Once I received an offer for one of my listings. Came complete with a copy of an escrow check, a two week closing, more than full price, request for 6% closing costs contribution and the notorious unsigned “pre-approval” letter from “Eddie”. Well being the professional Realtor that I am the first thing I do is pick up the phone and give good ole’ Eddie a call. I figured I had best ask him about this 6% seller contribution on a conventional loan. Also, thought it might be nice to find out who Eddie is and who he works for.
Well Eddie it turns out IS a Mortgage Broker and is ready and excited about getting a loan closed for these Buyers. Seems they were under contract before but the deal didn’t close. Something about the Seller. Anyway, Eddie being full of knowledge and very helpful told me that doing 6% in closing costs with this Lender is no problem and in fact the Buyers are fully approved from the prior purchase and all they need is a contract and an appraisal and he will close in 7 days! Wow! I am really getting excited now. So I let Eddie know the offer is for $205,000 and I want to make sure they are qualified for this amount. “No problem. This is less than the house they had under contract” Eddie says. “Get me a contract and I will order the appraisal today” This Eddie is on the ball!
Now like the good little Broker I am, I call the Seller, who happens to be a Realtor and Appraiser, to present this offer since the numbers do work out OK for him. Well first we have a good laugh at Eddie but decide to take Eddie at his word and accept the offer. We change all the time limits to reflect Eddie’s optimism about closing in 7 days. And we decide to add a little addendum stating the closing costs contribution of 6% will be made only if on the closing statement. No last minute “under the table” monies will change hands.
I get my Seller’s signature and fax this contract over to the Buyer’s agent. I decide to give her a quick call to let her know when she meets with the Buyers she needs to get as much information from them as possible about where they found Eddie and ask them for a “Good Faith Estimate” just to make sure the numbers are OK.
The next day the Realtor calls me fit to be tied. It seems good ole’ Eddie had contacted her to let her know that the Buyers actually only qualify for $185,000! And the Lender will only allow a 3% Seller contribution! I guess the bottom line is “Eddie don’t know squat!”
Moral of the story: A pre-approval letter from anyone besides the Lender is a worthless piece of paper. It is very important to place your Buyers with Mortgage Brokers that you can trust and who have a track record of successful closings. Be diligent when helping your Sellers negotiate. Don’t accept anything with out making calls to follow up and try to get as much information as you can. Listen to your gut instincts. What say you?
****This story has been embelished and the name has been changed to protect the guilty.
First published July 2006
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