South Bend Home Loan

Wednesday, May 29, 2013

Beware The Repair

I pride myself on smooth, on-time closings for my clients but this week seems to be a ‘pride goes before a fall’ kind of week for me.  Of the seven closings I have scheduled for this week, five of them were delayed, rushed, or cancelled because of repairs.

So why is this happening?  And how can we prevent it?

Sometimes, a buyer knows they want something fixed on the house from the very beginning so they write this into the purchase agreement.  I love it when buyers do this.  It lets all parties know at the very beginning of the process exactly what is wanted so they can plan accordingly.

The problems come up when the repair is delayed.  Sellers will often wait on doing them until they know that all other open issues related to the purchase are done.  Understandably, they don’t want to pay for repairs only to then find out that the appraisal came back low, the loan got declined or the septic failed.

Why is this a problem? 

If a buyer writes a repair into the purchase agreement, the lender sees it as a condition of the sale so it also becomes a condition of the loan approval.  Most lenders need to have all open conditions in hand at least a week before closing to finish out the final steps.  That means the repair needs to be done and verified as done by the appraiser 7+ days before the closing.

How can we keep this from delaying the closing? 

To keep this from delaying your loan, put a timeline for the seller in the purchase agreement.  Don’t just say “deck to be stained”  say “deck to stained by June 27th”, leaving enough time for the appraiser to verify that it’s done and get their report back to the lender at least a week before closing.

Another option is to write up an addendum and remove the condition from the purchase agreement once the buyer feels that the work has been properly done.  I like this option better because it doesn’t require an appraiser to go back out which is an added cost and time delay.  The bank will still need that 7+ days to finish the approval and close smoothly, but they won’t need the 3-4 days on top of that to have the appraiser go back out.

What if the repair came up mid-contract?

Sometimes all parties don’t know about the repair upfront.  They become aware that it’s needed when the home inspection or appraisal come back. 

When the repair came up as a part of the home inspection, this typically won’t delay the loan process because the bank is not normally involved in that piece.  Some lenders do require copies of inspections, but not most, so these repairs can be done right up to closing if needed.
The Realtor still needs to allow extra time, though.  We’re in a busy season and trades people are backed up.  The work done is also not always up to the buyer’s expectations.  If the Realtor is thinking the work can be finished the morning of closing and things will go smoothly, their risking a closing nightmare and a very unhappy client.

When the repair comes up because of the appraisal, we’re back to the “7+ Days” thing.  That means either the seller needs to get the repair done fast, an extension needs done or – sometimes – both.

Hope for the Best…

Bottom line - when repairs are on the radar, the Realtor needs to hope for the best but plan for the worst.  Repairs take times.  They’re not always done right.  The bank may need to verify that the work is done.  To keep a happy homebuyer and to reduce the stress levels for all parties, expect delays from the repair and allow extra time for things to be done as needed.

Wednesday, May 15, 2013

It’s The Loan Officer’s Fault – 3 Reasons Deals Die

Get around any crowd of Realtors today and you will quickly start hearing stories about home sales that fell apart in the last hour.  It feels like an epidemic.  Yes, sales are increasing but, sadly, so are fall throughs. 

With all the stress in getting a buyer from the first showing to the week of closing, it’s incredibly painful for the Realtors when things fall apart at the last minute (not to mention for the sellers and buyers).  Sadly, many times it’s the loan officer’s fault.  Here are the top three things loan officers don’t do that can kill a sale:

They Don’t Ask

There’s a huge list of things that some loan officers don’t ask the buyer up-front that can make or break the sale.  Some aren’t asked because the loan officer feels like they’re prying by asking and it makes them uncomfortable (things like if the buyer pays child support or if they are a US Citizen).  Sometimes they don’t ask because they’re not paying attention.  For example, the loan officer may not review the paystub before sending it to the underwriter so they don’t see the garnishment withdrawal and don’t ask the question to find out what it is. 

Whether from awkwardness or sloppiness, questions are missed upfront that are critical to whether the loan gets approved or not.  Yes, the questions may seem invasive.  Yes, the questions may be uncomfortable.  However, it’s much more uncomfortable to call a buyer the day before closing and telling him he can’t buy his home after all.  Bottom line - Loan officers need to ask the questions that need to be asked, in full and upfront. 


They Don’t Know

Other times, the deal dies because the loan officer just didn’t know what they should have known.  You’ve likely heard this sentence in a Realtor’s horror story “But the loan officer knew about that the whole time!  It wasn’t something new, they knew about it from day one!”  Many times a deal dies because of a situation that the loan originator knew about.  What the loan originator didn’t know was that the situation mattered. 

Perfect example – a Realtor friend of mine had a deal die last week because the home her client was buying as a primary residence is a 2.5 hour drive from where he works.  The underwriter declined it saying that this was too far of a commute to believe it would really be his primary home.  Did the distance from the house to his office change from start to finish?  Of course not.  The loan originator just didn’t know that the distance mattered so they didn’t address it upfront and instead left it for an underwriter to notice and decline the loan over.

They Don’t Tell

This one kills me, because it happens too often and it’s so unnecessary.  There are times when the loan officer asks the questions, they know there’s a problem with the loan approval, but they don’t tell anyone.  They’re afraid of the confrontation so they keep it to themselves, hoping they can find a way to fix it or that a miracle will happen and the problem will go away.

Do miracles happen sometimes for buyers?  Absolutely.  I often joke about my ‘great loan karma’.  Things really do just seem to go right for my clients with the loan approval process, even when it seems like the odds are against us. 

I’m not against trying for the Hail Mary and believing that a solution can be found.  I AM against keeping the other parties involved in the dark.  If there is a problem with the approval, the buyer(s) and selling agent need to know.  The loan officer and selling agent need to jointly decide how to keep the listing agent in the loop as well.  No one wants to scare the seller, but they have a right to know about problems too, especially when repairs are in process.


So….why do I share all of this with you?  Do I really want to point out how loan officers mess up and break hearts of home buyers and Realtors alike?  Of course not – it’s not fun pointing out the failings of people.  Fact of the matter is, though, this stuff happens.  It happens a lot – BUT IT DOESN’T HAVE TO. 

Selecting the right loan originator will help prevent problems like these.  Everyone makes mistakes sometimes, but some people make a whole lot fewer than others.  There really are very good, high quality loan officers out there who DO ask the right questions upfront, who DO know what the potential problems are so that they can address them at the beginning, and who DO man-up and tell the buyer and Realtor if a problem arises that may impact the loan. 

The choice in loan officer matters in getting smoothly to closing – choose wisely.