Wednesday, August 22, 2007

Most loan commitments are as good as the chicken scratch on a cocktail napkin

I've been selling Real Estate in South Florida for quite some time now. I have seen and heard of many deals that are dying before they reach the closing table due to lack of communication,laziness and no regard for other people that might be out on the streets. It's bad enough that consumers are lead down this path of destruction and are losing money and time.
I have seen the up's..the downs and even the in bet-weens. But we really have a major problem here. My company recently changed to the FAR 9 contract which in my opinion...... protects the sellers a bit more with the time-lines. If a commitment date is not going to be met..then the buyers/agent must notify the sellers/agent in writing that they seek an extension. Now if they do not put it in writing and the date passes then the seller has just cause to keep the escrow for their trouble. Some Realtors® just let the time go by and think they can just let it slide. If they chose to do it correctly,...then the seller can either grant an extension or cancel the contract and all deposits are returned to the buyer. If the buyer/agent does not follow this correctly...then they must forfeit their deposit. Now most of the deals I personally handle are from my listings. My partner is our buyers agent and uses our contracts.
I really like this change in the financing clause. It's basically the same except the new one doesn't have such an easy out for the buyer if the lender screws up their deal. Every state has different rules and laws and some contracts are different. The problem is some of the contracts out there still have that clause that might make it difficult for a seller to dispute the escrow held. I would really like to see a clause that just clearly states that if the time-line is not met and there is not any notification in writing then the buyer and or deposits are now considered in default. Now I am not trying to take sides here but you have to understand that when a Realtor® presents an offer on one of my listings my sellers cannot afford to take the property off the market and the find out at the 12th hour that there is another excuse or another issue with the loan and not being able to fulfill their obligation to close on the property.
Timelines are very important and if you look at the inspection clause you will notice that there are conditions and deadlines. If they are not met by the buyer then there can be a dispute if the sellers side was not notified in writing. It is so simple. If you can't meet it then just notify us writing. Please do n ot come back later and try to fight it because 9 out of 10 times you will lose. Same goes for the should be exactly the same.
It is the buyers agent and the buyers responsibility to make sure that all time-lines are met. When they write a contract and base a commitment date on the loan officers guarantee then who do you think should be at fault.....the seller? nope. I have also noticed that when the deal dies and the lender is at fault they just say that they are not a party to the contract. You know what? that might be true in spirit and I'm not an attorney but if there is a financing clause in the contract and there are specific items that need to be followed then who decides? After all when we put in these time-lines don't we ask the lender before we write in the date? If that is true than how can these lenders guarantee a full commitment if they can't get one until a day before a closing? To me when I receive a full commitment it means the bank fully agrees to lend the buyer the money and that there are no other outstanding conditions.
I have heard about too many underwriters who just take a contract and put it in a pile and disappear on vacation without telling anyone. How come they request to see a fully executed contract but they do not even look at the closing date? Why do so many Realtors® sit back and do not take more of a proactive interest in the deal. Aren't they getting paid? Don't they want to be part of the deal also? If not...I will be more than happy to take the full commission and close the deal myself.
Hey...I'm not that stupid and have been doing this for a while and I know from experience that you pretty much cannot have a full commitment until all outstanding conditions are met. Well then how can you put in a date and represent it as a full commitment or even a commitment with outstanding conditions. That tells me you might as well throw out that clause because you'll never get it until closing. How does that protect the seller in this situation? Do they just throw darts blindly and hope they hit the bulls eye? I think not. I am just getting tired of all the invalid promises. But please understand that even though this is additional protection for the seller...there are probably a few very disappointed ...very angry buyers that were unable to make their dreams come true.
We all want the transaction to close but I think some of these clauses need to be re-evaluated and they need to be written in plain English and not only for attorneys to understand.It is our job as Realtors® to try to give the client a brief summary of any clause they might not understand.....but not all consumers are that savy when it comes to some of the language written in these contracts. I bet you that if I was to do a survey you would find many experienced Realtors® that would tell you that when they get a contract...they aren't as confident as they used to be when it comes to closing a transaction under these strange conditions we are experiencing in todays market.
It could be a very painful outcome in the end. Look at yourself in the mirror and see if you are guilty of this. I guess people really don't care.
The Real Deal

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