred maintenance on homes, so if you are a seller and your home needs some work it wouldn’t hurt to take care of some of that work prior to putting your home on the market. If you have trouble deciding what should be done and what could be left for the new homeowners ask your Realtor. Oh and by the way, my clients have switched to a loan agent I work with a lot and we are back on track and submitting an offer tomorrow…
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8 Responses to “Are you even trying to close this deal??”
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Great Post Nicole,
Congrats and good luck with the offer you are submitting with your clients. I too have experienced some of the frustration you spoke of in your post. Communication is key to having a smooth transaction and if everyone works together to close the transaction and have both the buyer and seller happy then it is a win win situation. I’m glad to hear that it seems like you and your clients are on the right track and i wish all of you the best of luck. They are in good hands,
Adam
Nicole,
Great blog. It seems to always come down to communication doesn’t it!
Hi Nicole,
Chosing a strong Team to represent you is very important, someone who will take the time to read and understand the REO Addendum. As you point out there are a number of clauses in the addendum, (understanding that it wa written by the bank) that favor the REO Seller.
The agetn who just wants to try to push a sale through for his/her benefit are not doing right by their client and chances are won’t be around for long.
Larry
Yes! It would help if everyone did the job that they were supposed to do! There are some really good professionals out there and then there are some….I don’t know what you want to call them! Good thing you kept yourself ahead of the game so your clients didn’t get in trouble! Now that’s a “professional”!
Hi Nicole,
Great blog and thanks for sharing the experience! Coincidentally, I recently posted a similar blog on my website (http://www.talkofrealestate.com) about various roadblocks in transactions. It seems like we all run into some sort of hurdles due to stricter lending guidelines and various reasons that affect the market. It is true that it’s a buyer’s market right now, but there’s so much going on that the buyers need to be aware of and prepare for with these unexpected situations.
Nicole,
It is so true we grow a “sixth sense” after a while and can almost predict a problem, like you predicted with that loan agent.
Communication solves almost every problem in our business, and I am glad you got a lender you trust on the team.
I did not realize the most recent situation about deferred maintenance in properties, so thank you for bringing that to my attention.
Good luck on your offer!
Brian
Great blog Nicole! Your clients are fortunate to have you as an agent making sure to protect their best interests. There are so many aspects involved in the purchase or sale of a home that it really is crucial to have a strong team on board.
You briefly touched on looking at the fine print…in my limited experience dealing with REOs, don’t be surprised if the fine print contradicts itself, depending on which page you are looking at. In the same transaction, the red flag went up about the listing agent of the REO at the beginning of the transaction. I only wish I knew then how much he was going to impede the sale, which eventually fell through. REOs in particular need all players, on both sides, to really want it if it’s going to get closed.