Atlanta Real Estate | Atlanta Housing News for Real Estate

Interesting thought.  I personally would like to see lenders restricted on the last minute conditions after we have been told all is well for weeks on end.

Gene Riemenschneider Realtor Brentwood Homes for Sale (Area Pro Realty)  We all would.  It makes sense.

I would love to see that. All your points are well-taken, and it happens all too often, even in this market. There should be some better way to confirm that the prospective buyer is in fact legitimate...

Shoshana Shay (St. Pete Realty)  I think there are 2 sides to a transaction, buyer / seller.  We need to ask ourselves..."Why the disparity in obligations?"

Jim,

This is certainly an interesting concept, especially with so many deals falling out in this market.

Rich

Pre-approval from a mortgage broker you, as a Realtor, work with regularly (assuming you represent the buyer here) goes a long way to ensuring these kinds of issues don't arise. In my neck of the woods, the bigger problem is appraisers who are very conservative so they don't risk overvaluing properties for banks. Even though you can easily identify other sold properties that compare well and sold for a similar amount, we still have financing that gets pulled long after conditions have been waived because, while the buyer was approved, the bank decided it didn't want to finance the house. Suddenly you have a situation where buyers and Realtors are all susceptible to law-suits where the bank is not - and yet it's the bank that is the one and only source of the sale's collapse. Not a happy scenario for anyone involved! (And hard to avoid if the price negotiated appeard to all to be fair...!)

Richard Iarossi, Crofton MD Real Estate, Annapolis MD Real Estate (Long and Foster® Real Estate, Inc.)  I am seeing the same thing here.  You mean to tell us all that in all our markets property is being tied up without even a chance of selling it?  We need to open a discussion on this.

Stephen Hodge (Re/Max Lakeshore Realty Inc., Brokerage)  Most agents that write a contract do not know what they are doing.  They are used to good times, happy days and win-win solutions.  Those days are dead and gone for quite a while to come. 

There are ways of gauging the values of proerty if a person s is willing to do a lot of in depth research,  Most agents do not.  They wing it.  The buyers on the other hand can pull a weak agent around and make demands on them. 

Hi Jim,  I have seen some of the craziest things lately with buyers--don't want to share their finances with their agents--only to cancel multiple contracts for various reasons (all in the loopholes of our contracts) and wind up not being financially able to purchase ANYTHING in the end!  Agents' lack of the contract are just as guilty as the buyers are too--perhaps a buyers agent/buyer disclosure for our poor sellers going through all of these crazy transactions?!

These days, I like to see the pre-approval, DU, proof of funds - with the offer, and I offer the same with my offers or within a day or two.

Hi Jim -- I agree that there has to be parity there, which there is not.  Knowing a good buyer's agent when one is a listing agent can go a long ways to vetting buyers.

Some listing agents here ask the buyer to release earnest money to the seller at the end of the due diligence period. That at least provides some level of protection for the seller. I would love a buyer disclosure if I was the listing agent, but can also see where buyer's agents might claim this infringes on client confidentiality.

Jim, in a buyer's market buyers can get away with not being as qualified. But it is a double standard with the seller most of the time having to go through hoops.

I have been finding lately that every time I write an offer for a buyer, the other agent is being very good about actually calling the lender and chatting with them to verify they actually Qualify. Which is just fine with me, since it makes my buyers stand out as the best :)

Jim

I totally believe it's our job as listing agents to get the  'real' picture of the buyer for the seller.  As a buyers agent......what is the point of working with folks that aren't 'ready, willing and ABLE'.  For years I've called lenders and asked more questions about the buyers ability......if I didn't know the buyers agent.  If I know the buyers agent is a top notch agent than I trust them.  That has seemed to work well over the years.

Great Post.......good to revisit this from time to time.

Jim, if I don't know the buyer's agent, I am more inquisitive. A trusted agent brings qualified buyers because they aren't wasting their time either. But this a very compelling idea I can see happeining in the future.

Sharon

I truly enjoyed this: I go a call a few days ago from a buyer  I did not know;  was not referred to me but called of the sign I have on the back of my truck. I was happy.  He told me he is thinking about buying a foreclosure home in the 40K range. I told him I had none at the moment of my own listings but I can surely find him some then proceed to ask how he planned to pay for the home. Would it be cash or financing as I know most in that price range are either way out of town or need work so they sell cash.

Fine he said I have a friend that has a business that can lend me the money. I said so is the friend buying the house? he said  NO.  OK so I told him I would need his friend to be ready with a bank statement and a note written that he will loan this guy the money to buy a home. I am thinking Yeah right I am about to run all over town for listings that sell in a few days cash with a buyer that is thinking about  using someone else's' money to buy and I don't even know that someone. I sent him some listings by email. Never heard from him again. :) I felt bad for a day or so for not trying to fallow up better but then again !!! SHOW ME THE MONEY !

Hi Jim, Good post. Thanks for sharing.

