Sacramento Real Estate Views

The 60 Day Escrow – If You’re Lucky

I recently had a transaction that I was working cancel due to, well, many things but the seller’s primary contention was that the buyer had not acted in good faith in obtaining the loan.  While there were many factors that contributed to the delay that were wholly the responsibility of the seller, it points to the fact that today’s mortgage industry is in a bit of a shambles.

Buyers who are submitting financed offers are not getting the attention from the banks unless they are the only offer submitted.  I’ve been working with two financed buyers since October of 2008 and getting them in escrow has been a challenge.  With my most recent experience with a financed transaction, I understand why.

“Interest Rates Still at All Time Lows”

It seems we’ve been saying that “interest rates are low, it’s the time to buy” for years.  Over the last two years however, the mortgage industry has taken many hits in lay offs, lenders failing (that number has to be well over 300 lenders who have gone out of business since the start of the downturn) and loan programs evaporating.

When the goverment got involved at the beginning of this year, the interest rates fell down to levels never before seen in the history of mortgage interest rates.  This created a wave of refinancing that  lenders were ill equipped to handle.  There was no time to prepare for it as it happened literally overnight.

This wave of refinances, even though most lenders say that they make purchases a priority, put all loan processing behind the proverbial “8 ball”.  There isn’t a lender that I’ve spoken with in two or three weeks who can get a loan done in under 30 days and many say they need 45 to get it done.  This includes Wells Fargo, Countrywide and other independent brokers that I’ve spoken with.  Loan processing, underwriting and funding times have all been affected as lenders don’t have the staff to churn this paperwork out in an expedient manner.

Banks Take Thier Time

In the transaction I mentioned above, the bank didn’t get me a contract that anyone could read.  I rode them for two weeks to get us a legible contract.  The inexperienced assistant said, “well can’t you just use the originals?”  Would you make a loan on an agreement that wasn’t signed by both parties or one that you couldn’t read?  If you did, it wouldn’t be long before you were out of business.

The escrow officer complained, I complained, the appraiser complained and the listing agent still wouldn’t get us it to us.  It wasn’t until we had been in escrow for 25 or so days that we got a legible contract out of the listing agent.  Then the seller, who I’m sure wasn’t advised of the situation and was more than likely making decisions based in incorrect information, wants to cancel because the buyers didn’t have their loan completed on time.

Needless to say, I won’t be showing that listing agents listings again in any market.  This particular agent has gained a very poor reputation since the market changed.

Everyone loses here.  A family lost a home and the bank loses money because when they canceled the transaction, they lowered the price on the home.  My client offered them $175K on a $154,500 listing price.  Then they lowered it to something in the $140′s.  The loan was in for final approval and very close to being completed.  We could’ve closed the transaction with a simple extension of 10 additional days.

It’s no wonder the financial institutions are failing.  They have no idea what they are doing when it comes to real estate.

The Lesson

When writing an offer on a home, if you’re financing, make sure that you give yourself at least 60 days to close.  IF your offer gets accepted, prepare your agent to write an extension addendum if you don’t get the documents you need to process the loan within 10 days.

Another thing I’ve begun doing is adding a clause in the contract when submitting to bank owned homes that reads, “all buyer contingency time frames begin when buyer is in receipt of a fully executed agreement and preliminary title report” or something to that affect.  This way if the bank is late in getting the docs to you, you’ll be covered in the financing contingency.  You’ll still need the extension but at least the seller will be aware of potential delays on their part.

If this doesn’t make sense to you, please call or contact me and I’ll be happy to explain this further.

Thanks for visiting!

Related posts:

1. Home Loan Interest Rates Down

Tags: sacramento mortgage interest rates

This entry was posted on Wednesday, March 11th, 2009 at 7:19 am and is filed under Local Real Estate Info, Market Commentary, Sacramento Mortgage Information. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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