This is a true story from a recent residential home sale; The buyer's agent came in with a full price offer, but asked for 3% seller subsidy for closing costs (which was over $ 15k) Seller responded with 2.5 % and the buyer accepted ; the contract was ratified with a loan pre- approval letter that was provided by a local loan officer. All went well with inspection and appraisal during the next thirty to forty five days.
Three days before settlement - we see no closing disclosure so we begin calling. The Loan Officer does not return calls or emails; suddenly the day before the buyer's agent calls to describe a problem- saying child support was not disclosed and the loan can not be approved; but if the seller can give $ 10,000 then it can still go... he says money is needed to pay off buyer's financial obligations and to buy down the rate.... Upon extending the contract 3 days, the agent goes into great length about how the buyer only qualifies at 6.5% which costs $10k to buy down from the 7.25% current rate.. Finally, he says they will take ½ % off buyer's commission- Reluctantly, the seller agrees to contribute an equal amount, but the addendum he sends does not have the commission part for them. We ask for clarification and a contract addendum finally includes both the added seller contribution and buyer's agent fee reduction ( which we learn was in the buyer's agency agreement in addition to whatever commission the contract stipulates)
We happened to meet the buyer after closing ( while removing lockbox and signs) and he says they promised he could get in for $ 35k but when they first sent closing docs, it showed he needed $ 45k -- and he told them he would walk away - in the end he needed $ 40k which he is angry about but did come up with and closed.
Some would consider this a complete shake down by Buyer's Agent and Loan Officer - whether they knew about the buyer's obligations or created that for the story is hard to verify. A seller that is anxious to close, and may have already made plans to leave town on the planned settlement date, or reinvest the funds, or otherwise move on with life plans is in a vulnerable position, and some buyer's agents know this and take advantage of it. In this case, the Buyer is not happy, but apparently the agents don't mind ( they know this may be his only house transaction for 5 to 10 years) . Luckily in this case, the seller simply agreed to the extra funds, but it's often not the case that they can.
I despise dishonesty, and I consider this to have been less than transparent. When did they learn about " other financial obligations"? Did they plan it all along to get a buyer to increase his needed down payment and a seller to go down in price by increasing the seller subsidy? We'll never know. But, whenever planning a transaction, it's best to do pro-forma financial calculations -- both for loan pre-approval and for both parties to know as closely as possible, the funds needed or funds resulting from their side of the transaction. Please contact us for pro-forma work - to determine if a purchase or sale may work out as you would like. We plan for transparency in loan approval, in pricing offers and in closing transactions so that both buyers and sellers are treated fairly and know what to expect.
Thanks for reading.