Best - Sash

Jim...

We are spending more time "culling" buyers that are either not is a position to buy or who are not ready to buy. we don't need real buyers, not pretend ones!

I'm a mortgage originator.  I totally understand your point.  I've seen deals fall through at the end due to various issues...mainly on the buyer/borrower not being honest through the process only for the underwriter to find this out at the end.  The main reason for deals not happening recently (in my area) is that the appraisals are not acceptable: due to values mostly.  It is an uncomfortable position to be in for all parties. 

We all want to make that sale, especially now in this market. We make a seller sign a contract when listing the property. Why are we not making the buyer sign a contract that includes the necessary information that they have the financial capability to buy and will use you (in lieu of using multiple agents and playig those agents against each other) only to purchase the property they are looking for. If they are not willing to sign and give complete information are they really looking to buy.

What an interesting concept! Wouldn't that be great to have a legally binding Buyer Disclosure that functions like the Property Disclosure. In addition to having it include various financial disclosure (like name of lender being used, type of loan, etc.) I'd like it to include whether they've recently been in any other contracts that fell through, and to know why the deal failed - financing, inspection or buyer remorse.

I'd also like to see a change of attitude where the earnest money is given to the seller. Taking a home off the market for a couple-three weeks in this market is just too risky. It's time for the buyer to truly put up money showing good faith to buy. Krimminee, even some retail or Internet stores charge a "restocking fee".

I think Lenn uses something like this.

I have always worked hand and glove with my lenders to get credit pulled and a pre-approval or approval. Not a pre-qualification.

I would love to have a State Mandated Buyers Disclosure.

I like Elaine's suggestion - just like option money, the earnest money should go to the seller and be refundable only in specified situations.

Jim, We do have a buyers disclosure statemenmt that we can use in my area. I have used it on occassion. I have another one I use with short sales that I use every time.

Here's the Buyer's Disclosure Statement.

It's a good form. Very comprehensive.

Debe Maxwell, Realtor® Let's Talk CHARLOTTE! (Helen Adams Realty)  Debe, I go back and blame the inexperienced agent for not taking charge.  It creates a major mess for all.

Christine Donovan Costa Mesa Real Estate (Broker/Attorney) 800-610-7253 (Donovan Blatt Team - Donovan Group Realty)  Same here, but many times the buyers balk...and their agent stonewalls.

Chris Olsen Broker/Owner - Olsen Ziegler Realty (Olsen Ziegler Realty)  I agree, well said.

John Novak - Las Vegas and Henderson NV Real Estate (Keller Williams Realty The Marketplace)  That protection of the buyer has caused many a seller a major loss in both finances, and opportunity.

I have always tried to work closely with the buyers lender, I do not get paid if a deal doesn't close, neither does the seller or the listing agent, I can not see wasting a huge amount of time on someone who is dishonest and not forthcoming with the true facts.  Its' just the best thing to do to make sure you are working with a qualified, motivated buyer.  

Gary Woltal - REALTOR® Dallas Ft. Worth (Keller Williams Realty)  Well when I see so many Pendings fall out of contract and homes coming back on the market by the hundreds we cannot blame the appraisers for all of this.  What about the buyer?  Too many agents are still putting persons in their car that do not have any ability to buy.  The pain in compounded when they decide to write a contract and tie up the lives of desperate sellers.

Sarah Nopp, REALTOR(R), CRS. RE/MAX Four Seasons, Olympia WA (RE/MAX Four Seasons)  Sarah you are so right.  If we do our jobs correctly, we can move forward with confidence. Other agents are not doing this.

Sounds like you have had personal, and frustrating experience with this. The main word I picked up on in your post is desperate. I haven't seen that here on the buyers side as much as the sellers side, but history tells me it is coming or already here and I haven't seen it yet.

Anna 'Banana' Kruchten, Anna Banana Realty, Phoenix AZ  Thanks.  We need to revisit a lot of issues that sometimes we just take for granted.

Frank & Sharon Alters, ePRO, GRI Fleming Island FL Real Estate (Watson Realty )  What is the old saying?  "What's good for the goose is good for the gander."  Fair is fair.

Elena Martinovici Broker- Phoenix , Arizona (Professional Marketing Realty)  I loved your answer.  Why waste your time?  You are the professional and when you ask questions professionally you see how quickly the would be buyer evaporates.  You called it right!

Sasha Miletic - Windsor Real Estate (RE/MAX Preferred Realty Ltd.)  Thanks!

Richard Weisser Coweta Fayette Real Estate ERA United Realty  Real buyers make a big differnece in the results.

Chad Huffstetler (Capital Mortgage Corporation)  Chad thank you for your insights.  I can understand appraisals not coming in, but unqualified buyers in the mix....more often than not can be prevented.

