Home Selling in Encino>Question Details

cathy0927, Home Buyer in Los Angeles, CA

Buyer has not yet removed his 17 day loan contingency while trying to get a JUMBO loan

Asked by cathy0927, Los Angeles, CA Fri Feb 7, 2014

The 17 day loan contingency was supposed to be removed February 3rd. My realtor (who is now also the realtor for the buyer) wants us to give the buyer another 2 weeks in which to remove the loan contingency, citing because of the new 2014 Frank Dodd regulations and getting a JUMBO loan requires additional documentation, it is unreasonable to think a buyer would be able to sign off in 17 days. The realtor also told me typically a buyer doesn't sign off on the loan contingency until the underwriting conditions are met. Is ANY of this accurate? Escrow told me we are on track to close in 45 days, if not possibly sooner (it was a 45 day escrow), and I've read underwriters typically come back and continue to ask for documents up until funding the loan, so my gut feeling is the buyer doesn't want to sign off on the loan contingency until the loan is funding, as that's precisely when escrow is expected to close (end of Feb/begin of March) and with the extension buyer would then sign off).

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Some great answers, I'll just add that extension of a contingency release or closing date should carry a price. A simple example: if a buyer wants to extend closing by 10 days, compute the cost of 10 days of additional property tax plus 10 days additional interest on your current mortgage. Demand that a non-refundable deposit be made into escrow for that amount before the extension is granted. I'd usually add a few more $$$ to that total to solidify the buyer's commitment to the purchase, but it's a start.
The point is that the buyer is costing you both hard dollars by delaying closing and missed opportunity to find another buyer by continuing to tie up the property.
1 vote Thank Flag Link Sat Feb 8, 2014
Teri Lewis - Robyn Jones Homes. This is not an uncommon problem and my advice to my clients is always to deliver the notice to perform. There is no reason why you should be taking the risk when 23 days have passed since escrow opened. In my experience if there aren't red flags in the file, any good lender can give the ok to release the loan contingency within the 17 days. Best of luck!
1 vote Thank Flag Link Sat Feb 8, 2014
If the offer says 17 days then it's the buyers responsibility to remove the contingency in 17 days. If their loan has not been approved, they still need to remove the contingency and take on the risk.
1 vote Thank Flag Link Fri Feb 7, 2014
This is not true. We can close Jumbo loans just as fast as conventional. Send me an email if you have any further questions or need help with something
Flag Sun Feb 9, 2014
Your agent should be getting 'aggressive' in protecting your interests since you are the one paying him because sales can easily go south because of lender issues. You may want to speak to his Broker and let them know that you feel your interests are not being properly represented.
Flag Sat Feb 8, 2014
I would think so as well, but the realtor insists no buyer will sign off on a loan contingency until underwriting has given approval...even if that exceeds the 17 day loan contingency period. He says they will not risk their earnest money until they know for sure they have gotten their jumbo loan, and he says jumbos take longer to get with new 2014 Frank Dodd rules. He says I would be taking an "aggressive" stance if I forced the issue and requested the two day notice to perform.
Flag Sat Feb 8, 2014
First it's important to get a few things straight. 17 days is next to impossible to get a loan commitment on any property. If the buyer has done a complete application with full documentation before writing the offer, just getting the appraisal back and reviewed after any inspection or due diligence is a tight time frame.
Next your agent, having written the contract is in a very awkward position. Who do they truly represent? On paper may be you or both parties, in reality they represent themselves getting to double end a transaction. If you have reason to suspect the agent is being less than fully forthcoming, you are in a difficult position. State laws vary, but in my state an agent can only be a Dual agent with written authorization from the seller. Check what the laws are in CA to find out where you stand.
Finally, if you insist that they remove the financing contingency after 17 days they have 3 options. Remove it at the risk of losing their earnest money. Ignore your requests and hope you don't mean it . Or deny the request and put you in a position of putting the house back on the market.
If the offer is good, based on the short time frame, you may want to grant them some extra time, but 30 days from mutual acceptance should be enough for most lenders.
If the offer is less than you really believe you should accept, consider forcing the issue and getting back on the market.
We have no way of knowing if the offer you have is worth sticking around for. How much do you trust this agent? Consider talking to the managing broker, but realize they have a vested interest in you completing this transaction.
1 vote Thank Flag Link Fri Feb 7, 2014
Mark - you make a good point regarding the ability to get approval for FHA in 17 days, but it isn't always the buyer that causes the delay. Last week I closed a SFR that was to be sold "as-is." The buyer was well-qualified, but the underwriter wanted a few repairs to the property that took some time to complete. The seller could have refused and lost the buyer, but decided to invest a little and get the deal done. Extensions can happen for lots of reasons that are not always the buyer's or lender's fault.
Flag Sat Feb 8, 2014
Mark is correct. It depends on the lender.
Flag Sat Feb 8, 2014
17 days is very doable here in SoCal if the buyer has been properly screened, and he lender is good at what they do. I recently got approval on an FHA buyer with 3-1/2% down, in less than 17 days. Great lender.
Flag Fri Feb 7, 2014
Mark Marino, Keller Williams. I would recommend you request that your agent serve the buyer with a Notice To Buyer To Perform (NTP) to remove the loan contingency. The default on the CA Residential Purchase Agreement is 2 days, so 48 hours after the buyer received the NTP, you can unilaterally cancel the agreement. What that accomplishes is two things: (1) It send a strong message to the buyer that you expect them to act asap, and (2) Even though you might not want to at this time, you now (after 48 hours) have the right to cancel the agreement without any consent of the Buyer.

