I posted this in the General Real Estate section, and then realized it would probably get more notice in the Henderson forum:
This is my first time selling a piece of real estate, a property in a gated community in Las Vegas, NV (I live in South Florida). Via my RE agent, I received an offer from two military veterans on November 25, which I accepted. Several days later, the title company sent me some Condo Certs links to pay for a "Full Resale Package and Disclosure" ($160) and a "Servicemembers' Civil Relief Act Disclosure" ($119). I signed a bunch of paperwork with a mobile notary at home and the closing date was supposed to be January 3rd. I got a message from my RE agent on December 21 that the VA loan fell through because one of the applicants did not have sufficient job history, and their earnest money was returned to them.
My questions are:
1) Did somebody jump the gun on the paperwork? (Why did I have to do all that paperwork when the buyer didn't have financing yet?) Silly me, I thought it was a done deal when I heard the closing date.
2) Was the "Servicemembers' Civil Relief Act Disclosure a legitimate seller's fee?
3) Am I going to have to pay for the HOA Resale Package again if I don't get another offer soon?
4) If I got another offer from a veteran, do I have to pay again for the Servicemembers' Civil Relief Act Disclosure?
5) Is there any type of financing offer I should avoid? (dear G-d please send me a cash buyer)
6) What usually happens with earnest money when financing falls through?
I know my RE agent should be answering these questions, but he talks in such circles that I don't understand the answers (and due to his hefty contributions with renovations and other wonderful qualities I admire, I cannot consider anyone else)
Thank you for any contributions you can make to enlighten me.
Sorry to hear that. It happens more times than I think people are aware. Having a good agent could definitely help reduce those fall outs. Thank you for your in depth question. I'll try my best to help.
1. You have to check the pre-approval letter and see how it was worded. You should be looking fo a fully underwritten approval letter with the property appraising and title being a couple of the only contingencies.
It's not a done deal until it records. Literally as an agent the whole job is to make sure everybody is doing what they have to do to get to the glorious closing. It's like herding cats.
2. There are a couple of fees that the seller must pay in a VA loan. I'm almost positive it is, but not an expert, I'm sure someone will chime in. A quick google search got me here. It covers a lot more than just the VA loan.
3. HOA are jerks. But we need them because some people cant keep the property clean and kept up. Your HOA resale package is definitely is good for some time but I think the payoff will have to be reordered after a certain amount of time. But thankfully for you all you have to do is call your HOA and they will answer that.
4. Don't know and really don't understand why you were paying anything prior to closing...but I'll ask my VA lender that question and let you know.
5. This is generally the order of financing that as an investor I prefer:
Cash is King. But you'll have to give up some equity. These buyers know that and sellers should too. For example I can close before the end of year on your property but it would have to be at a discount.
Hard Money Loan. These are usually reserved for us flippers but some buyers that don't qualify for standard loan products so its almost as good as cash. Just have to jump through minimal hoops and usually there is 10%-50% down.
Conventional are the next best thing because the seller is putting down from 5%-20% down. These buyers will have a nice EMD and are usually more stable meaning that they don't "usually" flake.
FHA. These are the the majority of the buyers out there. As you can guess this is where the most fall out we see. The buyer only has to put down 3.5%. So sometimes they just have enough to do that and closing cost so if anything goes wrong they sometimes can't recover in time. Now of course this isn't everybody but just the experience I've witnessed. It all comes down to the buyer.
VA. Being a veteran I appreciate what they tried to do however the program has quite a bit of room for improvement. The buyer can get in with no money down. However I will say that the majority of VA loans that we accept get all the way through with no problems but it's about the team you have around you. The agent should now about VA loans or have the common sense to call the lender and ask all the questions about the flow and how to get to a successful closing. The lender has to know what they are doing because this program has it own set of rules that usually requires expertise. The best lenders usually has someone that only does these.
Lease Option /Seller financed. Sometimes this is the best way to buy and/or sell the house. This subject is a whole three day course so what you need to know is don't do this unless you're working with an expert or are the expert.
6. EMD. Is whatever the contract says. If they released it without your signature they probably already have it in writing in the offer you signed. There is a loan contingency that is usually 14-30 days that says something like if the buyer can't qualify they are released out of contract with no damages awarded.
There are some things that I hope you and others learn from this. One is read and understand the contract and everything you sign. Everything is there and anything that is changed has to be in writing and if there are disputes the contract will be the document used to resolve. Two, you have to understand who you are working with and what is happening (to a degree). Regardless of contribution and character. At the end of the day this is your investment and you have to control the outcome. To do that you have to understand how it works. And if the person is not willing or able to break it down for you they're not the right person. And three, **** happens, deals fall out everyday, just reset, get back to it, and try not to make the same mistakes again. Hope this helped. Merry Christmas!