Jim, I ALWAYS prequalify my buyers and if they do not want to give me ALL of the pertinent information and confirmations then I will not waste time. For my listings, we insist on a  pre-APPROVAL letter and I follow up with the lender by phone AND in writing to confirm any and all details. It's been raer but I have had only a couple fall off because of deceptive buyer issues over the last nineteen years! Great points!

Lawrence Sanek  The problem is we have way too many agents and out of desperation they are waiving the rules of pre-qualifyig the prospect, obtaining a sign buyer agency agreement.  Their brokers are just as out of touch as the agents that have never sold one home, but drive around making everyone miserable as they play "Realtor!"

Elaine Reese, REALTOR® in central Ohio (Real Living HER, Worthington Ohio)  My thoughts exactly.  I like the restocking fee idea!

Missy Caulk-Ann Arbor- Realtor(R)- Ann Arbor Real Estate (Keller Williams-Ann Arbor)  I agree Missy.  It makes sense.  If someone is not forthcoming...something is wrong.

Doug Curtis (Coldwell Banker D'Ann Harper, Realtors)  I agree to a certain extent where ther eare represented buyers, but I do not want to open up the door to more fraud.  If they have a due dilegence contract and cannot perform after their financing term has passed...that is just too bad.

Bryant Tutas-Tutas Towne Realty, Inc  This is perfect Byant!  Thank you for sharing!

****"Here's the Buyer's Disclosure Statement."****

Gail Tassey**South Austin Real Estate Austin Texas **512-217-9482 (Sky Realty Austin)  Gail I could not agree more.

Joe Pryor.com Realtor Oklahoma Investment Properties (RE/MAX Associates)  I've not had it personally happen to me because I ask lots of questions.  It is the desperation of the seller and their inexperienced agent that they are moving forward into things that will just not work out on any level.  When in doubt ask questions followed by even more questions.

I have one of those buyers now that is under contact and its not looking like they can actually qualify....series of lies.

Russell Lewis, Broker,CLHMS,GRI (AvenueOne Properties, Inc.)  Russel I do the same,a nd by the grace of God we have had very few deals if any fall out because of this. These are not ordinary times.  Now is a time for even more caution.

Chuck Carstensen (Re/max Associates Plus/The Discovery Coach)  A series of lies...compounded by more lies and half truths.

It has always puzzled me as to why the contract is loaded with escape clauses only for the buyer.  The seller pretty much has to die to get out of closing the deal!  Something that definitely needs a second look!

Interesting post and thank you for sharing it . . I always look forward reading and leaning from  your posts, that's why I'm a subscriber to your blog.

Jim, the guy in the mirror, the agent or broker needs to take responsibility for the mess too.

Jim, This is a really interesting perspective, one that I agree with. 

The contract is written to protect the buyer, clearly.  Knowing that, it is certainly reasonable for the seller to have expectations of the buyer.

Jim, Thanks for the post as a newer Agent I'm always looking for things to be on the lookout for. I always enjoy your informative posts

I won't take a Buyer out unless I know they are pre-qualified from a reputable Lender. In addition to a pre-qualification letter from a Lender, we turn in an "Info on Buyer" for which tells the Seller where they work, how long they've been there, current address, whether or not they've filed bankruptcy, etc. I have to sign that form, and I'm not putting my name on something I haven't verified. Why would I want to waste my time representing a Buyer who has a possibility of not being able to follow through with the purchase? I think it's the Realtors' obligation to qualify their Buyer. 

Nice post, more than ever I have to tell buyers a due diligence period is NOT a clause to keep house shopping or make up their mind. Unfortunately I've been seeing this used as such quite often...

I love BB's form...sending it to my board now!

In Oregon, we have a new loan status form that has not caught on yet. Its use is voluntary. It has the bank singing of on the degree they looked at the buyer. The 4 degrees range from the buyer blew smoke over the phone for 5 minutes, all they way to we looked at credit,pay stubs for the last jillion years, talked to the neighbors and put him under the lights and sweated him out! He will perform!

Always preapprove with a lender, get them to take a full application, however the lenders/underwriters need to take more responsibility here...The one problem I have seen occuring in the past 180 days are the underwriters changing the many requirements in all aspects like a shell game. The rules are always changing??? The banks are not held liable in these shell game scenarios??? Hence you will see Escrows falling out or extending into overtime at the cost of the Buyer and the Seller, the Buyer not being able to give proper notice as a tenant and may have to move in with relatives and live out of a suitcase and where does his animals go? The seller, more than likely will have to plan, carrying the mortgage another month, on moving out and cleaning as well as his next tenancy or home he is purchasing. etc etc.

When representing, "First time home buyers" 100% of the time I have them get  pre-approvals. I have had only one first timer buyer fall out of Escrow because of financing (only because the lenders removed that loan program while we were in the financing contengency) the Buyer was crushed, luckily the DEVELOPER allowed the earnest money back. A lot of Developer contracts have provisions that claim the earnest money regardless of the loan, its a stressfull situation for the buyer, but it really forces them to be honest with their ability and preapprove themselves to an actual loan with many different Lending scenarios.

