Lender Dropped the Ball and Cost Us Thousands!

32 Replies

Hey!

Up until now, we have bought our homes in cash. I wish we could continue to do so, because bank mortgages aren’t fun!I would really like to see if I could get some guidance from the BP community and figure out if we have any recourse.I will keep this as brief as possible.

We put in an offer on a house in Michigan.Our realestate agent suggested we put the offer in with a thirty business day close period.We didn’t like the idea and preferred a 45 but, we agreed and our lender related that they would be able to close in that time frame.All of our task to get the loan completed and closed were done in a timely manner.The lender did not schedule the appraisal in a timely manner, then on the day of the appraisal the guy got sick so it was resceduled for a later date  .Once the appraisal was completed, the lender kicked it back for discretionary corrections.At this point we were very much on schedule to miss our close date.Now, we were told several times by our agent who heard it from the seller’s agent that they had a backup cash offer in place and that that offeror had already done an inspection.So we knew they would most likely back out if we busted the close date.However we did get the seller to agree to a week extension, so long as our lender could provide a clear to close based on the date of the extension date.The lender would not provide any firm date, seller was not happy with the banks position and backed out the at the earliest opprtunity.

We spent about 1k for inspection, appraisal, and credit checks.Although we were not allowed to look at the appraisal because it was not finalized, we estimate that the home would appraise for about 10k more than our offer.

What recourse do we have?Do you have any suggestions/advice that might be helpful for our current situation and the future.

Thank you so much for your time,

Jacob

No recourse that won't cost you more than the $10k "paper gain" to recoup than you think you could have earned on the deal. Move on from this with a lesson learned that in this new TRID environment, you need to set more reasonable closing timeframes and/or be able to move all-cash if the lender commitment goes south.

You have no recourse. choose a better lender the next time around 

Hi @Jacob Tudor ,

I think I can help simplify this conundrum for you.

You hired someone to do a job, and gave them the materials to do that job (your financial paperwork, etc, is the same as providing a painter with paint and paintbrushes). They didn't perform. That sucks. Either you gave them crap materials (eg, your financial house is a mess, like giving a painter crummy paint), or they suck (you provided top notch materials/paint, and STILL got shoddy workmanship out of it), or some combination thereof.

What due diligence did you do when you hired that person? How thoroughly did they vet the materials you provided prior to agreeing to do the job? What reasons, in particular, did you have for hiring this particular person over some other person that in theory has the exact same license? 

The contract should have had a financing contingency so you would be entitled to your deposit back  also it is very rare to close a loan in 30 days your agent should have had advised for  least 45 days. If the deal was that good why did you not use cash like you mentioned to close and refinance at a later date?

Thanks for the replies!  I will certainly try to pick a better lender next time.  Any advice on the topic is aappreciated also.  Chris, we chose the large bank lender based on our experince with them on our business account.  We expected them to be able to perform.  As I mentioned we gave them the best paint to work with but no dice.  

What stops us from filing a small claims case at a minimum?  Their actions  alone or lack there of were the sole reason for us losing the house.

Originally posted by @Jacob Tudor :

Thanks for the replies!  I will certainly try to pick a better lender next time.  Any advice on the topic is aappreciated also.  Chris, we chose the large bank lender based on our experince with them on our business account.  We expected them to be able to perform.  As I mentioned we gave them the best paint to work with but no dice.  

FYI: For retail banks and credit unions, the mortgage division is always distinct from the retail banking side of things. Kind of like Sears having good bedding in the bedding department, does not mean the Sears-branded auto repair shop outside has good mechanics. 

On top of that, if you walk into a larger branch of a big bank, and they have semi-open cubicles for four LOs over yonder, and you walk up to the one LO that isn't busy and has an empty desk... why isn't he busy? Why is his desk empty? 

The large bank lenders right now are about worthless.. for instance I will not accept an offer on one of my new constructions if the lender is WElls fargo.. as a matter of fact I will not accept an offer from a buyer unless I know the mortgage broker personally and know they can get it done.

and out in the mid west its even more problematical.. where you had such wild swings in values in the down turn.. appraisal issues are rampant..

If you can I would pay cash and refi.. that way you save the deal and if the refi takes a little time that's OK you did not loose the deal.

