Lender not funding loan, now what?

We're selling our house and buying another. Everything has been going smooth with both transactions. Buyers of our house were "pre-approved" for their loan. Inspections were quick and easy, appraisals went smooth. Escrow closed on time with no issues. Now the Lender is holding off on the funding of our buyers loan. They’ve told our agent, the buyers agent and the loan officer that they’ll call back, and never do. Now they’re asking for additional documentation. They seem to be “stalling”. But, nobody, that we’ve been able to talk to, seems to know why. Isn’t the lender obligated to fund the loan, once loan doc’s are signed? Our real estate agent told us that escrow has closed. Is that true? Doesn’t the loan have to fund before the escrow can close? Is there anything that can be done? If the loan doesn’t fund soon it could have an impact on the purchase of our ‘new’ house.

Thanks;
john

[HomeGuru]

Originally Posted by john_dou

We're selling our house and buying another. Everything has been going smooth with both transactions. Buyers of our house were "pre-approved" for their loan. Inspections were quick and easy, appraisals went smooth. Escrow closed on time with no issues. Now the Lender is holding off on the funding of our buyers loan. They’ve told our agent, the buyers agent and the loan officer that they’ll call back, and never do. Now they’re asking for additional documentation. They seem to be “stalling”. But, nobody, that we’ve been able to talk to, seems to know why. Isn’t the lender obligated to fund the loan, once loan doc’s are signed?

**A: no.
******

Our real estate agent told us that escrow has closed. Is that true? Doesn’t the loan have to fund before the escrow can close? Is there anything that can be done? If the loan doesn’t fund soon it could have an impact on the purchase of our ‘new’ house.

Thanks;
john

**A: I suggest you call your agent and get the real story. Then post back.

HomeGuru;

Thanks for your quick answers. A little more information before I tell you what my agent had to say:
The buyers in this case are putting no money down and they’ve paid their closing costs by asking for money to be credited back. Their offer was in excess of our asking price by about .02% ($6000). I guess I should explain that I live in California where offers in excess of the asking price are not very unusual. In this case we had 3 offers submitted at the same time. The buyers have a good credit rating but had recently been married and didn’t have a lot of savings, hence the no money down offer. They had been pre-approved (by this lender) for loans and interest rates in excess of the deal they actually wrote. Which is another reason why I’m finding this so troubling. They are doing an ARM with interest only payments for the first few years, (I don’t know how many years). We just found this out when we went to sign papers last week.

Now to what my agent just told me: First she set me straight on the escrow close… it must’ve been a misunderstanding on my part. Or, then again, maybe it was a miscommunication on my wife’s part… But, escrow has not closed and will not close until funds are dispersed. She told me that as of Tue. the lender requested a report from the appraiser, justifying his appraisal. The appraiser spent most of the day Tuesday doing this report and faxed it to the lender late Tuesday. Per a telephone conversation on Wed. morning, with the loan officer, the lender stated that he’d call back with an answer within the hour. No call… after another call to the lender he promised to call back by 4 PM (Wed.)… the loan officer has still not heard from the lender as to when or "if" he plans to fund this loan. This has been going on since last Friday, when this loan was “supposed” to fund. Each day the lender would tell the loan officer that the loan should fund “tomorrow”. Yet, when tomorrow would come, he’d need something else or want more information. We were scheduled to move yesterday, 2 movers had to be cancelled and phones, newspapers, mail, etc. all had to be re-directed back to their original addresses. My agent tells me that the lender is “God” in this situation and there’s nothing we can do. It just doesn’t seem right… especially after everything’s signed and approved. Isn’t there something that can be done? BTW, the loan officer started the process for another lender on Monday… we should hear something from this new lender by next week.

Sorry, didn’t mean to write a mini novel…

john

The latest, as of this evening our realtor called to inform us that the buyers lender had their appraiser "drive by" the property and has requested either a reduction in the selling price of the property or another appraisal using their appraiser.

First off I don't believe this. Secondly, our home is one of, if not THE, nicest home on the block. Comps in our area more then justify our selling price and the appraisal.