Learning from many different experiances, I have seen some Sellers agents require that the Buyer get pre approved through another lender that they have approved for straight forward dilligent lending (now prevalent in REO transactions like Bank of America and Wells Fargo owned properties). With the idea of that if the Buyer is preapproved through two lenders, there is a higher % that he will complete the deal. I am now adopting that idea in my practice especially if I do not know the lender very well.

Sellers, asking for non refundable money and a perdiem will just scare off many first time buyers in most situations. I feel that if the Lenders and underwriters do their part on really taking an application and processing it, we will have better % results in Escrows following through to close.

As always, great post Jim. We think alike.

Yet when you have the seller, and you quiz the buyer's agent, how often does the buyer's agent get defensive? Many buyer's agents don't do their due diligence on their own party.

We had a BA bring us an offer this week and the "prequal" was on a typewritten paper that looked like a 10-year old made up the letterhead. Mortgage company was called "mymortgage.com" or something similar.

I asked the BA if she spoke to the lender and she acted really offended. The piece of paper should be good enough, right?

Money down? NOPE. Contract was $500 if accepted, and then check within 5 days.

Inspections? All of them, within 25 days.

Think how long this buyer (if real) could tie up the property!

When I tried to ask questions, the BA got really defensive and arrogant and refused to answer. This deal just smelled fishy all over, but the other agent didn't get it. She was so happy to have a "buyer" and felt we should jump all over it.

Jim,

I'm a new Agent as well! Thanks for sharing!

Wow, I am also a new agent and i havent ran into this yet, i am dreading the day. Thanks for the Post

Jim~ I think the buyer's disclosure is a great idea.  I am going to send BB disclosure to our board too.  We will see how that goes!

We go for the pre-approval right away -- before they go to look.

Hi Jim. I thought you would like that. Our Florida Association of REALTORS(R) has all of our forms available online at no cost. They have 100s of disclosures, contracts etc.. The problem is there are so many forms that most agents don't take the time to go through them to see what "goodies" can be found.

The first few times I sent the form over with my seller's counter offer the BAs called my wondering if I was crazy or what!! They didn't like it at all. Oh well. That's not my problem.

It's a good from to use when you first meet with buyers too.

My first broker taught me that once the buyers put some financial information like down payment, type of financing, etc. to the contract, seller has right to ask for verification of this info. Buyer's disclosure at the point of making an offer is a great idea. Like the form provided by BB. Thank you for the post. Comments are great, too!

As an agent representing the seller, I have seen a buyer that had a social security number that "could not be verified."  My seller got the earnest money.

We have a clause in our real estate contracts that state that if the buyer misrepresents their financial information and can't close as a result, the seller gets the earnest money.  I always remind mortgage officers of this clause that seem shaky to me.  I tend to get more accurate preapproval letters from them after I remind them of that clause.

I like the Florida form!

Lenders are still not up to speed.  They still tend to tell the cleints things that they cannot do.  Many lead the buyer on. I place the blame on the lenders not doing their work properly. Sometimes its the buy but not many times in this area. 

Absolutely go for the pre-qual to begin with and then build off that immediately going forward. If you don't you can be wasting their time and yours perhaps.

Patricia aulson/portsmouth nh real estate

I agree with Gene that lenders should be restricted on last minute changes. I have a deal now that we were notified 4 days before closing that they couldn't do the loan.  I now have them with a better officer who can do the loan. 

I always chat with the buyer's lender before I present the offer to my seller.  Especially when the loan officer and buyer have the same last name.... or the loan officer and agent!

My buyers, if not already pre-approved when they contact me, receive a list of preferred lenders before I go and show them properties. If they get the green light from any of the lenders on the list, then I know we are good to go and I can vouch for their credit worthiness when submitting an offer.

"I was really hoping to do a lease purchase or rental."

Boy does that quote bring back bad memories!  I haven't had a contract fail to close yet, but I've had some close calls, almost writing a contract when I shouldn't. 

I've have always had a policy that I will show a property to anyone once.  If we go beyond that, then I have to have some sign of financial capacity, viz., a pre qual letter.  A few years ago, I was being handed leads by my broker, all of which had pre qual letters.  One after another.  Not one came close to writing a contract because in every case, the so called potential client was using me to locate potential rental property!  In one case, I spent two weeks checking out homes with this lady.  We found the home of her dreams.  I'm about ready to write.  Next question from her?  "Call the agent and see if they'll do a lease or lease option to buy."

Moral of the story?  The pre qual is essential, but don't trust anybody with a pre qual until you have gotten on the phone with the lender and verified a few things.  What saved me in the cases above and what continues to save me from the sorts of troubles mentioned in your excellent post is that I refuse to write until I am absolutely sure there is capacity to close.  Period, no exceptions.  A buyer who won't tolerate examination is worthless. 