You have no legal recourse, period.  The big banks are Always the worst when it comes to getting a loan closed.....it's just the nature of the behemoth.

Hey Jacob-

Sorry to hear about the snag on your deal. We had something very similar happen on one of our deals, however, we were actually selling a property and buyer was getting a VA mortgage. We got notice the week of settlement that buyer couldn't locate his DD214 (lender never notified us and even sent us buyer's conditional mortgage commitment that made no mention about a DD214) Obviously we were beyond upset, however, the time and resources we would have had to utilize to "correct" this(i.e. small claims, fight to hold escrow deposit, etc) would have unfortunately been a waste of time. We went back to market lined up our next buyer and sold the property.

It sounds like you hope to go after the $1k in appraisals, inspections, etc?  Just having a snapshot of your scenario I'd suggest you chalk it up to a lesson and move onto the next property.  30 days was pretty aggressive and didn't leave much room for any snags (i.e. sick appraiser, etc)  I'd suggest moving onto your next deal with new lessons in hand rather than seeking out your options for recourse against this lender.  

Just a thought--I know their points/rates are high but have you considered a hard money lender to get into the property and do what you need to.  You will pay a premium and they are definitely not a long term solution, however, if it helps you to avoid losing another deal like this it may be worth it.  The lender we use is typically able to close within about 10-14 days and they will lend based on the financials of your deal. (Obviously they'll vet you/your experience first.)

Ray

Chris - point taken.

Steven - Completly understand about the 45 day period.  The realestate agent has been good up to this point but lets us down on this one.

Didn't pay cash because we didn't have enough to cover this house.  We are still buiding our way up.

Jay - a appreciate the advice concerning the large lenders and won't chalk my experince  up as an anomoly.  The old conundrioum of paying cash or getting a loan....

Thank for the great advice everyone.  I trust that if the majority say to chalk it up, it is the correct course of action.  I think I'm just going to go back to cash which will slow down business growth and in our situation, thats okay.

Originally posted by @Jacob Tudor :

Chris - point taken.

Steven - Completly understand about the 45 day period.  The realestate agent has been good up to this point but lets us down on this one.

Didn't pay cash because we didn't have enough to cover this house.  We are still buiding our way up.

Jay - a appreciate the advice concerning the large lenders and won't chalk my experince  up as an anomoly.  The old conundrioum of paying cash or getting a loan....

 I wouldn't blame the agent here unless he told you to use that particular lender. His job is to help you win the bid on the offer. A 45 day timeline was probably a no go or the seller, and since there were other offers likely, not having an unusually long closing period likely got your bid accepted. I typically will not accept 45 day closes on properties I sell.

Have a source of funds lined up even prior to a purchace . Heloc , hard money , friends , family . Why ? The great deal generally go to cash buyers , fast closings . once you get the property , then get a loan . 

Originally posted by @Russell Brazil :
Originally posted by @Jacob Tudor:

Chris - point taken.

Steven - Completly understand about the 45 day period.  The realestate agent has been good up to this point but lets us down on this one.

Didn't pay cash because we didn't have enough to cover this house.  We are still buiding our way up.

Jay - a appreciate the advice concerning the large lenders and won't chalk my experince  up as an anomoly.  The old conundrioum of paying cash or getting a loan....

 I wouldn't blame the agent here unless he told you to use that particular lender. His job is to help you win the bid on the offer. A 45 day timeline was probably a no go or the seller, and since there were other offers likely, not having an unusually long closing period likely got your bid accepted. I typically will not accept 45 day closes on properties I sell.

I agree with Russell, 45 days would be a no go. Especially on a property that was desirable enough to secure a cash back up.

@Jacob Tudor Don't let a bad experience with one loan officer from a large bank alter your entire investing strategy. As a broker, I do a lot of loans for people who are fed up with the big box banks. Get connected to a solid loan officer who understands real estate investing. Ask them for references to investors they have closed loans for and ask fellow investors in your area for referrals to a good loan officer who closes loans for them.

"how is worth 10k more" as is or ARV?

was the lender Quicken? cause they are among the ones that suck as well!

We frequently are called to close for people when lenders back out.  Try to establish a face to face local relationship if possible.

Originally posted by @Jacob Tudor :

What recourse do we have?Do you have any suggestions/advice that might be helpful for our current situation and the future.