An appraisal was submitted to the lender over a month ago. Now, after having the loan package for more then a week, they ask for a re-appraisal!? They've held up the funding of this loan for over a week now. Everyday it's a new excuse, a new reason to postpone! I'm told that what they're doing is not illegal and they are perfectly within their rights. The lender can hold up the close of an escrow for as long as they like? This has to be highly unethical! Who do I file my complaint with?

[HomeGuru]

The way I see it, you have no valid legal complaint against the lender.

HomeGuru, Thanks for that... it’s what our realtor is telling us as well. Just doesn’t seem right.

The Lender approved the (buyers) appraiser, and approved his appraisal of the property several weeks ago. The Lender approved the buyers and approved the loan documents... all done, signed and approved weeks ago.

After all of the reports (pest, roof, home and appliance) were submitted, work accomplished, documents signed, moving arranged (for both buyers and sellers), etc. Then the Lender decides to stop the process, giving a different excuse for each day of delay. (Based on rumor and speculation, the buyers locked in interest rate was ready to expire and the Lender wants to raise the interest rate.) Yet, as the sellers, we have no recourse. There’s nothing we can do but sit back and wait for the buyers to get funding. In the meantime the purchase of our ‘new’ home is in jeopardy.

If the buyers are unable to find funding, and we lose the deal we’re pursuing or have to re-sell our home and start over, do we have any recourse? Who's responsible for this fiasco? The buyers, the Realtors, the Lender?

thanks;
john

[HomeGuru]

Originally Posted by john_dou

HomeGuru, Thanks for that... it’s what our realtor is telling us as well. Just doesn’t seem right.

The Lender approved the (buyers) appraiser, and approved his appraisal of the property several weeks ago. The Lender approved the buyers and approved the loan documents... all done, signed and approved weeks ago.

After all of the reports (pest, roof, home and appliance) were submitted, work accomplished, documents signed, moving arranged (for both buyers and sellers), etc. Then the Lender decides to stop the process, giving a different excuse for each day of delay. (Based on rumor and speculation, the buyers locked in interest rate was ready to expire and the Lender wants to raise the interest rate.) Yet, as the sellers, we have no recourse. There’s nothing we can do but sit back and wait for the buyers to get funding. In the meantime the purchase of our ‘new’ home is in jeopardy.

If the buyers are unable to find funding, and we lose the deal we’re pursuing or have to re-sell our home and start over, do we have any recourse? Who's responsible for this fiasco? The buyers, the Realtors, the Lender?

thanks;
john

**A: read your contract and understand the financing contingency, closing date and default provisions.

[Bigfoot]

The person who performs a 'pre-approval' is not necessarily the same person who does the underwriting--final approving of the loan. By your own admission, the buyers are offering more than your asking price and the lender's latest appraisal indicates that possibly your house is overpriced. Appraisers have to be able to justify their decisions. As the seller you want the highest dollar amount possible, and, the buyer wants to pay the lowest price possible.

Of course, if you back out the next buyer may wind up with the same appraiser--regardless of who the lender is. And that next buyer may not have $6000 or more of their own money to assist in buying the house.

[HomeGuru]

So writer, after reading your contract, is the Buyer now in default?

What is the name of your state? What is the name of your state? California.

As I understand it, we gave the Buyers a certain amount of time to have inspections done, get financing, and to close escrow. Although, it will expire soon, it has not expired, therefore the Buyers are not in default. If this is not done in the time they have left, what are our options?

My confusion comes from the fact that we have a Lender who has agreed in writing to fund a loan to the Buyers. The Lender gave these people a piece of paper that essentially said that they were “Pre-Approved” for a loan up to a given amount of money and for an interest rate not to exceed ___. Partially based on that documentation, we agreed to sell our house to these people. We had other offers. One offer was actually for more money then these people were offering. We sold our house for considerably less money then these people had been ‘approved’ for. Now, this Lender is not honoring his “Pre-Approval” letter.

As for the appraisal, shouldn’t that stand on it’s own? If this Lender is concerned with the appraisal they should never have agreed to accept the appraiser and should’ve appointed their own. Waiting to do this after the loan documents are approved and signed is, if nothing else, highly unethical. If the Lender’s concern is that the clients will walk away from a home, leaving the Lender with the problem of re-selling that home, then he should not have handed out that “Pre-Approval” letter!