Hi Jim,

We come across this a lot in our area.  I will not write an offer without a pre-approval.  Once I get it, I phone the lender to see if the buyer has even made loan app, and what kind of financing they would qualify for, and what they might need in seller concessions.  I also advise the buyer's that home inspections are not for renegotiating the purchase price....the seller does not HAVE to pay to have things fixed..and are they still willing to buy it at that price if that is the case?

On our listings, we can put the property as CONTINGENT instead of PENDING "subject to final loan approval", but many agents won't show houses in CONTINGENT status. 

I think the way earnest money is handled is a joke.  Either do away with it, or make there be a choice of reasons in the contract as to who it gets returned to if the deal crashes....(unknown defects, buyer "changes their mind", or whatever).  why should a seller have to sue someone to get to keep the earnest if the buyer wasn't servious about buying the house to begin with)?  or why can't the buyer have it back if there are serious defects that can't be taken care of?

Jim,

Good post. I like Elaine's comments and want to thank Bryant for the Florida Form. I'll adapt it to Ontario.

Our market has returned essentially to its highs. We are now with 3/4 of 1% of the alltime high in the Greater Toronto Area. So, most deals go through. We only have a limited number of defaults.

Brian Madigan

EXIT Hill Country Realty  You are right.  If the seller balked at the last moment they would sue them for specific performance, and commissions...but buyers walk with their earnest money most of the time.  What's up with that?

Fernando Herboso Real Estate Maryland, DC and Virginia (Key Realty Group-Foreclosures in Maryland,Rockville MD)  Fernando!  Thanks!  I am amazed at how much a marketer you are.  You never seem to run out of great ideas.

Mark MacKenzie Real Estate Planning  Life should be a two way street.  I once had an offer on our listing with an appraisal clause...if the home does not appraise etc... So my counter was..."If the home appraises at a higher value than the agreed upon price the buyer would pay that price!"  The agent went postal.  The buyer wants to steal and have no consequences.  It only happens if we allow it to.

Andrew Mooers  Exactly!

Fort Wayne Homes for sale by Brian Kuhns (Coldwell Banker Roth Wehrly Graber)  Thanks Brian.

Lori Cain (Chinowth & Cohen Realtors)   I agree.  The agents need to be more pro-active.

Get Us A Home Realty - Frank & Jodi Real Estate Brokers  The new contract in Atlanta was the wrong thing at the wrong time.  That is what most buyers assume it is.

Lisa Heindel, New Orleans West Bank Real Estate (Keller Williams Realty Westbank) Me too! I want to send that to my broker and the forms committee.

Rob D. Shepherd (Coldwell Banker Coast)  The problem is that under federal law the loan officers cannot divulge that the buyer is a deadbeat, that he walked out on his spouse and let her go into bankruptcy.  We can only see the part that yes he/she qualifies ( even if only marinally!)

Frank Cash  What my loan officers and a few closing attorneys I am speaking with in Atlanta..they are telling me that everyone is doing FHA.  There is no money, no 20% down.  So loan officers are dealing with many first time home buyers that are complaining they do not even have the 3.5% down payment.  If sellers pump the price up of the home to cover the costs...they do not appraise.  Sellers are going to have to realize they are going to take a loss in this market.

Erica Ramus, Broker / Realty Executives / 570-622-6006  I agree..I have advised several sellers to turn down fishy offers.  They were phony.

Keith Burke (ERA Professional Real Estate)  Great I am glad you enjoyed it.

Aaron Poling (Long & Foster)  You'll do fine.

Owensboro KY Real Estate Specialist Vickie McCartney, Broker, ABR (Home Realty GMAC Real Estate Owensboro Kentucky)  I think it is a great idea, and I love it that Bryant shared the form!

Bob & Carolin Benjamin - E Phoenix Arizona Real Estate (Benjamin Realty LLC)  Smart!  That is the way to do it.

Bryant Tutas-Tutas Towne Realty, Inc  I agree.  I also want to thank you again for taking the time to share this.  This is really something that we all should be thinking about.

Svetlana Stolyarova,Local-n-Global Realty, Broker (Local-n-Global Realty)  I'm glad you enjoyed.

Melina Tomson, M.S. Salem Oregon Real Estate Specialist (Tomson Burnham, llc)  Our contracts in Atlanta are now basically an options / due diligence contract.  Depending on the timeframe they can tie up a seller for quite a while and then just walk before the expiration of the due diligence period by giving notice - that does not have to include a reason.

Eric Bouler (Prudential Gardner)  Sometimes we never know.  Buyers can stil go to a website and get a BS pre-approval or fake appoval letter.  There has to be a better way to verify the facts.

Patricia Aulson Portsmouth NH Real Estate-Hampton NH Rea (PRUDENTIAL VERANI REALTY - Portsmouth NH Real Estate )  I totally agree.

