Selling My House: Lesson Learned
November 6th, 2008 by Terence Gillespie
Email this article to a friend
This is a follow-up to my article How To Sell Your House Without Using A Realtor.
As I write this (11/6/2008) I’m waiting for the buyers loan to be approved so the close can be scheduled.
That sounds great, doesn’t it?
The problem is the sale was supposed to close 34 days ago (Having already been in escrow for 30 days). The reason for the delay(s) have been:
- The buyer fired his first broker the day before he was going to submit the loan docs to the first bank. That’s because the broker added more fees and points to the loan just before submission and that ticked off the buyer enough to find another broker. That’s a complete restart of the entire escrow process!
- The second broker had to scramble to put new loan documents together as the loan was switched to new terms: Only 3% down and now an FHA Loan. This required a new appraisal, a new sales contract, an FHA Rider and other misc. documents be signed before the loan could be submitted to the new underwriter.
- The new underwriter rejected the loan even though they pre-qualified the buyer. I don’t have any info on why it was rejected.
- The second broker had to find another bank, have the buyer sign new docs and submit to the new bank.
As of now we’re waiting for the third lender to approve the loan.
I’m wondering why one bank would approve a loan another bank rejected? Since I’m confident the buyer was properly pre-qualified for the loan I can only speculate on the second banks reason for denying the loan. I suspect its because banks are reluctant to loan money during this economic downturn. The buyer has a FICO score of 780, but that’s only one factor.
This is not the main lesson, but, next time I would probably screen out buyers who were not able to apply for traditional financing of 20% down. I’ve got 60 days invested in this seller and the risk is just not worth it. He was originally putting 10% down and then switched to 3% when getting a second mortgage broker. From the banks point of view 3% down is way too low nowadays or anydays. The second mortgage broker was confident that the buyer was a good candidate for an FHA loan and I went along.
I’m giving all this background because I’m just now learning the most important lesson of the entire sale. Here it is:
No matter how confident I was in the buyer I should have been more actively finding alternate buyers even up to the last minute of the closing!
And I’m talking about finding alternate buyers even though I had a firm contract, was in escrow with a very motivated buyer and had every reason to believe the buyer could get the loan!
That’s quite a pessimistic approach: No matter what anybody says, no matter what contracts are signed, no matter how pre-qualified the buyer is, no matter how close to the closing date you are . . . . . . you STILL need to be looking for more buyers. But, I think its true. And, if I had to do it all over again (And I just might) that’s what I would do.
I’m not saying to lie to the ‘backup’ buyers. Not at all, just tell them the house is under contract, but, you’d still like to tell them all about it and show it to them, take down their information and will call them if the sale doesn’t go through.
Understand that I may get a phone call in the next few hours saying that the buyers loan went through and the loan will fund in a few days. But, that’s why I thought it was important to write this article, at this moment. Because I think its foolish of me to have all my eggs, so to speak, in the basket of only one buyer.
It’s like like conducting an auction and letting one bidder dominate the proceedings such that all the other bidders disappeared. That’s only ok IF that one buyer actually purchases. If they don’t, it doesn’t matter how well-intentioned they were, you still lost the other buyers attention, a lot of time and probably a considerable amount of money.
The escrow process is focused on finalizing the sale to one buyer. You don’t find out whether the sale will even happen until the very last day of what may be a 60-day or longer, process. You can’t afford to lose those 60-days should something happen that is not in your control. Sure, you could increase the size of the buyers deposit, but, that’s unlikely to compensate you for the lost time and effort of a 60-day delay.
So, keep a log of every person who expresses interest in the house. And, keep showing it to alternate buyers even when the house is under contact. Just tell the alternates what’s going on and whatever happens, remain diligent in marketing the house up until the time that you’ve received the proceeds of the sale.
Tags: Broker, commission, DIY, fsbo, House, How-To, lending, Lesson, Marketing, money, mortgage, Real Estate, Realtor, Selling
