I had something happen last week that caught me off guard. An agent from another company had written an offer on one of my new construction listings. The offer was contingent on the sale of the buyer's current home. Needless to say, the builder would not accept the contingency, marked it out in a counteroffer and we returned it to the other agent. I was totally surprised when I got the contract back fully executed, with the buyer agreeing to purchase with no contingency. I called the other agent up, asked him point blank - "Can your buyer qualify to purchase without selling their current home" and he said "yes, no problem they have excellent credit and are ready to close". WELL... I didn't quite believe it, so I called the very conservative local lender and the lender said the same thing. So we moved on, the builder installed some upgrades for the buyer at his expense, AND the buyer PAID THE BUILDER $750 cash to do some additional upgrades, and we were going to closing! As I'm sure you've figured out, this transaction never closed. At the walk thru, the buyer giggled and said "well, we can't buy this house until our other house sells". I think the builder and I both had a mini stroke and our eyes rolled back in our heads. We stayed calm and professional, while inside we were FUMING. I excused myself and went out to call their lender AND their agent (who didn't bother to come to the walk-thru), and the lender said "oh yeah, they have to sell or lease their house". WELL, DUH.. anyway, long story short, the house is back on the market with the upgrades added to the price.
The point of all this rambling is a question. Did this happen because the other agent was desperate for a closing and failed to disclose the actual situation? Did the same thing happen with the loan officer who failed to disclose it to us in the prequalification letter? I believe so. They both were having one of those "let's throw this deal against the wall and see if it sticks" moments. Their unprofessional actions affected everyone, in that it cost the builder a significant amount of money, it damaged my relationship with the other agent and the loan officer, AND it damaged the buyer in that it cost them a significant amount of money with their lost earnest money and what they paid for upgrades. Their agent had not advised them what a contingency meant.
If you are tempted to take a risk with a client to see if you can get it closed, think again. Don't become less professional just because you need a closing. If you maintain your professional standards, business will come to you. That's the truth.
Can you get permission in your contract to be in contact with the lender in the future? I know even with permission that they can still lie but when you stay in contact with them at least once a week you may hit on some missed communication.
I have never had a normal transaction here and I don't trust anyone in a real estate transaction even if they appear to stay on top of things.
Mary... this seems to happen in any market. Back in a minute... Renee... ouch.... I guess we can't do business together then? lol
In any case.... I am semi confused. You said you called the lender that qualified these clients? And when you said it damaged your relationship with the loan officer. Meaning? You won't use them? Just trying to be on the same page.
Overall..... yes, I see so many loan officers throw stuff up on the wall. I use this analogy often. It makes me sick even as a loan officer. I am curious.... I know there is no true recourse as in monetary....but why not complain to his company? The state? The BBB? Some of you think that this is a waste of time, but not always. The BBB will send a letter. Report the lender or loan officer to the state, to the banking commission. And trust me, I don't want to be labled a tattletale....but if we don't stand up and make notice of this, it will just continue and possible get worse. Hey.... if I did this or someone thought I did something wrong, by all means, please do.
i agree with jeff. out them to everyone who will listen.
I am sorry if I offended anyone but it was not my intent to be rude.
I have had one listing and two sales fall out of escrow in the last 11 months because of lack of communication.
The listing was due to an agent and loan officer who were not forthcoming but I did see it a mile away and luckily had two backup offers. One buyer was due to a builder's loan officer, saw that coming because I talked to him almost daily and felt he wasn't square with me. One buyer was due to a seller's lying about title problems on a short sale, was no surprise after about the second title defect was found.
Now y'all know why I trust no one! I treat everyone like they are a flake (which doesn't mean I am rude about it) BUT I do all the fact checking myself. We are ultimately held accountable by our clients so we do need to go the extra mile to be sure everything is peachy.
Mary, wow if you asked the lender if they qualified without selling their home, and he said yes knowing that they could not then, that is…….well I will just leave it as very unethical. But if they really did qualify, but they felt that they just didn't want to carry two mortgages, by doing a bridge loan, then I would not blame the Loan Officer for not knowing that they would not do that. I wonder if the other Realtor even bothered to ask the question and just assumed that they would.
Renee.... first off, you weren't rude, I was making a teasing statement.
George.... just my two cents, but if I was the loan officer and Mary spoke to me about this.... and then this fell apart, but we take your approach, that maybe the buyer was doing a bridge loan??? In either case, I would be clearing my name now, with mary. So, I would have to assume that the lender knew all along. Like I am trying to say, if this fell apart but as the loan officer, i did my job, then I am explaining this to the realtor if something else happened. If I am silent with no argument and or some type of response, then I would be guilty. Just my opinion from past experiences, when something does happen, no matter who's fault it is.