Jamie Parker Snellville Realtor, Gwinnett Realtor (Solid Source Realty )  There are still a lot of shady characters out there.

Joetta Fort - Realtor Denver Colorado Real Estate (The DiGiorgio Group)  There still is opportunity for deception. 

Susanne Novak (Solutions For Real Estate)  Same here.  I normally have many good lenders they can speak with. 

Robert Schneider (Blue Ribbon, Realtors)  I've not had that happen to me, but I do receive calls almost every day...wiht persons trying to do exactly this.  It comes out if you ask them enough questions.

Mary Too many agents are in a rust to put the "Pending Sale" rider out!  Contingent is better.

Brian Madigan LL.B. (Royal LePage Innovators Realty)  Brian you are blessed in Canada!

There have been times when acting as the buyer's agent, I'd wished I hadn't made it so easy for them to get out of the contract.

Years ago we had a couple of con artists hit our town - they made offers on every cheap fixer-upper in town, got them accepted and sent to clsoing, and then never closed on them!

Except for one. They wrote a personal check for the down payment (seller contract) and it bounced.

We never did figure out what the scam was, but one agent I knew tried. She called one of them and asked if they could meet for coffee. She wanted to know the scam, because she wanted in on it.

And yes, she told me about it. She was disappointed because they wouldn't share their secret.

A pre-approval letter is not worth the paper it is written on.  The ONLY way to be sure is to have your own mortgage lender pre-qualify the protential buyer.  Even a DU approval is grabage, because it is based on what was input into the DU program as income and asset information.  Garbage in, garbage out...  Then on top of that are the ever changing guidlines from FNMA, FHLMC  & FHA.  What is acceptable this week may not be allowed next, so when was that pre-approval issued, and what where the guidelines then.  If the buyer will not submit to being pre-qualified by your lender, with no obligation to use them, then you need to run away.

Jim. My experience has been that REAL Buyers seldom have anything to hide. If they are reluctant to tell you anything...9 out of 10 times...something is wrong. Move on and do not waste your time.

Great post!  I just had an agent email me over the weekend about a buyer who had multiple judgments against them (how, pray tell, did they ever get their preapproval letter is beyond me) who can't understand why the seller wants to keep the earnest money for wasting the seller's time. 

Another problem for these sellers is that while they were dinking around with these buyers their property has dropped in value more than the earnest money they MIGHT get to keep.

Another buyer related issue that slays me lately is buyers wanting to switch from conventional to FHA after the contract is accepted, because it will save them all kinds of points and fees.  That's great for them, but not always great for the sellers.

I think it comes down to what you and so many others have said.  Either know these things about the buyers before committing to a contract or build in a 7 day contingency for protection.  That way your sellers don't waste 30-45 days wondering about financing.

Great post!  I just had an agent email me over the weekend about a buyer who had multiple judgments against them (how, pray tell, did they ever get their preapproval letter is beyond me) who can't understand why the seller wants to keep the earnest money for wasting the seller's time. 

Another problem for these sellers is that while they were dinking around with these buyers their property has dropped in value more than the earnest money they MIGHT get to keep.

Another buyer related issue that slays me lately is buyers wanting to switch from conventional to FHA after the contract is accepted, because it will save them all kinds of points and fees.  That's great for them, but not always great for the sellers.

I think it comes down to what you and so many others have said.  Either know these things about the buyers before committing to a contract or build in a 7 day contingency for protection.  That way your sellers don't waste 30-45 days wondering about financing.

Great post!  I just had an agent email me over the weekend about a buyer who had multiple judgments against them (how, pray tell, did they ever get their preapproval letter is beyond me) who can't understand why the seller wants to keep the earnest money for wasting the seller's time. 

Another problem for these sellers is that while they were dinking around with these buyers their property has dropped in value more than the earnest money they MIGHT get to keep.

Another buyer related issue that slays me lately is buyers wanting to switch from conventional to FHA after the contract is accepted, because it will save them all kinds of points and fees.  That's great for them, but not always great for the sellers.

I think it comes down to what you and so many others have said.  Either know these things about the buyers before committing to a contract or build in a 7 day contingency for protection.  That way your sellers don't waste 30-45 days wondering about financing.

Great post!  I just had an agent email me over the weekend about a buyer who had multiple judgments against them (how, pray tell, did they ever get their preapproval letter is beyond me) who can't understand why the seller wants to keep the earnest money for wasting the seller's time. 

Another problem for these sellers is that while they were dinking around with these buyers their property has dropped in value more than the earnest money they MIGHT get to keep.

Another buyer related issue that slays me lately is buyers wanting to switch from conventional to FHA after the contract is accepted, because it will save them all kinds of points and fees.  That's great for them, but not always great for the sellers.

I think it comes down to what you and so many others have said.  Either know these things about the buyers before committing to a contract or build in a 7 day contingency for protection.  That way your sellers don't waste 30-45 days wondering about financing.