If your interested in learning more plug in to your local REIA. Just don't buy the course on the first visit.
I run www.SinCityREIA.com. If you're in Las Vegas on the third Thursday every month come visit.
Hey Wendy, I always make sure that the checkbox for seller pays Hoa Xfer fees and capital costs is checked when I’m buying but it’s certainly something you could have countered with buyer must pay. I don’t know how it would have played out if the sale didn’t go through but you’d be in a slightly better situation.
Just look for it on the next offer you receive and feel free to counter that part of the offer.
Edit: as I think about it. On short sales where the bank refused to pay for the Hoa costs I definitely had to pay for it out of pocket before closing, usually during the inspection period as a buyer. As the buyer has to read the financials and the cc&r’s and agree in writing to be bound by them.
Nevada law requires the seller to pay for HOA resale package. The contract likely has a timeframe in which the seller agrees to order the HOA resale package documents (typically a couple of days from accepted offer). The resale package will be required regardless of financing type or cash.
I didn't mind paying for the resale package, i was more concerned about the servicemembers stuff. i don't want to be "lightened" of any dollars unnecessarily and it seemed to me the title company jumped the gun with the demand. Thanks all!
It’s never a done deal until the transaction is closed and recorded with the County. You have to provide disclosures before closing.
It is possible to use the same HOA resale package if you go back into escrow soon enough. You will need to know how long before the disclosures expire. I've been able to get a deal done with same disclosures and even the same Demand, so my client did not have to pay for them twice. My favorite title lady is a big help with that too.
When financing falls through, if the timeline is still within the buyer's finance contingency, they typically get their EMD back.
Once in a while, some nincompoops will let the deal go all the way to the scheduled closing date to finally say it's not working out, and then the buyer often forfeits the EMD because they're out of contingency by then.
There is no type of financing to avoid. They are ALL good. It's more about what's in the offer. I like to see offers where the buyer is putting the entire down payment into escrow, not just EMD (and of course only the EMD amount is subject to forfeit if buyer does not perform). It's a way to show buyer is really serious AND has the money to close, before wasting everyone's time.
Regardless, unless a buyer has an UNDERWRITTEN APPROVAL, their loan can fall through during the process. Vast majority of offers are sent with a prequalification letter which basically just means someone pulled the buyer’s credit.
Finally. Relax. These things happen. Another buyer will come along and close the deal.
@Wendy L. Lots of good advice already give here by others. I'll add that when I represent a seller, I will vet the lender before accepting an offer.
Many lenders (Quicken / Rocket mortgage are prime examples) will give out a "pre-approval" letter without having done anything more than run a credit report and asked the borrower a bunch of questions.
Until the lender has reviewed bank statements, W2s, tax returns and pay stubs, that pre-approval isn't worth the paper it's printed on. You as the seller have no idea if this person can buy a home.
I recently had this happen with Quicken. The buyer came to me with a pre-approval of $380,000.
I called their loan officer and asked whether the he had seen the supporting documents above - and he had not, but he assured me that the loan would fund and that the buyers were collecting the necessary documents.
It was my initial contact with the client, so I took them to see the house they wanted in order to build rapport - and they fell in love with it. I called the LO again and said that they wanted to write an offer.
A few days pass and the LO calls me to say that upon further review, the maximum loan amount is not the original $380,000, but is now $225,000 because of the type of employment one of the borrowers has.
TL, DR; Your agent should contact the lender to see if all supporting docs have been submitted before accepting an offer.
l've had LO tell me everything was great, buyer qualified, no problem. Every time I would call, they would act like everything was fine. Then when it got down to the wire, they became really hard to reach, and finally the day before we were supposed to close, they emailed me to ask if the seller would pay closing costs. I don't know if they were hoping seller would be desperate enough to close at that point to change the contract and pay closing costs, or if they were just that incompetent, but the seller ended up keeping the EMD. We had another buyer in escrow before the ink was dry on that cancellation, and that one closed without a hitch.
From that I learned to make them send proof of funds for down payment and closing costs before accepting any offers. Still, even if their docs have been reviewed by LO, financing can fall through after weeks in escrow.
The only lender I know that will send an underwritten approval up front as part of their normal business model, is Ratewise. I have also seen them close fast, when other lenders couldn’t get it done and we had to switch lenders during escrow.
I’ve had much better experience with mortgage brokers than with banks. Wells Fargo and BoA don’t seem to be able to close anything in Las Vegas. Lol
@Casey Powers - On my dad's advice, I went to Chase once to ask about financing an investment property and was told, "We only do jumbos." Guy pretty much laughed in my face for my measly $100k loan!
@Wendy L. I've closed a few investment deals with Chase at around $100k. With these big box lenders, you need to find the right LO to get the job done.