I hate to suggest the worst, but with your agent also representing the buyer, it makes sense that they would encourage you to give the buyer more time, because the agent wants to double-end the deal. The buyer should have been better screened before escrow ever opened; or at the very least required to double-app with a lender of your (or your agent's) choosing that could fund the loan if something came up unexpectedly.
1 vote Thank Flag Link Fri Feb 7, 2014
Scott Pinkerton real estate pro los Angeles
With the new guidelines loans have been taking longer to get done. It is not uncommon for a buyers loan approval to take longer than 17 days. Has the buyers appraisal been done? Or are you still waiting on that? If it's been 17 days and no appraisal this could mean that the buyer is having a hard time getting approved. Typically the lenders won't order appraisal until buyer has been approved. Without knowing all the specifics of your transaction I can't really give any advice on what to do or not do. But I can say a lot of escrows are taking longer to close then normal . 45-60 days. Best of luck.
1 vote Thank Flag Link Fri Feb 7, 2014
I hate to say it...the first issue is that the listing agent changed his focus from being a listing agent and representing you exclusively, when he agreed to work for the buyer.

It is true that loan contingencies aren't met until the file clears underwriting. It's kind of late to be changing agents but you went off course when he represented the buyer.

Best of luck to you.
1 vote Thank Flag Link Fri Feb 7, 2014
Dual agency should be a crime. It's impossible to act in interest for the buyer and seller evenly. The agent wants that commission check and is only working in the best interest of that objective when working dual agency.

Whether you're the buyer or seller in this situation you have to play hard ball as if you're basically representing yourself. Or you will get played if you are deemed a softy.

No matter what you agent recommends if you don't feel right about it don't do it or ask more questions first.
0 votes Thank Flag Link Sun May 11, 2014

Since your agent is acting in a dual agent role it is hard for him/her to play hard ball with the buyer, as the buyer is also their client.

If you are not happy with what they are trying to do, have the agent execute a notice for buyer to perform regarding removing the loan contingency.

Does the buyer have the additional documents required on hand and ready to be delivered to the lender?

Based on the info you have provided, you have two choices: 1 grant the buyer the extra two weeks 2. Cancel the escrow and start all over with a new buyer.

I wish you the best!
Kawain Payne, Realtor/Notary
0 votes Thank Flag Link Mon Mar 3, 2014
Sounds like they don't actually have financing. As the seller you can request that the buyer get pre-approved by a lender of your choice. I would be more than happy to do that for you.