Hi Jim - Great post and great discussion.  When as listing agent, I objected to a proposed very low earnest money amount, the buyer actually said "What is the point of more earnest money? We can always get out of the contract if we want to".  And in most cases, that is true.

I call this "Bad Buyer Behavior" which is rampant in this Buyer's market.  Part of the problem is agents who permit this.  I won't work with buyers like that but as long as some agents will, the problem persists. 

Love the buyer disclosure form.  If this became a national standard, it would go a long way.  It can if agents insist on it.

Bryant Tutas-Tutas Towne Realty, Inc  

Thanks for this form - it is much better than the one that I have available for our use.

I am working on changing our PA so there is more propection for both parties and more likely to have a completed transaction.

I have been an exclusive buyer agent and a member of NAEBA for over 15 years.  In the time, I have never had a contract fall through because the buyers were less than forthright about their finances.  I think this is due partly to luck and partly because I deal with excellent loan originators who don't try to push through marginal buyers. But I think the real reason is because I do just one thing and only one thing - work with buyers.  I have the time and energy to devote to getting these buyers to the closing table, which includes making sure they are qualified.

Damon Botticelli - Las Vegas Real Estate (Realtor) (Realty One Group)  It is way to easy for the buyer.  All the onus is on the seller.

Marte Cliff (Marte Cliff Copywriting)  One is that they wear you down.  I have one person years ago in the early 90's..I figured out he had written 4 offers the same day.  So...two years later I found out the scam.  They would get access to the home (od a desperate seller) and do a pre-occupancy, or a lease purchase.  Legally it took up 2 years to get them out of the home.  They lived like kings free!

Jerry Current (HBC Realtors)  I do not know what the answer is, but years ago even when we sat down and pre-qualified the leads before giving them the names of several loan companies...they would just lie to us and waste our time.  They need to have a credit report pulled first.  Hey, we do it for renters, why not buyers?

Becky Brand (Shorewest Realtors)  Well said!  The home can drop more in value in 30-45 days than the earnest money the buyer will walk with anyway!

Margaret Mitchell, York Maine Real Estate (Coldwell Banker Yorke Realty)  Maybe the key to the entire thing is more earnest money.  It is supposed to represent sincerity.

Kathleen Lordbock KW - Brainerd Lakes Realtor/Staging Specialist ( Keller Williams & Re$ale Design)  Thanks for sharing.  This does not happen when the agents on both sides treat real estate as a profession.

Marilyn Johnson - You are the exception to the rule.  God bless you!  I wish we had more agents like yourself.  It isn't abouot slinging enough eals at the wall until something works...it is about working qualified buyers that have the ability to close. Amen!

Great discussion. I would propose something more meaningful and direct: Earnest money goes hard after inspection or 10 days, which ever occurs first. 

If the financing falls, that's the buyer's issue and should be locked down before they get to the negotiation table. If that is a problem, go back and sue the lender and leave us to work with serious and capable (what economics call "effective") buyers.

Michael

I like the idea and several other agents do as well of the buyers disclosure.  Right now I constantly try to do as much due diligence as possible no matter which side of the transaction that I am on. 

P.S.  I really like the way you have managed the comments on this post.

Michael Clarkson (Mile High Home Hunter Realty)  Well in a buyers market it would be hard to get hte extra cash later.  In my market the listing competition is too fierce.  I would opt to have a larger earnest money at offer inception.

Mike Henderson 303-949-5848 Genius Ventures (People-Property-Money ~ Everything the Investor Needs)  Thanks Mike!  I try to answer everyone!

Totally agree, how do we work on it?   How do we get it to change? 

I like the phrase, earnest money goes hard (loose it) after 10 days for nonsense.  Then who decides if it was a fictitious statement?  Don't get me wrong, I'm all for kicking some buyers butt now and then because it seems to be a one way street lately!

Jim -- this is an interesting discussion.  However, I think a lot of this problem has to do with the lack of training in buyer agency.  Like Marilyn Johnson, I also focus on buyer representation only!  I have had only one occasion when a deal fell apart due to financing... but this buyer as a pro who defrauded the lender as well.  I smelled a rat, and actually got to the bottom of this before closing.. and was able to warn the seller and seller's agent.  We need to better educate clients about the importance of buyer representation and we need to better educate agent who represent buyers to make sure they work with excellent loan originators and ask the difficult questions up front! 

Lyn Sims ~ Chicago Northwest Suburbs (Schaumburg Illinois ~ RE/MAX Suburban)  In Atlanta the new contract we are using is a due diligence contract.  There is an agreed upon time-frame to conduct that options contract.  During that time the buyer must do their mortgage and financing.  The contract itself is an all cash contract by default.  If the buyer is not able to perform after they go outside the due diligence period...the buyer forfeits their earnest money...AMEN!  No ifs or buts!  Of course if the brokers decide to return the money that is another issue.  My interpretation would say "No!"

