What Lenders Hate Admitting To

I'm going to admit to something that lenders try their best to keep secret.  Sometimes sales fall apart and it's because of something on the lender's side.

GASP!  I know, you're shocked.  What a huge, unexpected surprise.

OK, probably not.  Most Realtors can tell you a horror story or two of sales that fell apart, often at the last hour, because of something that the lender uncovered.  If you asked a lender directly about their personal experience with a dead sale, though, they'd probably give the "Oh, that never happens on MY deals." type of answer.

Truth be told, it happens to ALL lenders and this week it happened to me.  A client had a bankruptcy that included his home in 2009 but for some reason the bank didn't process the sheriff's deed until 2012.  I didn't find this out until the CAIVRS was run which was a week into the contract.

The homebuyer was angry.  I was nauseous.  The Realtor was kind but disappointed.  All in all, it was a rotten situation for everyone (definitely worse for the homebuyer).  Hindsight being 20/20, we all wondered why I hadn't run CAIVRS before the offer was made.  Truth be told, the underwriter and I had both looked at the file before giving the preapproval letter.  Neither of us thought that taking that step earlier than normal was needed.

We were wrong and the purchase fell apart. 

So why do I share this?  I share it because it's time to be open and upfront about this topic.  Fall through happens.  It's such a standard part of this business, that banks track it constantly to judge the quality of the files being provide.  They want a low fall through ratio, of course, but they never expect 0% fall through.  Mortgages falling apart mid-contract is just  a painful part of this industry.

That doesn't mean that Realtors shouldn't hold their lenders up to a high standard.  Many lenders are more thorough upfront and this definitely help more sales make it smoothly to the closing table.  A Realtor should look at the lender's track record and reputation in the community.  If the lender has a strong reputation and is known for closing the loan, the rare fall through should be understood as a part of the business.  If sales seem to regularly fall apart though, that may be a sign that the lender is not as detailed on the front end as he should be.

All to say, Realtors - be picky.  Hold us lenders up to a high standard.  Don't hold us up to perfection though.  Try as we might, things will sometimes go wrong.  If it does, please know we'll learn from it and find ways to avoid that pitfall for the next buyer you send our way.