Housing Resources Guide
|Published April 2010|
A willing buyer and a willing seller aren’t enough for a smooth sale
Real estate transactions are complicated processes, and here is one case example. This story is written anonymously since its purpose is to provide an illustration of difficulties that may be encountered, not to blame specific individuals.
A seller offers something for sale, and if the price is right, a buyer comes along and purchases it. Everyone gets what he wants, and the market cycles merrily along. At least that’s the way the market is supposed to work.
I found out recently that even when there is a willing seller and a willing buyer, things don’t always work that way.
In the post-apocalyptic world of the new real estate market, things are not that simple.
My ex-wife and I put our house on the market in January 2006, the worst possible time. It was just as things in the economy were beginning to fall apart.
When we listed our property, a 10-acre hobby farm with a huge 5-bedroom house, our price was in the middle of the range of what other similar properties had recently sold for.
What we did not know was that we were at the top of a steep and slippery slope. For the next three years, we found ourselves in a race in which we were not able to lower our price fast enough to keep up with the plunging market.
In addition to this, the expectations of potential buyers went through the roof, and we were forced to spend many thousands of dollars on improvements just to stay in the game.
Finally, nearly three years and three Realtors later, we gave up and took our house off the market. Constantly preparing for showings during which the potential buyer who requested the showing may or may not even show up, wears one down over time. It is a maddening experience.
A couple of months later, a potential buyer showed up on our doorstep in the form of a young couple who had toured the house the previous summer while it was still on the market.
We agreed that we were still willing to sell the property, and contacted our former Realtor to represent us. To be strictly accurate, it was the father of our former Realtor. Our Realtor had since given up the real estate game and moved on to find a career where he could actually support his family.
Following is a slightly edited log of the events leading up to the eventual sale of the property. It covers the roughly three-month period from the time the purchase agreement was signed to the time the sale was completed. It is intended to illustrate some of the challenges that can affect a home sale even after a willing seller and a willing buyer have agreed on a price.
It is not necessarily typical of what other buyers and sellers might encounter, but it provides some examples of what can happen.
One thing that is probably not typical is that although my ex-wife and got divorced at the beginning of this process, we continued to share the house because neither of us could afford two mortgage payments. This does, however, illustrate that whether one is buying another house or renting a new place, there are always complications.
We were as cooperative as possible during this process. We did everything our Realtors asked us to do, and even followed a few more unconventional suggestions from others.
One of these involved me ordering a statue of St. Joseph, who apparently is supposed to have some special powers over real estate transactions. I am not a religious man, but by that point, I was ready to try anything. I buried the statue upside-down on the southwest corner of the property, facing the street, according to the accompanying directions. I turned around three times and recited the home-seller’s prayer that was included with the statue (feeling slightly embarrassed at the prospect of what passing traffic might have think of my performance).
This log is based on my notes, recorded during that period, and reflects my perspective. No doubt the others involved have their own impressions of these events. I am confident in saying that everyone involved was fed up with the process by the time it was complete.
We met with our Realtor last night and signed a counter offer. We accepted the price part of the offer, but not all of the personal property they wanted. We did offer to sell some of the items at a reduced price. (Typical of recent sales, the buyers asked us to include an extensive list of personal property in the deal, ranging from book cases to tractors).
We won't know for a week or so if all of the contingencies have been met, so we are kind of in limbo. For now, we have to start preparing as if things are going forward, but can't go too far in case the deal does not go through. If it does, we will have to coordinate the whole moving process. When we do finally get to the point of moving, we will have to coordinate a plan to get two people moved in two totally different directions without getting in each other’s way.
Our Realtor said today that the buyers signed the revised purchase offer without any changes. The liquid propane tank was filled today and I called him with those numbers. (The buyers asked us to have the tank filled to determine exact usage). The soil tests have already been approved, so as far as I know, the only two contingencies that remain are 1) acceptance of the propane usage, and 2) the inspection.
We should know by the weekend if the deal is going to go through.
Then, it will be time to look for a place to live (my original plan was to purchase a house. By the end of the process, however, my savings and equity in the house had shrunk to the point where this was not an option).
The buyers agreed yesterday to pay for half of the new septic system. (An inspection determined that even though a new system was installed in 1990 when we purchased the property, the rules have changed, and that system was no longer compliant, so a new one was needed. The property was in Carver County, but I understand that the rule change came from the Minnesota Pollution Control Agency.).
It really is one thing after another lately.
The good news is that a friend and I got all the rest of my things moved last night. (Based on the scheduled closing date, I had moved into a rental townhouse two weeks earlier so that my ex-wife and I didn’t both have to move on the same day).
