There are only a few things quite as frustrating as writing a contract of closing in 30 days, and then being unable to close on time. Maybe the underwriter has questioned a line on the tax return or called for an additional requirement to obtain a termite report prior to approving the homebuyer for a loan: either way, it is no good.
Because these problems are becoming more common, it is the agent’s responsibility to pick up the slack, to raise the bar by identifying potential problems and dealing with them so that the deal will most definitely, be closing on time.
Here are three of the most common problems faced by homebuyers during the homebuying process and what agents can do to help their clients avoid them.
- Change in debt-to-income ratio. Sometimes the lender will qualify a homebuyer up to a specific purchase price. All is well and good. You locate a home for your clients, and you write the offer. Once the offer is accepted, the lender prepares everything for underwriting and oops… the debt-to-income ratio has changed. Perhaps the buyer has purchased a large item on credit (such as appliances, furniture, or a new car), or perhaps the buyer has co-signed on a loan for a relative or friend. In order to assure that this doesn’t happen to your clients, make sure that the lender has set expectations accordingly. One lender that I know uses what he calls the “10 Commandments of Lending” with all of his homebuyers. And, while he may have created the document tongue-in-cheek, he feels that if you present homebuyers with a set of things to avoid when obtaining a loan, you will save a lot of headache down the road.
- Lender or appraiser requires repairs. Even if your client is purchasing the home as-is, sometimes the lender will require specific repairs in order to assure that the home they are lending on is not going to cause problems down the road. Often, lenders want to sell their loans to Fannie Mae or Freddie Mac in the secondary market. In order to do so, those homes must meet certain guidelines—even if the client had planned to fix and flip. In order to assure that you don’t get caught chasing your tail at the last minute, communicate clearly with the lender about any potential hot button issues (problems with the roof or pest control) to assure that the selected loan program is suitable for the home your client has selected.
- Poor communication and general disrespect for deadlines. Time and time again, I hear complaints from agents, buyers, and sellers that the lender has not met specific guidelines, does not return phone calls, and can provide no concrete details about when and if deadlines will be met. While it may sound foolish, the first and easiest way to avoid this problem is to select a lender that has a history of providing excellent communication with all parties. Second, it is always best to work with a lender that has direct communication with those individuals who underwrite the loans. In this way, even if the news is not favorable, you are dealing with a good communicator who has direct access to decision-makers and who can speed things along.
The best way to assure you are closing on time is to work with a lender with a proven track record for success. If your client has a lender of his or her own, that’s great. But, be sure to have your client cross-qualify with your own lender of choice—not because you want your client to use your lender, but rather because you want to be certain that there are no red flags that could hamper a successful closing on your next transaction.