Thank you so much for your time,

Jacob

You have no legal recourse. Your loan application will include all kinds of disclaimers of liability. Your recourse is bad publicity. Facebook it, Tweet it, Youtube it...if you become obvious about it, someone from the bank may say, "Hey, let's do something for this guy so he goes away." That's unlikely if you're dealing with a huge bank - they get bad pub every day - but it could happen. And at least you help someone else out.

One note, though. I see a previous poster mentioning 45 day close. No way that works in a competitive bid situation. Your offer will get passed over. And it's not TRID making loans run long...it's lazy loan officers. TRID is just the newest excuse they can use for not having their **** together.

I haven't quite gone as far as @Jay Hinrichs on declining offers from Wells Fargo, but it's a thought. They're absolutely terrible. I do decline VA offers, which I hate doing, because I support Veterans, but I've never once had one close anywhere close to on time.

The standard Texas Real Estate Commission Contract has a clause that says the buyer can terminate and get their EM back if they cannot obtain financing within ___ days. If they go beyond that and then can't get financing, they lose their EM. If they're using a lender like that, when I get their first extension request, I warn them. "I'll extend one week. No more. If you can't close in a week, I'll put it back on the market and keep your EM for my inconvenience." Then they scream at their lender, and magically, stuff gets done. There are a lot of good loan officers out there. Few of them work for the big banks.

@Michael Hayworth while frustrating we will work with VA buyers as like you we try to support our veterans..my wife is adamant that this is our responsibility to allow them to use their VA loan.. So I let her handle those she has done them for 20 plus years.. ( as a broker not a lender).. I have one going right now on a new construction in Charleston that I did.. and low and behold they need a 2 week extension.. so its just part of it.

I think part of why the big banks are so bad to work with .. is that in the mortgage meltdown many LO's went to work for the big banks and they now are paid salary as opposed to mortgage brokers who are compensated on productivity and receive no salary.

the other issue is with the meltdown and the need to NMLS licesneing many of the old timers simply quit the industry so we are seeing a lot of newer RMLO's that simply can't get it done.  

@Jacob Tudor sounds like you just got some expensive education.  Be happy that you didn't have more of your capital invested into the deal.  Just walk away......Also never go with a realtors suggestion, stick with your gut instincts.  

I can't imagine trying to sue one of the big banks for your lost thousand.   You would spend far more in time and $ pursuing it I would think.     I just ratified a financed contract with a client in which we scheduled the closing 45 days out and the seller balked and wanted to move it to 30 days max. I told him that was not reasonable and he relented.   It's not such a good deal with cash offers to compete with though, and in fact I've been warning my client that I think it's a mistake.   Mistakes are easier to buy...   :-D

A lot of posters(agents) do not blame the agent because he got the offer accepted. That is only half the job. I can get offers accepted all day long but if they do not close what good is it  I like to get paid so I watch the timeline like a hawk. If the appraiser is sick call for another , If I could grab an extension I grab it IF I could buy another week or 2 I give my buyers an option . I know we are only getting half a story and the agent most probably did the best he could but never go out with out a fight Did I mention I like to get paid

Credit checks, appraisals, and inspections, are sunk costs that you pay knowing you won't get that money back if the deal doesn't go through for any reason, regardless of why. It's just part of the business. We had a bad appraisal a couple months back, and had to order another one, just eating the cost of the first one.

The one angle you might have is not getting the appraisal report. You paid for it, therefor it is yours (that's the law in California, and I think nation wide). If they don't give you the report, demand a refund for the fee. 

It's interesting hearing all the hate on Wells Fargo. We recently switched back to Wells because our rockstar mortgage broker moved there. He does not sound happy with the processing department, though. To handle more business, Wells apparently promoted a bunch of the experienced processors to managers, and hired a bunch of entry level employees to do the processing. Its sounds like a disaster over there. Luckily our guy goes to bat for us, working nights and weekends, and pushes the processors. He just got on one done for us in about 25 days.

Just my thought process here but wouldn't it be a good idea to rent the place you live from your own business then?  You still end up paying the mortgage the same way you would have if it was in your name but still allows for the freedom to move if needed.  

Or are there some implications that I'm not aware of that makes that a bad idea

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