Lesson Learned

[Scout]

Quick Due Diligence Lesson:

We are selling a piece of property, negotiated to a reasonable price, received verbal conformation that the buyer was pre-approved so we proceeded to complete the contract, made it through house inspection closing was postponed a week due to title search issue. On track until our lawyer got a call that she was never pre-approved, she had co-signed with her boy-friend on another property and could not get approved; now she is co-signing with her son and we are awaiting the outcome...

Lesson Learned: Never take a verbal from the other lawyer, ask for the pre-approval letter prior to signing contract.

 

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[Russ H]

FYI:

Preapproval letters can be forged.

Or can be issued from non reputable sources (i.e., mortgage brokers desperate for biz).

So you can have a nice juicy preapproval letter in your hand . . . and still get nothin'.

Sorry for the negativity-- but we never trust the buyer. Whenever we can, we get back up offers that are ready to close within hours of our 1st accepted offer going blooey.

At the very least, it keeps the 1st highly motivated!

-Russ H.

 

[MJ DeMarco]

- Contract was contingent on the buyer getting his credit score to 600 before close;

- Contract was contingent on the buyer getting his down-payment funds.

Wow, talk about slippery and sneaky. A pre-approval should imply that both are in tact yet this lender managed to subvert it.

That's like saying I'm a surgeon ..... albeit contingent that I

A) Enroll in med school
B) Finish med school and
C) pass the classes.
D) finish residency

In other words, the pre-approval said the opposite -- I'm not approved! Wow!

 

[hatterasguy]

When selling we always require a pre approval letter before we will talk to the people to much. Also you can usualy get a pretty good idea if someone can afford something or not by talking to them. IE what are they putting down, what kind of job do they have, etc. Lots of signs.

This market is fairly nuts, and banks are being real SOB's. So even if they have a legit letter the bank may pull a SOB move right before the closing and kill it. Or force them to extend the closing for weeks if not months. Thats very commen these days.

For new construction thats somewhat custom or totaly custom we require 10% down up front, non refundable if you back out. That way we won't get screwed to bad, if I'm laying out hundreds of thousands of dollars I want to make sure the people are not going to walk away on a whim. Than I'm stuck with a house I wouldn't have put in that area thats probably going to be hard to sell because its either overbuilt, or has features the general buying public doesn't like.

But in the end it happens. In RE it really isn't over until the money is in the bank, I have seen many deals fall apart at the closing table. More extreme examples are when the seller kills themselves insted of signing the papers. I know two casses where that happend.

 

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