Underwriter won't allow me to be reimbursed

Rental Property Investor · Arlington, VA · Member since 2014 · 95 posts · 29 votes

House has termites and electrical problems. Seller doesn't have money to rectify both problems. Seller agrees to repay me. An addendum is signed by both parties. Underwriter has this addendum which states, at closing, the seller will reimburse me for the items I paid for. Everyone is happy.

Day of closing, final HUD sent to underwriter and she decides I am not allowed to be reimbursed for the expenses I came out of pocket for, and had a signed addendum stating I would be reimbursed. I asked her why, and I quote, "because I said its not allowed"....why, oh, why underwriter? $2,000 lost because she said so?

Is she allowed to do this? If not, what course of action can I take after the closing? The house should close later today.

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Andrew S.

Investor · Raleigh, NC · Member since 2013 · 1k+ posts · 708 votes

11y

I may have missed something, but isn't it at least POSSIBLE that the seller will cut you the $2000 check anyway (I may be naive, but I assure you, I would!)? There ARE still people left with enough principles and integrity that they will honor a deal even if legally they don't absolutely have to. Can't hurt to ask

@Account Closed

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Guy Gimenez
Investor · Corpus Christi, TX · Member since 2012 · 2k+ posts · 1k+ votes
11y
Yes, she can do this unless you decide to make an issue of it. You have no recourse against underwriter/lender because they are not part of your purchase agreement. Your only recourse is against seller since they agreed to the terms, but once you close, you're likely out of luck.
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Curt DavisBusiness Member
Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
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@Angelo Behar
What I would have done is had the closing attorney repay me out of the profit from the seller side, this way you avoid these issues with the UW.
Curt Davis - KAIZEN Realty538 Reviews
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Angelo Behar
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Rental Property Investor · Arlington, VA · Member since 2014 · 95 posts · 29 votes
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@Curt Davis Would the closing attorney repaying me show up on the HUD? If so, she won't allow it.
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Jesse T.
Herndon, VA · Member since 2014 · 1k+ posts · 324 votes
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I assume you are the buyer?
Couldn't the seller reduce the price 2000 to make up for the amount you are out of pocket? Is the seller providing other closing assistance? Is your loan a low down payment loan? Those usually are the situations where underwriters get nervous about payments from sellers to buyers.
The concern is that the payments are being done to inflate the selling price. If they reduce the selling price, that means you pay less and the concerns should be alleviated?
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Curt DavisBusiness Member
Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
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No it would not show up on the HUD. You should check with your closing attorney on how to structure this. Good luck
Curt Davis - KAIZEN Realty538 Reviews
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Chris Bounds
Investor · Sugar Land, TX · Member since 2012 · 554 posts · 232 votes
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@Angelo Behar many conventional lenders (and even hard money lenders) will not allow you to receive any money at closing of a purchase. In this case, I'd just insist on lowering the purchase price by that amount. It's not cash in your pocket, but at least it's not lost money.
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Chris Bounds
Investor · Sugar Land, TX · Member since 2012 · 554 posts · 232 votes
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@Angelo Beharor simply have them credit that amount towards your closing costs. That is likely the simplest solution.
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Marian Smith
Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes
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You should at least be able to have the amount deducted from the sales price at closing--not a rebate but the bank should be happy as it lowers the amount financed--no experience here, just thoughts. Must be why people use special rehab financing, banks only loan more than market value if they can make sure the overage is put into the house and by licensed contractors, but what a pain and added expense.
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Angelo Behar
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Rental Property Investor · Arlington, VA · Member since 2014 · 95 posts · 29 votes
11y
@Chris Bounds My agent tried that and she won't allow it. This is only one of many things this underwriter threw at us. I had to dig up statements from over a year ago, resubmit the same exact paperwork multiple times, wait for a survey to be conducted before the property was purchased. The list goes on and on, and I know underwriters get to ask for what they want, but its beyond frustrating when they decide without justification that I cannot be reimbursed after the seller already agreed to reimburse me.
@Marian Smith That was what we had the addendum for. The thing that is bizarre is why did she wait until the last minute to decide we weren't allowed to be reimbursed?
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Angelo Behar
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Rental Property Investor · Arlington, VA · Member since 2014 · 95 posts · 29 votes
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@Curt Davis I'm going to call the title company and see what they say.
@Jesse T. It's a conventional loan with 20% down. And those expenses were the only thing I was being reimbursed for. The seller was not contributing anything else to me.
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Chris Bounds
Investor · Sugar Land, TX · Member since 2012 · 554 posts · 232 votes
11y
@Angelo Behar I understand your frustration. Been there before!
Remember, as the purchaser you have control over closing the loan. The lender may decide to back out of the loan, but you still decide if you want to agree to their terms. It may come down to deciding if $2000 is worth throwing the whole deal away or not. That may be beyond irritating, but if there is still a lot of profit to be made then I'd go forward and note the lesson learned for future deals. Otherwise, if you really want to make sure you don't lose out on the $2000 you can try to get the seller to sign an extension while you look for another lender. Going that route you'll also need to decide if its worth the extra hassle (paperwork).
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Jesse T.
Herndon, VA · Member since 2014 · 1k+ posts · 324 votes
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I agree with the others saying to try to get the purchase price reduced.
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Greg H.Pro Member
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Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
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@Angelo Behar
The easiest way is to amend the contract and have the seller pay $2000 of your closing costs but the HUD will have to be redone and underwriter will have to approve and you may not close today.
Or have the seller purchase you the most expensive home warranty possible and then cancel it after closing
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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
11y
Revise the contract, for $2000 seller contribution to buyer closing costs. Conventional guidelines allow this, but the "rebate" scenario. This is Not an arbitrary decision by the underwriter.
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Angelo Behar
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Rental Property Investor · Arlington, VA · Member since 2014 · 95 posts · 29 votes
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@Chris Bounds I appreciate the insight. Trying to get the price reduce after the final HUD got submitted when the closing date was yesterday probably won't fly. Its a great deal so we're just moving forward, we're already in our third extension because of the hoops the underwriter made us go through. My agent has 12 years of experience and has never met an underwriter as difficult as the one we had to deal with.
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Angelo Behar
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Rental Property Investor · Arlington, VA · Member since 2014 · 95 posts · 29 votes
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@Wayne Brooks Underwriter literally told me she will not sign off on this loan if we put the seller contribution in the HUD.
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Greg H.Pro Member
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Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
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@Angelo Behar
Then scenario for the home warranty above should be able to get you $700-900. Have the seller pay for the survey or any other allowable items. Get as much of the $2000 you can !
FYI- An agent of 12 years should have known that a side deal for $2000 was not going to fly
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Marian Smith
Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes
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Is there any reason why the deal has to be included on the HUD? If it is an addendum, couldn't you expect the seller to fork over the money after closing much in the same way you expect the seller to leave behind the washer and dryer if that is in the contract? And if the seller does not, couldn't you file a claim and get a judgement? small claims court? it is a contract afterall.
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Greg H.Pro Member
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Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
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Originally posted by @Marian Smith:

Is there any reason why the deal has to be included on the HUD? If it is an addendum, couldn't you expect the seller to fork over the money after closing much in the same way you expect the seller to leave behind the washer and dryer if that is in the contract? And if the seller does not, couldn't you file a claim and get a judgement? small claims court? it is a contract afterall.
Because both parties will sign a document at closing stating that there will not outside agreements that are not disclosed
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Tami DuBose
Lender · Prairieville, LA · Member since 2014 · 146 posts · 114 votes
11y
@Angelo Behar , @Greg H. is giving you the best advice. By now, you've likely resolved the issue. The seller can pay up to 6% of your closing costs when you put 20% down. I'm sure you have over $2000 in closing costs.
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Account Closed
Investor · San Francisco, CA · Member since 2014 · 577 posts · 203 votes
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@Angelo Behar
A better structure would have been to negotiate down the purchase price significantly to cover your cash out expenses.
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Angelo Behar
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Rental Property Investor · Arlington, VA · Member since 2014 · 95 posts · 29 votes
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@Greg H. I think if we had more time to arrange the price and things of that nature it would've worked out better. But again, why should we have assumed that the underwriter would change her mind and would not allow us to be reimbursed the day after the closing should have been done. And we already extended a few times because of the underwriter.
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Account Closed
Investor · San Francisco, CA · Member since 2014 · 577 posts · 203 votes
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@Angelo Behar
There are lots of rules that prevent parties from obtaining credits... Risky to have it done any other way than negotiating price... I've been in your position before....deals requiring considerable work prior to being able to get a lender to lend on it. I've generally past on these deals, though I have negotiated down purchase prices, few ever get accepted. For me, most of the deals have presented quite a bit of risk that I'm not willing to take.
This is a good opportunity to alter your approach going forward on these types of deals...
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Angelo Behar
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Rental Property Investor · Arlington, VA · Member since 2014 · 95 posts · 29 votes
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@Account Closed I will heed your advice good sir, I will make sure that this fiasco doesn't happen again. Kind of reminds of fighters in the UFC that let the judge decide the outcome, you just never know... Thanks!
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Greg H.Pro Member
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Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
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Originally posted by @Angelo Behar:

@Greg H. The underwriter not allowing us to be reimbursed doesn't fall on the agent. How would he know that for no apparent reason the underwriter would not allow the reimbursement at this stage of the game. She accepted it at the time when the seller signed the addendum and I uploaded to the website.
@Account Closed I think if we had more time to arrange the price and things of that nature it would've worked out better. But again, why should we have assumed that the underwriter would change her mind and would not allow us to be reimbursed the day after the closing should have been done. And we already extended a few times because of the underwriter.
Angelo-
Obviously I am not privy to your specific transaction however credits from seller to buyer done in this manner have been against standard underwriting guidelines during the 25+ years I have been in the business. This is to prevent "kickbacks". I wasn't trying to beat up your agent but in my opinion he should have known how to word the credit properly to make it acceptable
I hope you were able to take advantage of some of the suggestions here to recoup some of your $2000
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