And Mary... sorry, I am not trying to take over your post. Just a good topic of discussion and I wanted to give everyone an idea of how I look at things and what I would do or how I would have handled it if I was the loan officer.
The lender should be reported to the state.... Take them to the wall.... I clearly see that the lender mis-represented the Buyer's eligibility....
But... Did the lender by chance say the same thing to the Buyer's agent to make them think that it was no problem?
If the Buyer's agent knew early on, then fry them with the State, the MLS and the Realtor Association.... With trash like this, it makes us all look bad....
Jeff & Bill with all do respect and I mean that, that lender should not even be talking to the Mary without the Buyers permission. When I first started in this business, I came very close to giving more information then I should have to the Listing Agent and almost got myself in hot water. From that day on I will not talk to the Listing Agent unless I am given the go ahead to do so. My responsibility is to the Borrower and no one else. If I am given the OK I will answer what ever the Listing Agent asks truthfully. But my experience is that the Selling Agent will usually advice the Borrower that he or she be the only one allowed to have contact with the Listing Realtor.
It does not sound like this lender got permission to talk to Mary, and therefore, found himself in a situation that if he said to much he would be in trouble, and by not saying enough he is in trouble. He needed to have been a little wiser in this situation, and he was not. That to me was his big mistake.
As lenders we have to be very careful of how much of our Borrowers information we divulge.
George.. I never once said that I would give information. That is totally different then filling in everyone on what is taking place. Giving information in my opinion would be credit, credit scores, income, etc etc. But in the relm of communication, letting the listing agent know that I have them qualified and that it was based on a bridge loan... or it was in regards to qualifying for both mortgages, or that they need a lease on the one house is open discussion. But there is more to it then this, because if my name is attached to this deal... I will pull either agent aside, but without giving information that you are assuming.
George... I am not playing good cop, bad cop. I know what you are saying, but again, there is more to this than what is being explained. But I would let all involved the time line and what took place... or what was done or not done. There is nothing wrong with this. I think you are assuming more detailed information, that was never mentioned in these comments. And I am just pointing this out, because this is the 2nd blog that I have seen people assume something without asking in detail. This is how things get started in a negative manor, even in this example of this blog. And in your statement, that he found himself in a certain situation... then that is on him. It has nothing to do with permission. It's all on how you go about stating facts and what you state. And all I was pointing out is that I wouldn't have allowed this and if I did....then I would bring up certain facts. And that is all that I stated.
And I guess the reason for such a long comment is because you mentioned..."giving more information" We need to clarify what kind of information that you are talking about. This is important when it comes to comments that can be up in the air. Information is a very vague word and I just don't want to be though of one thing when it could be in regards to something else. This is how some people make poor judgment calls on a situation.... and this could affect me in general just in the near future. Just my opinion..
I have a different perspective when acting as the buyer's agent. I give the seller's agent the name and phone number of my loan officer. I want him to put them at ease. The loan officers I normally work with are pros and will not give them confidential information but can confirm their ability to complete the sale.
Also I am amazed at an agent or a loan officer who would waste everyones time including their own. If the deal ain't happening, it ain't happening.
Sounds like an inexperienced agent and loan officer.
Jeff, I would agree that a lot of assumptions are being made, and assumptions ususally lead to wrong conclusions. So with that said let me make it clear about divulging information. I don't feel that a lender should state anything beyound what is said in the Pre-Approval Letter to the Listing Agent. To do so would be to involve himself, I believe, in the negotiations of the sale that is not his place. Also, the Commitment Letter is usually given atleast a couple of weeks before the Closing. As we both know the Commitment Letter is going to state all the conditions that a loan was approve. So if the house existing needs to be sold before closing or alternative financing needs to be established it is going to state that. That is the way my underwriter issues all our Commitment Letters, but maybe I am assuming that everyone else does also, so that would be wrong on my part if it is not the case.
Negotiations should be between the two Realtors and I do not feel that it is a good idea for a Loan Officer to get into the middle of it unless asked to by the parties that he is representing.
Againg we can assume all night long, and I don't want to do that, nor are my comments intended to be argumenative, because we are usually on the same page. But here we are probably reading a little to much into the information that we have, and that is why we are probably differing on this.
OK now I need to get some sleep, before what ever is left of my brain stop to work.
Okay, so the BUYER signed the countered contract which removed the Contingency to sell their current residence first. The Buyer's Agent confirmed that the Buyer was capable of satisfying the contract. Mary Ann called the Buyer's lender, as most strong client advocates would do. The lender concurred with the Agent.