Alex Greer
Loan Officer
NMLS #1056079

0 votes Thank Flag Link Sun Feb 9, 2014
Firstly, therein lies one issue with dual agency as he/she cannot equally protect both parties interest 100%. The buyer should have been pre-approved with or w/o Dodd-Frank new law, lenders are still performing with the 21-day guarantees.

They should remove the contingency since that is in the contract. I may also give a 10-day extension (more than enough time) with an incentive or cost and want to know the exact reasons u/w is holding up the deal. Getting back tax documents could be the delay but you are entitled to know the buyer will perform. Otherwise accept the strongest back-up offers (being that the property is in Encino) and/or make it a condition the buyer apply with a lender you know.

Well I hope this helps you! If you have any further questions or if you would like a loan, feel free to contact me!

Good Luck!

Will Cook
Sr. Mortgage Consultant
NMLS # 1048392
Phone: 949.205.7635
0 votes Thank Flag Link Sat Feb 8, 2014

You should decide how much longer you would want to extend the buyer's loan contingency period. If you'd like, you can try speaking with the buyer's lender and getting an explanation from them if you feel that you are not getting enough information from the Realtor. It is not unusual for the loan contingency to go passed 17 days-- however, 2 weeks seems like a long extension on that contingency. You do not have to give the buyer an extension for 2 weeks (less time is a possibility).

Good luck,
Sara Mehrpouyan
Rodeo Realty
Direct phone 818-903-2040
Bre License #01712757
Email: smehr818@gmail.com

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0 votes Thank Flag Link Sat Feb 8, 2014
Unlike one of the answers below, it is possible for any Realtor to be a dual agent & still represent 'the transaction' and be fair & abide by the language of the contract in fairness to all parties involved.

Look at page 2 of your purchase contract; Is the box at the upper portion of the page checked off so that it is basically stating "buyer has until their loan is "Funded" to remove their loan contingency? If it is checked, they potentially CAN HAVE until 'past' the 17 days to remove a loan contingency. Having this box checked is basically stating that the buyer will have until about 48hrs before the day you close, to back out & recoup all of their deposit, without penalty, should their loan not close.

**If that box is not checked, then, regardless of their lender or loan underwriter issuing a letter or stating that the buyer "is approved", after 17 days that lender should be able to feel confident enough that the buyer's loan WILL ultimately be approved, so the buyer would have enough confidence in their ability to 100% secure financing & close on the house, that they Would remove their loan contingency.

*****Everything can be nice & happy until it blows up in your face & there should be an understanding at the 17 day marker, how much Good Faith Deposit might be in jeopardy should the buyer Not be able to close after this 17 day period.

Keep in mind too, that should your escrow not close, if that box on pg. 2 is Not checked & now it's day 30 & the buyer has not removed their loan contingency & you are not closed. Escrow is a 3rd party & CANNOT release Good Faith Monies back to the buyer unilaterally. They must have your signature as well to release those funds.

That's when you might put your foot down & say to the buyer "You're not getting squat, until we come to an agreement on how much of your Good Faith Deposit I'm going to keep!"

If you'd like to discuss this further, please shoot me an email directly or give me a call, I don't look back on this same Trulia posting for Answers after mine, or Replies from you beneath my answer.

Emily S. Knell
562-430-3053 c
Realtor Since--- 1996
Realty ONE Group
BRE# 01211967
0 votes Thank Flag Link Sat Feb 8, 2014
Many times buyer's getting loans will actually ask that the loan contingency stay in place until it is funded (which they should have asked for when they submitted their offer) and different lenders can work faster than others. Before you give the buyer more time you may want them to cross qualify with a lender you trust. You can also ask for them to release all or a portion of their earnest money deposit in exchange for the extra time, if they are confident about getting the loan that won't be a huge issue to them and if the deal does go off track you will have something to show for it. If they don't accept your terms, I would suggest you give them a Notice to Perform & place the property back Active (subject to cancellation).
0 votes Thank Flag Link Sat Feb 8, 2014
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