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Closing an Escrow Against the Odds
I may have been riding ponies and yelling giddy-up last night but this morning my birthday is over and I’m just another old fart whose day of glory has passed. No more 20-year tawny for me today, me — who had the brilliant thought that if one glass was a fine way to end the evening, a second glass might be even more fun. Instead I have built-in radar that says, nope, you, young lady, need to go directly to bed, do not pass go, do not collect $200. Put that head on the pillow, NOW.
I am thankful for my built-in radar because it keeps me out of danger. I have pretty good gut instincts as well which I, at times, rely upon. It’s the reason we closed an escrow on Friday that probably would not have otherwise closed this month.
This was a transaction initially scheduled to close within the first week of June, not the end of June. Mid stream, the mortgage lender switched the financing from conventional to FHA because the buyer did not qualify. The underwriter discovered a foreclosure on record some 7 years past for one of the buyers and disqualified the buyer. Yup, guidelines can make provisions for waiting periods but underwriters can do what they want.
Then the file sat at the lender because everybody thought somebody else was working on it, or at least that’s the mortgage lender’s story and he was sticking to it. He went so far as to pull out the my-grandmother-died card, or wait, that might have been another transaction and these are probably guys without grandmothers, I may note. I dunno. What I did know was I had a very unhappy seller due to the financing for the buyers. She expected to close. She had to make another mortgage payment she wasn’t planning on making. She asked me for options.
The solution she liked best was to sell the home to another buyer. So that’s what we did. We signed a back-up offer with a second set of buyers and issued to the first buyer a Demand to Close escrow. The buyer’s agent was horrified. Said she had never received a Demand to Close escrow in all of her years in real estate. It won’t be the last, I offered. Not in this real estate market. The lender has the ability to make any file a priority, and it may as well be ours. They managed to pull a rabbit out of the hat and closed.
A Sacramento Mortgage Lender Can Make or Break the Escrow
The thing about primarily representing sellers in a transaction is a listing agent rarely gets the opportunity to recommend an excellent Sacramento mortgage lender to a buyer. This is normally handled by the buyer’s agent. That doesn’t stop lenders and their lender reps — the mortgage loan officers (MLOs) — from nonstop spamming / harassing and marketing to listing agents in hopes of attracting their business, but quite frankly they are barking up the wrong tree and going about it in the wrong way.
No veteran real estate agent is likely to recommend a mortgage loan officer due to a brief office meeting or over leisurely coffee breaks (what are those) at Starbucks. Agents recommend loan officers who have proven themselves worthy of a recommendation through performance. We put them on our list. They can’t ask to be added to our list because we won’t add them.
Sometimes I run into a situation with a buyer that is perhaps a bit iffy, which is a good way to describe some of the risky situations I spot. If I don’t recognize the mortgage loan officer in those instances, the sellers and I might suggest that the buyer get a second opinion from one of my preferred lenders. They are preferred because I know and trust them to thoroughly investigate and analyze a situation before issuing a pre-approval letter. They discuss options and make sure the borrower understands the mortgage choices at hand.
When a mortgage loan officer informs the agent, say, a week or so before closing, that the buyer can’t remove the appraisal contingency when an appraisal has been completed, a Sacramento real estate agent might rightly wonder why. Perhaps the mortgage loan officer will say something like the borrower was upset over all of the costs to get an FHA loan and decided to switch to conventional.
You know what that tells me? It tells me that the mortgage loan officer did not thoroughly explain the GFE to the borrower upon inception of the loan. It also tells me that the mortgage loan officer herself probably suggested the conventional loan as an alternative, not realizing that the buyer’s contract did not specify a conventional loan. The sellers will most likely consider this to be a contractual change, whether the MLO realizes it.
When presented with reality, the MLO might argue and say the conventional loan is better for the seller. Really? It might be for the buyer, but it’s not necessarily better for the seller. What if the seller had a former buyer in escrow who had an FHA appraisal previously completed, and what if that was the reason the sellers chose the present FHA buyer? No appraisal problems. Now that the buyer is changing financing, it changes the type of appraisal, and it could affect the entire transaction. Moreover, why would a mortgage loan officer who is hoping for repeat business leave the buyer’s agent out of the loop and overstep?
Perhaps the most endearing quality would be if the MLO desperately tried to justify the new financing by explaining to the listing agent how conventional financing works in comparison to FHA — especially to an agent who has been selling real estate before the MLO was born. Some mortgage lender reps set their own paths for failure, and they don’t need any help from anybody else.
