Not all agents have dealt with foreclosures before. This can be true for the agent listing the property and/or the buyer's agent. I have handled both sides of foreclosure properties for the last 3 years and have seen several mistakes made by agents not familiar with foreclosures. These mistakes can and have cost the buyer money.
1. Have a Current Pre-Approval - no matter what kind of home you want to buy, the seller is going to want to see a current pre-approval with your offer. Sellers will not want to tie up their home in a contract unless they know that the buyer is qualified. There are lots of places to get a mortgage pre-approval, even if you are borderline qualified. Do yourself a favor and make sure you really qualify at that moment. You may figure that there is no harm in stretching the truth as long as they take your offer because you'll have some time to get everything cleared up. There are consequences.
This just happened on a property I was listing for a bank. The buyer's offer came with a pre-approval. Great. It was a mortgage person I was not familiar with so I called him to verify that everything was in order. He reassured me that it was. Okay, offer gets submitted to the bank and accepted. Everything is going smoothly. Contracts go out, both sides sign, and inspection is done. Wonderful? Two months pass and the mortgage person needs an extension. Okay, this does happen in today's mortgage industry. No problem; the bank extends the closing date. Another month goes by and the buyer's attorney is now asking for another extension. The bank cooperates once again and gives the buyer an extra two weeks. That goes by and the buyer's attorney wants another extension. This time the bank has had enough. No more extensions. The contract expires. The bank has now lost a lot of other possible buyers while tying up this property for four months. The buyer wants to resubmit another offer. Before doing so, I have a long talk with the mortgage person. As it turns out, he should never have written the pre-approval. These buyers had credit issues to clear up and needed to get their score up to qualify. The mortgage person thought he could fix everything before they had to close. Now he reassures me that all is in place.
First, these buyers have to now go through my mortgage person for the pre-approval; they can take their mortgage with whomever they want, but I need to make sure they really are qualified. After all, my reputation with the bank is on the line. I no longer will take a pre-approval from this mortgage person at face value again. (I learn things too.) Second, the bank no longer wants to accept another offer from these buyers without a mortgage committment. This may not be possible, because mortgage banks will only issue a committment if there is a valid contract, which we no longer have. The buyer's agent is trying to figure out a solution, but they may have lost this opportunity.
Join me next week for 2. Making the Offer.
Dorit Katz is a Lic. Real Estate agent working in NY – Rockland County and Orange County. She handles all aspect of buying and selling homes, including foreclosures and short sales. If you have a real estate question, feel free to contact her at dorit@doritsellshomes.com or 845-642-0835.
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