Home Selling in 92563>Question Details

Please help, Home Seller in 92590

Is it normal for the buyer's loan to fall through? This is my 2nd time where buyers didn't get loan on day of escrow closing. Why are they?

Asked by Please help, 92590 Tue Dec 21, 2010

preapproved We are the seller of a short sale in Murrieta. We have attempted closing twice without success. Both times the buyers who were already pre approved didn't get the final approval from the bank until the day of escrow closing. Don't the banks know that these people don't qualify before giving them a pre approval letter to waste people's time? How can our realtor know this before accepting an offer?
We are about to put the home back on the market for the third time now. What can we do to avoid pre approval letters that are not really saying much?

Discouraged in Murrieta

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Great answers here. I would agree with Chris and ask your agent to have all potential buyers cross qualify with another lender. This way you have two eyes looking at the buyers ability to purchase the home. I would also ask for fully underwritten approval within 7 days after the offer is accepted.

I wish you the best and hope you can find a qualified buyer soon!

All the best!
1 vote Thank Flag Link Thu Dec 23, 2010
I may have answered your previous comment about this situation. With this question I have the following comments to help protect your interests which your agent needs to do. My 20+ years in this industry have enabled me to form these practices to protect my clients: The buyer's agent is supposed to have most of this done before they write an offer to a seller, but I find that through inexperience or laziness, it doesn't get done a lot and so that leaves the bulk of the follow-up with your listing agent.
1) Tighten up your contract with the buyer: Insist that they start contractural deadlines after the bank has approved the short sale, but that escrow opens right away and then within 21 days from the bank's acceptance, the lender will have an underwritten approval of the buyer's loan, or you can kick them out of the deal for non-performance, but before then, it is VERY important that::
2) You will want to speak directly to the buyer's lender and ask the following questions: Do you have a completed application? Have you pre-qualified them or had them underwritten for pre-approval? Can you tell me about them? Do you see any problems or red flags? Have you run a credit report? Do you have Verification Of Employment? What are their FICO scores? What are their ratios? What type of program are you planning to put them into? Where is their Down Payment money coming from? Do they have W-2 or self-employment income? Have you decided who to place the loan with yet? Have you run the package through Desk Underwriting (AU) yet? How long will it take to get the appraisal done and turned around? How long will it take you to get loan approval? If the lender answers well to all of these questions, then have the lender send you a copy of all the work that was done on this buyer. Then have your agen't's lender go over all of this to make sure it conforms to the TYPE of loan the buyer is tryng to get. KNow that even doing all this there is no absolute guarantee in the present world of lending challenges, but at least it will give you a better chance of success. Ellen Hayes, Murrieta, CA Remax 951-600-8657
1 vote Thank Flag Link Tue Dec 21, 2010
Have your listing agent use their, lender to do a cross quailfication. This will make you to feel a little better going to the process the 3rd time, knowing you have two people looking over the approval for the new buyer. I know that to get an short sale approval from the bank can take some time so, make sure after 30 days the buyer are still going to be approved. I have a great lender who does this. Best of Luck to a successful closing!
Pauline Woelky, West Realty
1 vote Thank Flag Link Tue Dec 21, 2010
Dear Discouraged in Murrieta,

Love the name by the way, I feel like Dear Abby :). Unfortunately, this is a component of our marketplace at this time. There was a time where I had gone 5 years, that's right , 5 years without ever loosing a transaction once we got past the first 17 days. Now people are a bit different and banks are a lot different. This situation can be really exagerrated if you are a short sale listing as well.

Your agent (at a minimum) should request cross qualification with their own lender. If someone doesn't like it, then they need to explain it falling through two times thus making it a requirement of any offer. This is VERY common right now because of situations like yours. I know that is a common answer, but there is more - you should make sure your agent shows you their strength financialy speaking.

If there is only one offer to consider, the math is pretty simple BUT and this is a BIG BUT - if they can't get the loan at the end of escrow, your agent should of already Removed the Contingencies after day 17, thus enabling you to put in a claim for the deposit. You don't have to go after it, but you would have had the right to. The buyer should KNOW by day 17 if they can get the loan or not. Your agent needs to be on top of this. This shouldn't be coming up on the day of closing! That requires an explanation in my mind. If there is only one offer, and you knew it was risky when you accepted it, than it is what it is. But if you chose betwen more than one, the vetting needs to be better. And you have to get that loan removal done.

Good luck and I hope you the very best - Stefan
Web Reference: http://www.stefanwest.com
0 votes Thank Flag Link Tue Dec 21, 2010
I am so sorry that you have had this experience. We have many new lenders on scene . We have lenders that are desperate. Sometimes I find they do not do their homework. My favorite saying is they throw 10 against the wall, if two stick they are happy. If your and my loan was one of the 8 which fell to the floor I am really mad. I expect my lenders to work just as hard on the good, the bad and the ugly. Some loans take more time, sometimes it is in the packaging. Sometimes you need letters of explanation. A good lender would have this in place before the underwriting team requested it. I do not like to take a buyer away from a lender with whom they have developed a business relationship, however, it is my job to find you the house and get the loan to close. If I need to, I give them a choice of 3 lenders I have worked with and found to be professional. You know, who ever you were working with, did not do their homework, as it takes about 2 hours of the lenders time to put the correct information into the desk top underwriting. If you get an approval you are good to go, as long as the information put in was correct. You can ask your real estate agent, to have the buyers cross qualified with a lender she has found to be of high ethics. The agent can have her lender call and get copies of what is needed, no need to re run credit. A good lender can review and know if it is marginal, strong, or keep looking.