The bad news is that our Realtor called last night and said the closing will not take place at 9 a.m. tomorrow as scheduled. Despite the fact that we have been trying to push them along for months, and they have assured us all the way that they saw absolutely no reason that things would not go smoothly and on schedule, now they tell us that the buyers’ financing guy can't get things through underwriting. So now, they changed back to the original underwriter that they wanted to use, but can give us no idea how long it might take. I could be three days, or a couple of weeks, but probably less than a month.
Now I have to figure out how to pay two house payments and other bills for both places, which is EXACTLY what I was trying to avoid, and why I asked our Realtor 100 times if there was any reason at all I should be concerned, or plan that things might not go through. I also have to call the electric company to ask them not to cancel the service as previously arranged (so my ex-wife will still have lights). Then I have to call my insurance agent and tell him not to cancel the homeowner’s insurance. I am sure there are others I have to call to tell them not to cancel accounts as arranged, and ask them to continue service for an indefinite period until we figure out what is going on.
It is even worse for my ex-wife. I am sure she will have to cancel her closing on her new place, and then try to coordinate it to match our new closing date, whenever that is. She will also have to call all the people she had lined up to help her move and reschedule them.
(We were extremely frustrated at this point. We had asked all the questions we could think of before making plans to move, and we still ended up in a risky position. Getting accurate information proved very difficult).
I had a vacation day scheduled tomorrow for the closing, and now I am just going to go to work so I don't waste a precious vacation day.
This stress-free week thing is not working out very well.
(It did not help that, although the buyers’ mortgage broker was local, the underwriter was in an office in another state).
The update (from last Friday) is that the file is in the hands of the underwriter, and they are shooting for a closing on Wednesday or Thursday this week. Their shooting has not been very good in the past, so we will wait and see. A Thursday closing would leave my ex-wife a whole 24 hours to get her other deal closed (she was somewhat lucky, in that her new house was newly built and bank-owned. Otherwise, there could have potentially been two other families who had to try to reschedule closings around this moving target).
Following is the update from last night. The quote is from the buyers’ financial person.
“We have progress today! Our file has touched down and now is in the hands of my underwriter of choice. I am very excited that it has reached its destination, the next step is to get looked at asap! Understand that underwriters look at hundreds of files per week. I am pushing hard. I hope to see an approval Wednesday or by the latest Thursday. This is what I am told and I am taking this as gospel.
Again thank you for your patience and know that this will happen, it’s just a matter of when.”
The above is the group message that is sent out to the buyers, the Realtors, and my ex-wife, and possibly the closers. I finally sent him a message yesterday and asked him to add me to his e-mail list, since I was having to rely on my ex-wife or our Realtor to forward the updates to me.
From the above message, it appears that we have gone from “shooting for a closing” on Wednesday or Thursday to “hoping to see an approval” by Wednesday or Thursday, and they won't start thinking about setting up a closing date until after they get an approval from the underwriter.
In the meantime, we keep getting bills for the house, and really have no idea when this will be resolved. The electric co-op also called me yesterday wondering what is going on with the closing (since I arranged to cancel service, and then had to call them back and tell them not to, so the woman has had this file sitting in her desk for a couple of weeks already).
It’s just the same old story, more delays and target dates that drift like clouds on a windy day.
“Good afternoon all! I am writing because I have confirmation from my underwriter that he has the file in front of him!
He officially received it after lunch time so he told me that he will have the conditional approval on my e-mail/fax before I rise in the morning, Thursday. This is great news and encouraging that we are on the right track! Nine years experience tells me he will want something lord knows what as a condition from him in the approval. This is standard. Very few files go through underwriting these days with out having something to be updated or verified. I asked if we can turn any conditions around in the same day (to get our final approval and get it ready to close Friday) and he told me that we could (barring the time of day).
We are going to do everything in our power to close this Friday! Thanks again for your patience and trust that we are doing all we can.” (the above is another quote from the buyers’ financial agent).
I find it interesting, the subtle changes in language as this evolves.
