There are about 2.5 million real estate agents of all shapes and sizes -- give or take. And many of them have gray hair. How did they get gray hair? From home buyers. A typical closing time on any sales contract might be 30 days or so, and a lot has to happen during that time. There's much at stake, and if either the buyer or the seller doesn't perform as agreed then things can go wrong. Blown escrows, re-listing of the home for sale, lost deposits. Why do buyers give agents gray hair?
- The buyers haven't applied for a mortgage, much less gotten a prequalification letter. Sure, they've been to the websites and calculated their own debt ratios. I've even seen a website that lets buyers compose their own prequalification letters based solely on data input by the borrowers. (Can you believe it?) But the buyers haven't applied for a mortgage because they figure that everything's going to be okay because their credit is good and why apply for a mortgage without a contract in the first place only to "ding" their credit report, right?
Bad move for two reasons. The first is obvious, if there's a mistake on the credit report or someone is a victim of identity theft, there's little time to get things corrected. Especially if the buyer's names are common ones like John and Susan Smith. (I Googled John and Susan Smith and Miami and got 292,000 results!) If the buyers had applied before making an offer they would have had time to correct any errors before wasting precious escrow time.
Second? Lenders can count income differently than one might expect. Self employed and had a big year so far? Are you using that newfound income to "prequalify" yourself? Great. How was last year? Not so great? Lenders can average two years income if they want to get a better picture on how much money you make. One bad year and one great year might make for one big average year. Presto! You're not qualified because you didn't use the correct income numbers.
- The buyers haven't chosen a lender. Okay, maybe the buyers have applied for a mortgage but they've applied with more than one company waiting until the very last minute to make up their minds. Nothing wrong with having one lender play off another is there? Of course not. America was built on competition.
The problem is that buyers think they can just call up any of those lenders the day before closing and say, "Okay, I choose you!" and everything falls into play. Wrong-o. All third-party documentation such as title work, appraisals and verifications all have one name on them, most likely the initial lender. An appraiser won't do four different appraisals; the appraiser will only do one. That appraisal might be transferred to another lender, but again this isn't an automatic feature either. The same goes with title or legal work. This can take a couple of weeks for everything to be changed.
- The buyers aren't sending in their "loan conditions." When lenders approve loans, invariably there are a few missing pieces to the puzzle that are needed before printing closing documents. Some of these loan conditions might be a missing bank statement, tax returns or even providing proof of insurance coverage for the new home. Sometimes buyers think that they simply need to fax that one last item over and instantly their loan documents are forwarded to their closing agent.
No, loan conditions may need to be met before it ever gets to an underwriter. Often when buyers "finally" get all their requested documentation into their lender or mortgage broker then loan papers may still be a week to 10 days away.
Perhaps one of the best ways to reduce the number of gray-haired agents is to be prepared. Do as much as you can before you ever get in an agent's car. Find a lender, get preapproved and have your loan documentation at the ready.
Published: August 20, 2004
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, a veteran Mortgage Banker, successful Real Estate Consultant and author of