Good Luck

Micki Dickinson, GRI, RECS
0 votes Thank Flag Link Tue Dec 21, 2010
Unfortunately the preapproval letter you receive with an offer will always come with the unknown, will the buyer receive a mortgage commitment. The mortgage commitment is rarely given at the time of an offer. This is because a mortgage commitment requires more detail and evidence of ability to support the requested loan amount. To do that takes extra time. More often than not buyers have already been looking and frequently write an offer on a home before obtaining a full commitment. That said, a preapproval is still a great assurance. Keep in mind a skilled Real Estate agent will not purposely waste time showing homes to a person they do not have confidence will be able to have the ability to buy. A buyer who is preapproved has had a lengthy conversation with a bank. The Realtor working with the buyer will be involved in the approval process to assure that they are not wasting time and money showing homes to a buyer incapable of fulfilling a purchase offer.
0 votes Thank Flag Link Tue Dec 21, 2010
Really the only thing you and your agent can do is have the buyers cross qualify with a lender that you trust. You can also require underwritten approval not just a pre-approval. Guild lines are changing almost daily in todays mortgage market so someone who is qualified one day, may not be the next.

Good Luck to you and your family, I hope third times a charm.

Chris Blasic
Realty World & Associates
0 votes Thank Flag Link Tue Dec 21, 2010
This is going to happen. There are many reasons loans get cancelled, most of which you as the seller have no control over. Two things you can do: 1) require a pre-approval from a lender you have confidence will do a proper pre-qualification, even if the buyer doesn't actually do the loan with that lender (you can't force them...) and 2) require a shorter loan contingency period. Because loans are so difficult to close today, most buyers want their loan contingency to go to the last day of escrow with no deposit risk. That's horse dung. Since most escrows are 45 or 60 days, that means you have to keep your fingers crossed for an awful long time without knowing if you really have a sale. You can share that risk with the buyer by saying, "ok, 45 days escrow, but 30 days on the loan contingency or no deal." If the buyer is properly pre-approved, they should be willing to share the risk.
0 votes Thank Flag Link Tue Dec 21, 2010
It is a problem, the property in today's markets has to appraise, then the buyers have to be approved by the underwriter / bank who will put out the money for the loan..... And these days everybody is extra careful, I just wish they would do it ahead of time, before everybody loses time and money and energy and nerves....

Short sales are particularly difficult, as at the end the bank has the last say what they will accept and if they will accept the buyer..... I feel for you and hopefully the 3rd try will be a charm.

Good Luck to you.... you know your Realtor can probably do very little being every so depending on what the
bank in a short sale situation is actually going to accept.... It is just as hard and frustrating to the buyers who THINK THEY bought a house, only to find out that the bank said NO....

Good Luck to you!
Edith YourRealtor4Life and Chicago and Northern Illinois Connection
0 votes Thank Flag Link Tue Dec 21, 2010
Kathy, I would think it is the buyer's real estate agent that should be doing all of the work for their client! Sellers should not be responsible for seeing that "Part of YOUR job is to be sure the mortgage officer can guarantee their approval." That is the buyer's REAL ESTATE AGENT's job!
0 votes Thank Flag Link Tue Dec 21, 2010
DON'T YOU LOVE IT.. it horrible situation THESE BANKS CREATE with all kinds of drama for listing/buyers agent, seller, buyer.

Think about the buyer who spent money on inspection, option and appraisal money NOW can't purchase a home, potential loss of escrow money based contract.

Seller may have moved out of their homes... IT IS HUGE PROBLEM.. nothing anyone can do.

I think of 2 lenders THAT I can't post on public venue which will pull the plug at the last minute... when speaking with them .. they state why waste their time till closing.

To me class action suit needs be filed against the lenders well known who do this ! ...

As expression "don't get me started I could keep ranting about this"

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
0 votes Thank Flag Link Tue Dec 21, 2010
This is terrible -- it's so disappointing for all sides, you, the seller, the buyer & the other agent --
why are you discouraged ? You need to take control ! Part of YOUR job is to be sure the mortgage officer can guarantee their approval -- this is crazy ! There are so
many great mortgage people -- be sure your Buyers go with one YOU know that will not let this happen.
If you need some names -- send me an email & i'll locate one in your area Kathy Critch kathycritch@gmail.com
0 votes Thank Flag Link Tue Dec 21, 2010
You should only accept a preapproval where the loan officer has run what is called an automated underwriting approval from either the Fannie Mae or Freddie Mac computer where the underwriter has seen all the documentation.

A lot of times a loan officer just scribbles something on a piece of paper for their real estate agent clients so that the agreement can be written.

This is not a 100% perfect system because the mortgage underwriter does have the final say. Also, an appraisal has to happen and there may be issues with that.

If you have any other questions about this, i am licensed in CA and happy to help.

Fred Glick
Web Reference: http://fglick.com
0 votes Thank Flag Link Tue Dec 21, 2010
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