I'm starting to see an uptick in loan and financial problems which cause properties to go back on market. Here are some reasons that I'm hearing about, have known about historically or experienced personally.
Buyers want to switch lenders mid stream. Here is why that doesn't work. In almost all cases involving borrowed funds, which is the majority of the time, the accepted offer is accompanied by a financing approval document from a specific lender. That loan approval is a part of the offer. Who the lender is, their strength and reliability, the terms of the proposed loan verified against the offered terms and the thoroughness of the approval (did they just check for a pulse or did the lender really do their homework), are all considerations the seller looked at in accepting the offer. The Residential Purchase Agreement contract or "RPA" as we call it, says "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". What does that mean to you as a buyer? If you want to switch lenders, the seller has to agree and the switch has to be documented in an Amendment to the contract. If the seller doesn't agree, guess what? You have to stick with your original lender or cancel. Why would a seller not agree? Well, perhaps the #2 lender isn't as strong, reliable, has a proven track record or is in some other way unknowable or seemingly a risk. Or, perhaps too much time has gone by and a switch will reset the clock and require an extended escrow. Buyers should carefully weigh the reasons for switching lenders. If its just to shave off a few bucks, is it really worth it? Also, consider this. Lender #1 has spent countless man hours working for you thinking the loan is going to fund and close. It costs them money. Their staff doesn't work for free. So please, have some ethics when you ask for a loan approval document. If you just get any willing lenders document with the plan of switching lenders later after you have done some rate shopping, well, that's just dirty pool and as has happened recently, it can backfire when the seller isn't on board and the whole house of cards falls down. Rate shopping should happen before you make an offer, not after.
Buyers discover the real payment, taxes and insurance costs after entering into a contract. This is a huge purchase. Doesn't it make sense to find out how much it will cost before you enter into an agreement to purchase? You compare prices on everything else before buying. Why not for the biggest investment you will ever make? Have an in depth conversation with your lender, before writing an offer, about what the payment will be at a variety of price points. Canceling 2 weeks into a deal because you decide you can't afford it is just plain rude and hurts a lot of people. If your lender won't do that with you then find another lender.
Lying on loan applications. People do it. But here is the thing. You are going to get found out. The underwriting process is vital to the loan industry because it is the checks and balances for the whole shebang. It is document dense for a reason. Lies I have seen include:
- Phony proposed commutes to avoid the higher rates and down payments that investment or 2nd homes require ("I'll be commuting every day from San Jose"). Not even remotely believable.
- Non disclosed loans for down payments. If the cash magically appeared in your checking account last month, underwriting is going to ask where it came from.
- Down payments that are actually coming from a line of credit instead of actual cash.
- Over stated incomes. Seriously .... do people think nobody will check?
- Incomes that don't belong to the applicant. FYI, when you are divorced you can't continue to claim your ex husbands income as money you yourself have earned.
- "My accountant/tax guy said I shouldn't buy anything right now". Be kind and find out your financial situation before you go shopping, use up everyone's time getting approved, writing offers and getting sellers involved in moving. If you have a financial team to confer with, please do so before you write an offer. This seems self evident but apparently not to everyone.
The cost of the renovation is too high. Do the calcs for the renovation before you write an offer, not 2 weeks into a deal. Not only will the cost of renovation impact your ability to purchase or make the property no pencil out but the condition of the property can sometimes prevent a lender from funding. If you are fixer or flipper, ask your lender ahead of time what types of property issues will not be acceptable. If the dwelling doesn't have an intact kitchen, bathroom or has tons of termite issues, it may not be suitable for a financed purchase. Plan ahead for fixer renovations.
I could go on but I'm pretty sure you have gotten the point. Do the work up front, not after you ink a deal, and be honest. Its the right thing to do.
209 Willow Drive, Solvang (2/1 on .18 of an acre) 683K Just a few blocks to downtown Solvang.
525 Valley Dairy Road, Buellton (3/2 on .19 of an acre) 725K Corner of Via Corona and Valley Dairy. Very convenient to the lower school campus and just a few blocks to middle campus.
2961 Stadium Drive Drive, Solvang (4/3 on .84 of an acre) 830K Check this one out if you need shop space.
3114 Calzada Avenue, Santa Ynez (3/3 on 4.85 acres) $1,495,000 If you love contemporary, then you also know how few we have of them. Fresh remodel on this conveniently located view ranchette. Clean lines but not austere. Bright and sunny but still private. The location is a real winner being so close to the Roblar end of Calzada for easy in and easy out. I'm making a bet this one won't last.
5600 Armour Ranch Road, Santa Ynez (2/2.5 main house, 3/3 guest house + managers quarters and party barn on 119+ acres) $12,500,000 Apex of Armour Ranch and Kentucky Rd.
Back on the Market
269 Glennora, Buellton (3/2 on .28 of an acre) 595K This is a listing in my own inventory and yes, this superb value is back on the market due to no fault of the property. This is a really good value, priced well by a motivated seller. In the 5's, that usually means a tiny house on a tiny lot. Not this one. Over 1700 square feet and nearly a third of an acre. Desirable location backing up to the ranch property behind for no neighbor in the back but you will see the occasional horse meander by. Come and see this on on Sunday from 1:00 to 4:00. Rhoda Johnson from my BHHS office will be there.
Price Reduction (and back on the market)
2750 San Marcos Avenue, Los Olivos (3/2 on .19 of an acre) Was 725K with a new price of 699K. This is a listing in my own inventory and shared with one of my favorite agents, Nina Stormo from my Berkshire Hathaway office. Back on the market due to no fault of the property. Come and see this fixer with a future at open house this Sunday. Nina will be there.
3576 Paloma Street, Santa Ynez (3/2 main house and 1/1 guest unit on .21 of an acre) Was 669K with a new price of 629K. This one is starting to look interesting considering the fully separate unit. Each has own laundry and full kitchens.
811 Rancho Alisal Drive, Solvang (4/5 on 1+ acre) Was 795K with a new price of 735K.
1319 Cheyenne, Santa Ynez (3/2 on .24 of an acre) Listed for 695K and sold final for 680K. Original price was 765K with 216 days on market.
567 Rosenvej, Solvang (3/4 on .32 of an acre) Listed at $1,095,000 and sold final for same, $1,095,000. Original price $1,125,000 with 72 days on market.
**Click on each hyperlink to see the listing office related to each property. Property links may not open if you are using Internet Explorer as your browser. Transactions noted here were completed by myself and other Realtors. I clearly identify those that I participated in. The hyperlink to each listing shows the listing office name if you would like to contact them directly. 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.
Sharon Currie | Realtor DRE#01357602
Berkshire Hathaway Home Services BRE#01317331
Physical: 2933 San Marcos Ave #102, Los Olivos
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