Mary Ann, how long of a timeframe was there between the time you went under contract unti the day of closing? Did you have a financing contingency that required formal loan approval within 30 days? Did you ever receive notice of formal approval from the Buyer's lender?
The Buyers signed the contract so they should have known the contingency was removed. The Agent could have been misled by the Buyers, but I doubt it. Same with the Lender. It smells like a conspiracy!
I agree with George, where is the committment letter? I didn't read anything in Mary's post as to where that was. There should have been a home sale contingency in that commitment letter.
Why did the buyer show up for the final walk-thru is beyond me. Almost seems like they wanted to rub it in. I have never heard of this type of behavior in my 22 years.
I wonder if there is a piece of the puzzle missing here.
Thanks Jay
I can't imagine conducting business that way! Did they think someone was going to pull a rabbit out of a hat and suddenly they were going to be able to close on that house? It certainly does make you wonder why on earth the buyer showed up for the walk-through. How people can do things like that is way beyond my understanding!
I'm sorry that happened to you and to your builder.
Ann Cummings
This situation does happen now and then. When working as a seller's agent I like to have a conversation with the lender, I am not asking him or her to divulge confidential information, but from the conversation I get a good sense of the situation.
Now because mortgages are available from so many sources, you might get a pre-qual from one company and then the mortgage is coming from some other company. I was working as a buyer's agent and my buyer did this without informing me until the process was half done. As soon as I found out I did disclose to the listing agent but it made me uncomfortable especially since the first mortgage lender was under the impression my buyer was still using him and he was busy putting a mortgage together.
Jay, great point. George does bring up the commitment letter issue. And this was my whole point from day one. We didn't get into details, but I would use this as my speaking sheet per se. A commitment is due on a certain time and is public knowledge to both buyer and seller. So,.... you can talk to either realtor and go over certain things. Hence the reason if something happened at the end, and myself as the loan officer didn't do anything wrong, damn right I am standing up and going over this with both agents. And this is not disclosing anything that nobody doesn't know about. Not in any way would I disclose credit and income....
And I agree with Randy... I have no problem with anyone having my numbers, even the seller and the listing agent. 50% of the time, I actually call the other agent to even give this to them, depending on the deal, location, people involved. I am huge on communication and everyone being on the same page.
Mary Ann
I see a few issues here but you mentioned Ethics in your blog…so I’ll tackle the Ethics issue.
Article 1
When representing a buyer, seller, landlord, tenant, or other client as an agent, Realtors® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve Realtors® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, Realtors® remain obligated to treat all parties honestly. (Amended 1/01)
So as I see it…if you asked the question and the other agent lied to you as it appears….they would be in violation of Article 1 and I would file a compliant with your local Board of REALTORS ASAP.
Also….this would be different from state to state I’m sure, but up here our Real Estate commission has stated that the a buyers ability or inability to obtain financing is a Material fact…and/or a Defect and that it must be disclosed.
I had a similar situation…Buyers removed the contingency because their agent told them they were protected due to their financing contingency (which was due 6 weeks later) and it would cover them. The commitment letter would have on the very last page a list of conditions …one of which would be a satisfactory HUD (proof of closing) showing enough funds to close.
Long story short… I did not believe that they could buy without selling and felt something was up.
So I pushed for info…made phones calls…faxed a copy of Article 1…talked to our RE Commission investigator and talked to the Mortgage officer who I could tell really didn’t want to 1. talk to me 2. tick me off. …he was clearly in a No Win Situation!
Ultimately the offer did not get accepted by my seller because the buyers could not prove they could buy without selling. The Mortgage officer…he’s no longer in the business…
In New York the buyer would lose their 10% deposit. If you waive a financing contingency and can't get financing you forfeit your deposit. Most new construction requires 10% at contract and another 5% in 60 days. (15%)
The seller can keep the money put it back on the market and sell it to another buyer.
When we make an offer, we have to give the buyer's finances. Income and assets. If their only asset is another house, (liability not an asset if they have a mortgage) their income would have to be high enough for the the 25% income to debt ratio.
I would assume that the buyers would lose their earnest money and the builder would have cause to sue for non-specific performance. I would have the builder threaten just to show the agent and the buyer that this isn't a "giggling" matter.
I too have had a similar situation.
My solution to this was to reqiure a prequal with my lender on any deal I had even an inkling would be trouble.
If the buyer refused,that put up a red flag and we built some extra protection in such as larger non refundable deposit and a quicker timeframe to close to minimize possible damage to my seller.
Unfortunately, if an agent is trying to deceive you there isn't any way to completely protect the seller.