A past client shared with me an experience one of her business acquaintances recently had during an attempt to purchase a home. What I heard from this unfortunate buyer emphasized to me the importance of having a seasoned professional in your corner. The lender in this transaction is new to the profession. It is unknown what the experience and background of the Realtor are. However, this was a transactional catastrophe that should have never happened.
As with many former homeowners coming out of the great recession of 2008, the buyer has a foreclosure and a bankruptcy in her history. A friend suggested to her that maybe enough time had passed since her financial troubles that she could again qualify to purchase a home. Since she was unhappy with life as a renter, she decided to investigate.
The buyer consulted with a lender recommended to her. After some discussion, the lender indicated the buyer may, in fact, be able to qualify for a loan to purchase a home. The buyer questioned the lender about her past bankruptcy and he confirmed that enough time had passed and it would not prohibit her from obtaining a loan. The buyer submitted all financial records requested for pre-approval and was delighted to hear that she was pre-approved. The buyer, again, asked the lender to confirm that the bankruptcy was considered and was, again, assured that it was and would not keep her from getting the loan.
The buyer’s Realtor was happy with the good news and quickly found a home for the buyer to purchase. An offer was made, accepted, and off they went! The buyer had the home inspected, paid for an appraisal, and continued on to closing. Everyone was thrilled! Until two days before closing.
Two days before the transaction was to close, after all of the money spent by the buyer for inspections and appraisal, after the sellers moved out, the lender notified the buyer that she did not qualify for the loan after all. The reason? She had a bankruptcy in her history that was too recent.
How could this happen?? Neither the lender, nor the Realtor ever asked the most important question, which should have been asked as soon as the pre-approval was issued: was the pre-approval based on a review by underwriting? The bankruptcy was on the credit history to be found, so underwriting would have seen it and immediately known it was a disqualifying factor. This is why it is critical to hire seasoned professionals with hundreds of transactions under their belt. A surprise like this should NEVER happen two days before closing a transaction. NEVER.
I cannot imagine the grief and distress felt by both parties in this transaction. The sellers moved out and were going forward with their own transition, only to suddenly find out they had to put the home they thought was sold back on the market and start all over. The buyer spent hundreds of dollars with inspections and appraisal, gave notice to her landlord, had movers lined up and maybe purchased some new furniture or window coverings for her new home that vanished in an instant. A truly horrible experience for everyone.
Even if a buyer chooses to work with an inexperienced lender, things can work out if the Realtor in the transaction is experienced. Because the Realtor knows what to expect from a lender and will know the right questions to ask. As a buyer’s fiduciary, a seasoned Realtor will never let a client spend money on a transaction that cannot close, because a seasoned Realtor can recognize red flags and know the right questions to ask.
When hiring a Realtor, do not be afraid to ask how long they have been in the business, how many transactions they have closed, and details of any sale-fails they have had. These are smart questions to ask and any Realtor worth their fee will welcome the inquiry.