Feedback wanted from Baltimore realtors on loans that fall out!

11 Replies

Hi BP realtors: I am doing some lending on flips in Baltimore County. I have a real estate license but do not actively list (no more retail for me)! Back in the prehistoric days (80's and 90's) when I was a listing agent, we were able to gather all manner of information regarding a buyers loan qualifications but times have changed. 

I am noticing that some of my flip clients beautiful renovations' get contracts very quickly....especially in the first time homebuyer price range under 200K. I am also noticing that some of these buyers loans' don't get approved and the deals fall through 45 days or more down the road due to the buyer not being qualified. Is there anything a listing agent can do to avoid this unfortunate surprise for their rehabber client? The rehabbers are paying high rates of interest and the clock has to start ticking all over again when a deal falls through. What kinds of questions and diligence can appropriately be done on the part of the listing agent with the selling agent/ buyers loan officer  during the negotiation stages while the buyer is so motivated to buy a property? Would appreciate any feedback! 

Don't the buyers have to submit a loan approval letter with the offer?

Yes, some preapprovals are worth less than the paper they are written on.  Two choices...the best is to make the buyers be preapproved with a lender the seller/selling agent trusts, making sure they get tax returns, w-2,s, 3 mo.s of bank statements verifying funds, etc. Secondly, they can require DU approval from the buyer's lender, where the underwriting has also been performed.

@Tim Youse Yes, but as Wayne says, the pre-approvals are bogus...lots of gray areas for things to fall apart. 

@Wayne Brooks Hi. Wayne. Thanks for your response. What is a DU? 

On the loan I am referring to today, the home had been significantly renovated and there were items the appraiser noted that had to be fixed prior to settlement. It seems like the appraiser is dragging his/her feet in coming back to approve the work. The seller is worried the deal with fall through. I don't know if the purchaser still wants to buy the house or not, but they have wasted almost 60 days of the sellers time. 

@Chris D. Desk Underwriting report, means the buyer's financials have already been approved by the underwriting dept., which where the typical last minute denials come from.  Now, if the appraiser is noting things that have to be fixed to mean the loan guidelines, then either the rehabber is doing a shoddy job, or the appraiser is overly picky, usually the former.

The listing agent on the flip should be advising the seller on whether the lender in question can close the deal, and whether the buyer is qualified. It is all just part of the vetting process. Not complicated, but to be honest, I find that a lot of flippers use sub par listing agents to try and save a few bucks, but end up costing themselves more in the long run by having to hold the property considerably longer.

Hi @Chris D.,

So I've got this running document called "references" that contains the names & phone numbers of agents, and property addresses, of transactions closed in the last six months.

Probably fewer than five percent of listing agents ever call my phone number that I put right there on that preapproval letter, to give me an opportunity to share it with them. 

If you as a listing agent have clients with abnormally high carrying costs (HML, etc), meaning that time is money in a very real way, you should absolutely be making those phone calls and treating it like what it is... a job interview for the lender.

@Wayne Brooks Hi Wayne. thanks for the tip about the desk underwriting report. I will pass that info. along to all of my borrowers. @Chris Mason identified something that I believe is true....happened on my very own house sale (I was not the listing agent). My top producing listing agent asked very few questions re: the buyer's qualifications and I found out there was a gift letter that was not disclosed at contract presentation...we got to settlement but I ended up babysitting the rest of the transaction which was something the lister should have been doing.

@Russell Brazil . Hi Russell. I loved your podcast interview. I agree with your post. Years ago when we all "worked for the seller" as sub agents we were permitted to dig deep and ask some pretty intrusive questions about the buyers' financial qualifications. It seems like times have changed and that getting granular on the buyers financial qualifications is no longer acceptable on the part of a listing agent perhaps due to buyer agency. I don't list anymore...am just a lender trying to give my loan clients advice on how to interact with their listing agents so that their contracts don't fall out. 

Originally posted by @Chris D. :

@Russell Brazil. Hi Russell. I loved your podcast interview. I agree with your post. Years ago when we all "worked for the seller" as sub agents we were permitted to dig deep and ask some pretty intrusive questions about the buyers' financial qualifications. It seems like times have changed and that getting granular on the buyers financial qualifications is no longer acceptable on the part of a listing agent perhaps due to buyer agency. I don't list anymore...am just a lender trying to give my loan clients advice on how to interact with their listing agents so that their contracts don't fall out. 

 You an still dig in and ask questions. The GCAAR Co tract even adresses this and allows for permission to be granted or not granted to talk to the lender. the MAR contract does not adress the issue.

Regardless of whether permission is granted though in the contract, one of the most important jobs of the listing agent is to do his due diligence. If you don't, how can you possibly advise your client on what contract to accept. A 300k offer with a 99 percent chance of closing is much more preferable than a 315k offer with zero percent chance of closing.

Also the listing agent should be staying abreast of everything going on on the buyers end of things so that they can intervene when there is a problem. They should be in contact with the lender at least once a week to make sure the transaction is staying on the time line.

The only time I've ever gotten pushback from a lender is when it is a lender who won't be able to close the deal. They just loop the buyer in on the fact that that we are asking more so now than pre trid.

@Russell Brazil Thanks Russell. I agree with everything you wrote. I'm glad to know that a listing agent can ask for specifics about a buyers financial situation and qualifications. It is a good tip to give to my loan clients, to drill down on how the listing agent will deal with the buyers financial qualifications when a contract does come in. For me, the answer would weigh heavily in the choice that I made in the decision about which listing agent to hire. I appreciate your feedback.

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