Financing in North Babylon>Question Details

Joanne, Home Seller in North Babylon, NY

Buyer was pre-approved, had inspection and appraisal done, went to contract, had title search..then loan was

Asked by Joanne, North Babylon, NY Mon Jun 1, 2009

denied. Reason was mortage broker approved income with overtime...how can a seller protect themselves from this?

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Short answer is you can't if there's a mortgage contingency in the contract. You should be requiring a formal preapproval letter however with offers and unless the letter specifically states that a full tri-merged credit report was pulled and assets and income verified and that the buyer is preapproved subject only to a satisfactory appraisal, an insurance binder and final underwriting review then it's not really a preapproval, it's a pre-qualification letter and these have always been worthless pieces of paper.
0 votes Thank Flag Link Mon Sep 9, 2013
Other than the poster below who said to not allow a mortgage contingency, you really can't do much as a seller to protect yourself since the buyer isn't required to divulge any information to you other than that they've been Pre-Approved. You could always have your agent verify with the lender issuing the pre-approval to see if they issued the Pre-Approval based on the receipt and review of supporting documentation or if they did a bling Pre-Approval (lots of lazy loan officers do the later or yield to pressure from their client to issue it without proof).

At the end of the day, it's a risk for you as well as the buyer but it's always helpful if the buyer's agent knows the Loan Officer or someone else you know does (or they've shown in some other capacity they're detail oriented and thorough).

On a parting not, the idea of not allowing a contingency may seem great for you as a seller but place yourself in your buyer's shoes before you likely end up in a situation with a greatly reduced # of offers on your property by doing this--imagine the buyer who has no recourse if the appraisal came in low or the lender had a guideline change, or the borrower was let go from their job.

I know this is an old post but I don't necessarily agree with the previous post so I'm adding my own feedback. Mistakes can be made by anyone with any amount of experience because experience doesn't mean they read all the guideline changes that occur almost daily in our profession now... I'm not saying someone with six months experience no matter how detail oriented and thorough will be able to go toe to toe with another Loan Officer with say, five or more years recent experience but at the five year mark, anyone still in the business is probably as proficient as anyone else (at least excluding non-specialized financing such as rehab/construction/USDA lending) unless they only do streamline refinances all day.

Best of luck in your future sales!
Web Reference: http://RobWeber.com
0 votes Thank Flag Link Mon Sep 9, 2013
Interview your agents. Do not take a referral from a friend or family member. See what kind of team is around them. (lenders, attorneys, engineers, stagers) How much experience do each of them have and how does the agent explain financing at a listing appointment or an interview for a buyers agent. You will know after speaking to a few professionals. You want to keep mistakes to a minimum in a relationship that could last between 3-12 months. And don't get me wrong, we can not protect ourselves from unintentional errors but keeping them to a minimum takes a little work on your behalf as well. I myself only work with a 30 year veteran in the mortgage business as well as a district manager of a smaller bank. When they say yes, it is yes!
0 votes Thank Flag Link Mon Sep 9, 2013
The best way a seller can protect themselves is by carefully interviewing real estate agents before choosing one to represent you during your home sale. An experienced and detail oriented agent would know that approving a buyer by using overtime income to qualify is a very risky stuation. Although there are times when a customer may be using a mortgage broker that does not communicate well with your listing agent there are ways to avoid this lack of communication. It is the listing agents job when representing a seller to make sure the prospective buyer is not only ready and willling- but ABLE to buy. In a case where the listing agent is not getting full financial disclosure from a buyer or their mortgage professional the seller can require the buyer to be prequalified by a mortgage professional that the seller and agent know will disclose their credit worthiness honestly. This buyer does not have to use this person to obtain funding as a condition of sale. However it may be required by the seller that they are qualified by this mortgage person as a condition of the offer acceptance. This way you and your agent know up front how a deal is being structured and the likielyhood of it going to closing.

Georgia Westcott
Broker/Owner
The Westcott Group Real Estate Company
17 Deer Park Ave
Babylon New York 11702
631-661-8888
0 votes Thank Flag Link Fri Sep 25, 2009
The seller needs to insist that all buyers they accept offers from a fully pre-approved by a trusted mortgage loan officer. Someone who was thorough would have picked up on the overtime and not approved that buyer.
0 votes Thank Flag Link Mon Jun 1, 2009
Hi Joanne-The only way is to not have a mortgage contingency in the contract. If you are dealing with an agent -ask them to contact the buyer and have them see if they can put more money down or use a different lender OR They may be looking to re-negotiate the price or are looking for sellers concessions. Was there a problem with the appraisal? Terry K 718-614-3167 cell
0 votes Thank Flag Link Mon Jun 1, 2009
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