Here is a topic that came up in conversation today which makes for an interesting quizz. Here is the scenario. Buyer writes an offer on a property and needs a loan to purchase so attached to the offer is a lenders preapproval document. This is standard procedure whenever a loan is required 100% of the time so this is normal. The Buyers offer gets accepted. Yay! Then, a few days later, Buyer gets curious and goes shopping for a better rate for his loan. He finds another lender who will ostensibly give Buyer a slightly better rate. Buyer than tells his agent that he has switched lenders. Which of the following is correct:
- Buyer can switch lenders mid-stream without penalty or problem as long as the type of loan and down payment remains the same and they still close on time.
- Buyer needs the signed permission and acknowledgement from the Seller in order to change lenders.
If you picked #1, you are incorrect and here is why. The details of the financing are an integral part of whether or not a Seller will accept an offer. A weak, out of town or internet lender may not be acceptable to a Seller. The Seller made their decision in part due to the financing details so a Buyer can't just decide to change the financing on the fly. The Seller needs to be advised and agree to the change. It is contractual, which is why any change to the financing details attached to the offer should be changed with an amendment drafted by the escrow company. Paragraph 3K states "BUYER STATED FINANCING: Seller is relying on Buyer's representation of the type of financing specified (including but not limited to, as applicable, all cash, amount of down payment, or contingent or non-contingent loan). Seller has agreed to a specific closing date, purchase price and to sell to Buyer in reliance on Buyer's covenant concerning financing. Buyer shall pursue the financing specified in this Agreement. Seller has no obligation to cooperate with Buyer's efforts to obtain any financing other than that specified in the Agreement and the availability of any such alternate financing does not excuse Buyer from the obligation to purchase the Property and close escrow as specified in this Agreement". The financing letter is not simply an attachment but is in fact made part of the offer via paragraph 3J.
Why do Buyers change lenders mid-stream? Well, sometimes it’s legitimate. Perhaps the Buyers lending picture is more complicated than the lender thought and the loan becomes impossible to fund so the Buyer has to scramble and find a new lender. That’s understandable but no less a contract variation. Or maybe the Buyer presented a letter from a well-liked local lender just to get the deal and then later brings in his buddy or family member which was the real plan all along. Maybe their lender buddy was on vacation so they wasted another lenders time in the interim just to have a document to attach. Or maybe the Buyer just wants to get a better deal and doesn't care about all the time, expense and trouble their first lender went through to get them approved.... shaving off a tiny fraction of a percent is all worth it right? Believe me, I've seen it all. All of the above has happened to me over the years. This scenario is very upsetting to everyone concerned. Everything has to be started all over again by a lot of people but instead of having 21 days for loan approval, now the Buyer has less because that clock does not reset automatically with a new lender unless there is yet even more adjustment that has to be approved by the Seller. It gets to be a mess right? So here is how you can avoid all this. Do your lender shopping ahead of time. The time to shop rate or lender is before you even written an offer. Not after. And keep in mind, you know what they say about the grass being greener on the other side right? It rarely is. Often those advertised rates don't really happen. Add in credit scores, credit profile, type of property etc. and before you know it, that low rate goes bye bye and you are right back where you would have been with Lender #1. Keep it simple and plan ahead. Shop wisely, ahead of time and local.
1329 Calzada, Santa Ynez (5/2 on an acre) 895K Since this is a listing in my own inventory, instead visit www.1329Calzada.com for the whole photo tour. This home is built to last and has a great floor plan. Love the 1976 amenities or make take this one easily forward due to the floor plan and high ceilings already in place. At just under 2,700 square feet, it is spacious and has two separate bedroom wings. Lots of big picture windows and doors to the pretty outside. Even has a/c! The pool is super cool with a automatic cover. The shop is going to be hard to resist for a lot of you out there that tinker or have a lot of rolling stock. 4 parking spaces plus a dedicated shop end or make the entire thing your shop because your daily drivers can easily be parked on the large cement parking apron and circular driveway. There is also an RV parking bay on the side. Nice lawn, views and something rare in this neck of the woods ... hooked up to sewer. You may not think that’s a big deal but it makes living in the country a whole lot more simple. Calzada address though not on the main road but instead on one of those quiet little cul de sacs. So much potential here and a fantastic location. See it!
2678 Santa Barbara Avenue, Los Olivos (3/3 on 1.85 acres) $1,950,000 No question, one of the top 10 trendiest, most elegant homes in the village with an inspiring campus and privacy gates. Really a stunner with specially curated everything. To see it is to love it.
2411 Alamo Pintado, Los Olivos (main house and full guest house on 12.49 acres) Was $2,195,000 with a new price of $1,995,000. Yes, it really was built in 1860, well, most of it anyway. I went looking for the old Huell Howser California Gold episode where he actually went to this property and learned the entire history of it direct from the owners. It’s a wonderful episode which goes into the whole stage coach stop history of region with an entire section on this particular property. I finally found the video! Do yourself a favor and watch the video by visiting the KCET link to the episode by clicking here. The whole thing is 55 minutes and really worth watching but if you want to skip just to this property, skip along to about minute 35.15 which is where this property tour starts. Its a priceless video. I sure miss Huell Howser.
560 Rancho Alisal Drive, Solvang (2/2 on 1 acre) 398K This is in the Alisal Ranch with annual land leases. Purchase price is for the structure only.
345 Calor Drive, Buellton (3/2 on .18 of an acre) 499K This is a listing in my own inventory.
222 Kim Sue, Buellton (3/3 on .16 of an acre) Listed at 559K and sold final for 546K.
2508 Janin, Solvang (4/3 on 1 acre) Listed at $1,095,000 and sold final for $1,033,800.
**Click on each hyperlink to see the listing agent related to each property. Property links may not open if you are using Internet Explorer as your browser. If you aren't already, please ask to be on my Daily Real Estate Update email list to receive the complete blog post with pics and aerials sent to you daily via email versus you having to remember to check my website or Facebook. Due to recent copyright issues, pics only appear on the email version. The identity of those on my list is not shared and I don't spam anyone. My daily updates are not a complete list of everything that happened today but instead events the general reader might find interesting or items you need to know to make good decisions. Readers should consult other venues of information gathering to find out more or to complete their information gathering efforts but this is a great place to start and I write every day Monday through Friday letting you know what I know. Transactions noted here were completed by myself and other Realtors.
Sharon Currie | Realtor BRE#01357602
Berkshire Hathaway Home Services BRE#01317331
Physical: 2933 San Marcos Ave #102, Los Olivos
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