Joan Whitebook, ABR,e-Pro,CEBA Southern New Hampshire (Buyer's Option Realty Services)  Joan you are so right.  I take real estate and agency very seriously.  I do not think most agents do.  The brokers are asleep at the wheel driving their golf carts instead of training their agents.  The law will ultimately blame the brokers also if there is areal problem.  After all the real estate agents are only agents under the brokers failed tutelage.

Jim

In my particular area here in Northeastern Pa, most all of the agents on our board require a preapproval letter from a local bank, credit union or savings and loan.

Several years ago our area had many buyers coming from out of state with preapprovals from their "banks" or mortgage brokers".   The majority of these deals fell through.  That is why we require the local aspect.

In my business, I ask up front if they are working with a local lender and who it is.   I know all the local mortgage professionals so I feel confident as to their ability to perform.

In the case of someone that wants to pay cash, I require a letter from a local bank officer that they have sufficient funds on deposit to complete the transaction. 

I also have had the sellers agent call the lender to make sure they are credit worthy and can complete the transaction.  Absolutley no problem as far as I am concerned.

When I present an offer, my buyer is all set and ready to go.  In our particular area, I can't have it any other way.  I prepare my buyers for what escrow may be required by the seller.  They clearly understand that they will lose this if they do not complete the transaction.  This goes for my investors as well.

Many agents in this area like to play fast and loose.  My sister (she is my partner)  and I work by the rules.

I would agree that there needs to be some sort of uniform disclosure for buyers so that there are no surprises down the road.

Jayne Vaughan, ABR,SRS (Century 21 Sherlock Homes, Inc)  If we work by the rules...everyone is a winner.  Driving around with a corpse in the car does not count as a buyer that can perform.  It is sad that more agent do not get it.

Jim,

This shaky real estate market isn't any different from the ones in the past. Buyers still should be properly pre-approved before they are allowed to sign a purchase contract.

Jim, Great Post!  Really good "Food for thought."  How's this for being pro-active?  Under "Agent's Comments" on MLS sheet, Listing Agent enters the following:  "Print attached Addendum for Buyer to sign and include with Offer.  Offers not including this Addendum will not be considered."
Addendum Document will say:  "Both Buyer & Seller agree that Seller will continue to show the property and accept Back-up Offers until ALL contingencies have been removed and 'Clear To Close' has been declared by Lender."  Then if the deal falls through at the last week/hour/minute due to financing, or anything else, you might have back-up offers to immediately consider.  Or would this just scare prospective buyers off and prevent them from offering on a property?  Thoughts?

P.S. - That would, of course, be in addition to the Buyer's Agent doing Pre-Qual, having Pre-Approval by a reputable Lender, and due diligence being done all around (ideally).

Esko Kiuru - Las Vegas NV Mortgage Consultant (Mortgage Consultant)  Esko, I totally agree, however they are not.  Their agents need to be more involved in this process before placing just anyone in their car.

Paula Burt (Prudential Bob Yost HomeSale Services) First of all..I personally like it.  However, in this market I think it should come initially from the buyers side their agent.  It probably would scare the buyer off as heavy handed.  If it was a standard form that our boards required us to use....across the board to all it would be less intrussive.

I must say that I totally agree with you about this.  I had a very bad situation last year with a contract that almost fell totally apart because the lender was basically a liar (unfortunately) and their agent just did not seem to care.  They strung me and my client out until the week of settlement just to have their lender say that they are not qualified now.  I sent them to another lender that I trusted and he got the deal through, but the worst part was that their qualified limit was $12,000 below our contract price.  My seller had to take that hit or move on and try to sell again.  We did "hit" the other agent in the pocket for some of the commission, but honestly, I felt that she should not have been paid at all.  She never checked in with her client's lender and she avoided my phone calls a lot of the time.  It was just horrible dealing with her.  I really wanted my client to move on, but considering the market conditions and her need to sell, she moved forward with the deal.  I felt horrible about it, but in the end, I did feel that I was able to save the deal and my client was happy overall.  I feel that as agents, not only do we have a responsibility to our clients, but they need to understand that they have an obligation to us as well.  Honesty is something that I demand and if I feel that I am not getting it from my buying clients, well...let's say, I just say goodbye to them.  I have better things to so with my time that get someone into a contract and have it fall apart and basically harm the seller by dragging them through the mud.  We do have an obligation to everyone that we are involved in a contract with to be honest and trustworthy just to begin with.  I always talk about this with my buying clients when we are signing a contract.  I tell them that they have an obligation to me, the sellers and their agent to uphold this contract on their end or they will lose their deposit.  Fair is FAIR!  Great post!

Tina Beasley (Real Estate Professionals, Inc.)   I think that these agents did not even qualify the person.  They just want a commission.  Their belief is throw enough junk up against a the wall and something has to stick.

Mirela Monte, Your Myrtle Beach Real Estate Connection  Thank you Mirela!