This is becoming a big problem in my market as I am sure it is in all markets.
Here is a common scenario:
You receive an offer on one of your listings and it has an attached loan approval letter. The loan is for 100% financing, the contract is messy, not complete and may have a unusual request or two. You have never heard of the REALTOR® , their company and more importantly the loan officer or their company.
- The loan approval letter came from Bob's Mortgage and Hair Cutting Emporium.
- It is unsigned
- It is in Microsoft Word format, meaning there is a good chance the real estate agent typed in the buyers name and numbers and sent it to you. (yes I have received more than a couple of them).
- The terms of the loan are something that your best lender can not even provide.
RED FLAG TIME!
So what do you do next?
- I first call the loan officer and find out who is Bob?
- I ask the loan officer, how fast can you provide us a loan approval letter from the funding lender?
- I present the offer to my client right away and report what I learned about the loan letter.
Even after doing all that I have had two escrows recently fall out of escrow late in the process, because the buyers were not credit worthy.
The lending side of the business seems to be getting worse as the market cools and some of the hard money is drying up. There are so many desperate loan officers and real estate agents running around that will say or do anything to get the contract in escrow and then try to make it work later. The sad part is after they have cost you and you client lost time, which means money they walk away as though nothing happened to go do it again to another seller.
A few agents in my area put in their listings that they require a loan approval letter from the funding lender. You can see why they are getting strict.
When working with buyers, I ask all of my clients to work with a funding lender whenever possible and to get a full pre-approval with documents. That will do two things for them.
- Their loan letter will be so much stronger to the seller, possibly making them more negotiable if they know they are dealing with a solid buyer.
- It will take away stress for the buyer. When we get in escrow, their loan process has already been jump started, shortening the timeline to complete the loan.
Excellent information.
I got a lender's letter last spring for a buyer looking in the $700K range in Mt. Vernon that was not on letterhead, had no terms or conditions, had no signature. It did have a logo for the lender which I could have easily have downloaded from their web page.
We found the house, but wouldn't present a contract until I got a proper lenders letter.
Good for you. This is where experience is so important.
If it's my listing, I also require a financial statement. Now aren't I a cantankerous old goat? I've seen too many offers with lender letters and when I run numbers, there is no way that the buyer is remotely qualified. Unless they can provide a "commitment letter" subject to appraisal, half of the letters out there are worthless.
RP,
What do you do when you have to deal with the lenders conditions,even after you`ve done what you`re mentioning?
It`s not an easy task.
Lenn - I have never seen anyone ask for a financial statement here.
Kimberly - That is really bad. It is like the wild west out there some days.
Scott - It is definitely not easy
Bryant - The letter that I altered for that one actually stated they verified the funds for the buyers down payment. The offer had no contingency for cash. The reason given for not completing the sale was they were not able to get their cash. I later found out the deposit at escrow had a stop payment on the check. More than a week after escrow verified they had the deposit.
I am filing a complaint against the Realtor for several other things that happened during the sale and may be also sending in complaints against the loan officer and escrow before this one is over.
Thesa - The one I got last said pre-approval and buyer funds verified. Neither was true.
Irina - I am seeing more and more bad letters.
George - My brother had a great line, when a client came to him saying they were working with a known bad loan officer. He said they had to decide whether they were getting a new loan officer or a new Realtor.
Randy - Get strong and "hard" earnest money from the Buyers - if they know they have significant skin in the game they'll either back off - or commit.
BTW - the word is "escobillo" - three times in a row!
In California, the CAR contract actually has a provision built in for the buyer to provide a valid VOD. Out of all the agents that we work with, only one of them makes the buyer stick to this provision. I have a feeling more will be going this way with the way things are headed. This agent also makes it a practice to run the agent presenting the offer to make sure they actually have a license. You would be sureprised how many offers he has received from "agents" that aren't even licensed!
Beth - I have not had a problem with unlicensed agents. They would not get paid if they are unlicensed.
Jeff - I am getting tired of the unsigned letters. Good Point!
Randy.... I guess this is really getting bad because you just wrote about this about a month ago? You will always see this with pre-qual letters. And I know some lenders allow the loan officers to their system that they could print out a commitment letter. This happens also. And in regards to a letter from the funding lender? That could take longer, because that lender doesn't usually look at the loan until the whole thing is processed almost 98%, then sent to underwriting... and that is how it is suppose to work....
Anyhow... yes, business is slightly slow and loan officer's are desperate.
Jeff G. - I have an offer in hand right now that has no loan letter and the brokers signature was obviously pasted in. They do this to make our lives interesting.
Jeff B. - The buyers are asking my clients to take their $900,000+ property off the market. I think asking for a strong loan approval letter is not unreasonable. They can get a pre-approval with documents in a day or two from a local funding lender.
Randy... the thing here is in a perfect world, in regards to commitments in 2 days. Yes, I can do this if it's an A ++ deal. Meaning, that we have a pay stub and a bank statement..... and it gets approved with an oline system. Anything outside of that won't happen in 2 days unless you have a rush job.
The question here is a pre-approval letter or are we talking about a commitment letter. There is still a big difference. And again, it depends on how you define pre-approval letter.
Jeff G.... sssshhhhhh Hhhhmmmm... and there would be 2 to 3 shooting locations only.... the office would be one, the bar would be 2nd.... working on the 3rd.... maybe 4 locations? one being a golf course? lol
Bob's Mortgage and Hair Cutting Emporium...Now that's creative! I was reading some of your comments to Jeff. Just wanted to insert my .02, FWIW. We usually fill in the blank application blank (how many days to apply) with 5 days to submit ALL their documentation to their lender. If I'm concerned about a messy contract, I'll shorten that time period, so my seller has an "out" if the buyer doesn't perform.
Jeff B - I want somethiong from the funding lender saying they pulled their credit and varified their funds at a minimum. Of the last 7 or 8 brokers letters I have received not one was good. Not a good track record when they are asking my clients to take their home off the market.
Jeff G - The sister series could be weak agents who use deperate loan officers.
Jeff - LOL