The problem I have is that this practice seems to be perfectly legal. How do I know, as the Seller, if the people buying my house can be, or are, approved for a loan if the documentation I’m given from their Lender is worthless?

thanks;
john

[HomeGuru]

John, anything new?

HomeGuru;

Nope, nothing yet. The Lender has sent out another appraiser to our house today. Based on the fact that the Lender has sent this appraiser and has his interests at stake, plus the Lender has already asked us to lower the selling price back to the original listing price, I don't expect this appraisal to match our selling price. Instead I'm assuming it'll match our original listing price. The price arbitrarily arrived at by our Realtor, based on old comps and her best guess. Gosh, wouldn’t it be a surprise if the appraiser actually arrives at the exact same figure? Even though since the house was originally listed other homes have sold for more… Although, I don’t think any of them have closed escrow yet. Oh well, we’ll see what happens.

john

[HomeGuru]

Non-closed sales are not to be used as comps by appraisers.

I had the opportunity to go home early from work yesterday. When I did, I found the Buyers Realtor still waiting for the appraiser to show. As we waited together, we were able to talk about this issue. I was not surprised to hear that the Buyers are much more upset about this whole issue then my wife and I. They’ve already filed a complaint with the California Department of Real Estate. The Buyers Realtor, and the Loan Broker have done the same. I learned that a new lender has approved the Buyers and the Buyers signed new loan documents on Monday. The new lender is scheduled to fund the loan by the end of the week. I’ve got my fingers crossed.

By the way, the appraiser never showed. Apparently this was nothing more then another ruse by the lender. The Buyers Realtor is beside herself. Why this Lender doesn’t simply refuse to fund the loan is anybody’s guess. Had he simply stated that he was not willing to fund this loan, the Buyers would’ve immediately gone out and found another lender. Instead he still claims that he plans to fund the loan, once his appraiser gets back to him. The one that didn’t show up to do the appraisal.

By playing his “games” the Lender has added at least two weeks to the escrow process, caused unneeded and unwanted additional stress and alienated himself with a large portion of potential clients. Obviously the Loan Broker will pass the word of his incompetence, along with two Realtors and a Loan Officer. For what purpose? We’re dealing with a large mortgage corporation here. They’re “Doing Business As” 11 different names and have 14 branches.

John

Let me add a little side commentary here...

I think most of us realize that the value of an item is what someone else is willing to pay for it. Real Estate included. Unfortunately, because emotions can, and do, play a part in that willingness to pay a certain price, we have appraisals. An appraisal is done for the protection of the lender. If the Buyer were to default on his loan the Lender wants assurances that he can recoup his money from the property. In this case, with a no money down offer, the Lender is only trying to protect himself. I don’t want to seem unyielding here. I understand what the lender is doing and why he’s doing it.

We listed our house at a price that would give us a “Quick Sale”. Comps in the area more then justify not just our listed price but the selling price as well. The buyers of this house are getting a great “deal”. But, we’re also getting a very good deal on the house that we’re buying. That’s why we were looking for a quick sale.

The only reason we’re in this position is because the Lender waited until the absolute last minute to put a halt to the proceedings. He could’ve and should’ve done this long before now. The property at issue has been appraised for the selling price. The Lender approved that price. He also approved the Buyers for a no money down loan. If this deal falls through the only people hurt will be us, the Sellers. We’ll most likely lose a great deal on a great house that we’re in the process of buying. The sale of that house is contingent on us closing escrow on our house. If the buyers default, they walk off to buy someplace else. I will, I’m sure, be able to find another buyer in short order. Even after doing that I most likely will still lose the deal I have on the house I’m buying.

Assuming that this deal falls through, the Lender in this case has caused me a lose. Yet he can walk away with the knowledge that he broke no laws, and did nothing that was illegal. At least based on what I’m being told. Apparently my only recourse here is to file a complaint with the California Department of Real Estate, on ethical issues, and hope that others don’t suffer the same fate as we have.

John