Nothing new to report. I am pretty sure the underwriter is on dope. The underwriter apparently keeps thinking up new hoops for us to jump through, and seems bent on delaying this process indefinitely. Part of the recent delays are also due to the Realtors. My ex-wife found out weeks ago (by calling the buyers' lender) that they required an escrow of 1.5 times the estimates for the new septic system. This is outrageous, because we already had to get competitive bids, and no contractor is going to get by with a 50 percent cost overrun. What it means is that instead of having to escrow the $15,000, it will cost to put in the new system, we have to escrow $22,500 “just in case” and this money is tied up until the project is completed. Anyway, the Realtors insisted that this wasn't necessary, so when we renegotiated the revised purchase agreement and addendums, they were based on the $15,000 number. Now, of course, the underwriter won’t budge on that point, and the options were for somebody to come up with another $7,500 to put in the escrow account, and none of us has that kind of cash laying around, or convince the septic system contractors to submit revised bids. Our Realtor reached the low bidder who was sitting in a fish house on Lake Mille Lacs, and he agreed to do this.
Of course, this was not good enough for the psycho underwriter. We have to get at least one more “adjusted” quote, even though the other guy was already the low bidder. Our Realtor said he would get that to the underwriter by today, but I don't believe anything anymore. And, I have no idea what other tricks the underwriter might have up his sleeve to delay things after he gets this piece. Beyond that, no one has been willing to give us any idea how long it might take to set up another closing once the underwriter is finally satisfied.
In other interesting developments, we found out this week that our Realtor is no longer working out of the same office. We found that out when my ex-wife called there and was told that he no longer works there, and they don't have our house on file. Fortunately, we have his home and mobile numbers which still work.
I found out yesterday that my ex-wife’s new Realtor plans to close her shop by the end of this week because she and her husband are moving out of the state. They apparently are going to work on the weekends until they clear up any outstanding contracts that they have been working on (we had our house listed with one Realtor, and my ex-wife had engaged the services of another Realtor to help her find a new house).
It appears that it will all come down to this afternoon. Up until some time after 1 p.m. yesterday, we were told they were still hoping for a 4 p.m. closing yesterday. That did not happen, and, it turned out there were two things that they still needed from the buyers (should have had by original closing date) that they didn't have. Many e-mails and phone calls back and forth. The mortgage broker changes his story with the wind. I think everyone has weighed in and impressed upon him the urgency of getting this done today. Even if it does close today, my ex-wife won't be able to arrange closing on her new place until Monday. If hers is not done Monday, she could lose her house and her earnest money. They buyers rented a truck for this weekend (arranged three weeks ago) and their lease on their apartment is up on Monday. I fear if this closing does not take place today, there may be bloodshed. My ex-wife, who is not normally musically-inclined, has been going around singing “I shot the sheriff” with a strange gleam in her eye.
We should know something by the end of the day.
Close, but no close. That is a play on words, see? The first “close” deals with proximity, and the second “close” refers to an action, such as closing escrow on a house, which didn't happen yesterday.
We spent three and a half hours in the office of the buyers’ Realtor yesterday afternoon. The closing was scheduled for 2:30. At 1:43, the buyers’ loan guy sent an e-mail to all involved saying “you have my word and the word of the mortgage company that this will close today.” (The “word” of some people is not worth much).
At 1:53 p.m., he sent an e-mail stating that the he still planned to close Friday, but the closers on both sides could only close at 2:30 p.m. (the scheduled time) because they had other closings scheduled later in the afternoon, so it would have to be pushed back to Monday (trying to make it sound like it was somehow their fault). Meanwhile, because of the distance we had to travel, most of us were already at or near the closing location because we had been assured that the closing was going to happen and had made arrangements to be there.
The sellers were ready. My ex-wife and I were ready. The Realtors were ready. The closers were ready.
The hang-up (according to the buyers’ financial agent) is that the underwriters at the lender’s office were not convinced that the septic system is working, and wanted further assurances from the inspector that it is. There is absolutely no reason that this should have even still been an issue at this point, but that is the way things have been handled all along by this guy. Several phone calls and discussions followed. Options were considered. During one conversation with the financial agent and his supervisor, the buyer was told that the supervisor would call the lender and “stay on the line until this was resolved.” The buyer called them again later, and was told that they had talked to the lender, but it hadn't been resolved, and they weren't sure if the lender’s office was still open. They would check, and call back in five or 10 minutes. That never happened.
If this does not close on Monday, alternative plans have been discussed. This is causing extreme hardship, especially for the buyers and for my ex-wife. The buyers have to be out of their place on Monday and my ex-wife could lose her new house on Monday. This is unbelievable, not only to me, but the Realtors as well, and they have many years of experience in this area.
This concluded what was an extremely stressful time for everyone involved.
My advice to any potential buyers or sellers who choose to jump into the market is not to assume anything. This is always a good policy, but it is even more important now.
One must verify everything, get things in writing whenever possible, and try to have a contingency plan even when one is told it is not necessary.