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HELP! Those buyers keep asking for a mortgage extension!

It seems to be a sign of the times, the new normal for home purchases.

mortgage contingency dateThe all important mortgage contingency clause. There is a date on the contract, then there is reality. It would seem that more and more requests for extensions on the mortgage contingency dates are being made by the buyers attorney these days as lenders heighten their scrutiny of their customers mortgage applications.

Sellers get very worried as these extensions come in. Is the buyer going to be able to perform? Is the house going to have to go back on the market? Valid questions indeed. Two questions I cannot answer with all certainty.

How can you protect yourself as a seller? The long and short answer is... be prepared.

You can request that the buyer show a pre-approval rather than a pre-qualification at the time of the offer. The pre-approval is much stronger than the pre-qualification, it means the buyer has made application already and the lender has pulled credit, verified certain things. It is still not a guarantee that the buyer will be given the loan. HOWEVER, based on the loan product the buyer is using or the particular lender they are using it may not be possible to obtain a pre-approval from the buyer. Sometimes a pre-qualification is all you can get.

You can request proof of funds for future deposits but that doesn't mean the loan will fund either.

There truly is no easy answer, and often it is not the fault of the buyer that these requests for an extension of the mortgage contingency have to be made.

Pushing a potential buyer to tighten those dates up when an offer comes in can also lead to issues for the seller. It can lead to an emotional reaction from the buyer to do so, and an inability to perform at the end of the day!

The cold hard fact is that mortgage contingency extension requests are on the rise, I hear it from real estate agents and from real estate attorneys alike. It seems to be the "new normal" and it is something we need to prepare for. We hope it won't happen, I am not surprised when it does happen. I also don't believe it automatically means the buyer won't get the mortgage after all.

Sometimes the mortgage approval comes in loaded with contingencies itself. When your attorney sees what is outstanding we may have a better idea what is going on. Some is normal, like pulling a buyers credit again just before the closing, or proof of insurance by the buyer for the home, clear title to the home. These are typical, to be expected and should not raise the sellers anxiety level.

When the buyer is not providing documents required by the lender in a timely fashion, that raises my alarm status for sure and a call to the buyers agent is in order to try and determine what is going on.

If I see an unrealistic time frame for a mortgage contingency date and closing on an offer to purchase I double check those dates with the buyers agent and ask if those dates came from the lender.

I know some lenders are capable of a 30 day mortgage commitment and a 45 day close. A certain few are even capable of a 21 day mortgage commitment and a 30 day close, but that is very, very rare. Some lenders just don't work that fast, certain programs will require longer time frames. I am far more comfortable seeing a 45 day mortgage commitment and a 60 day close, which can be moved to earlier dates if the commitment comes in faster. (On or before works well for me!)

Just another twist in the selling process we see on a daily basis in the Southern Litchfield County housing market! 

And the most important and hardest thing to realize is, it ain't over till the fat lady sings at the closing table!

 

Originally posted at "Mortgage extension requests on the rise, what's a seller to do?"

 

Andrea Swiedler, Realtor, Southern Litchfield County Real Estate

2017 President, Greater New Milford Board of Realtors

2017 Connecticut Magazine 5 Star Realtor

 

 Search homes for sale in Litchfield County, CT.

 

Coldwell Banker Residential Brokerage

Litchfield County Regional Office,375 Danbury Rd, New Milford, CT 06776

 

© Andrea Swiedler 2009 - 2017

 Always do right. This will gratify some people and astonish the rest. - Mark Twain

Comment balloon 31 commentsAndrea Swiedler • August 29 2013 06:18AM

Comments

I have had a ton of extensions to closings because of the mortgage and so far none of them have not closed.  Knock on wood...I think it's more the paperwork and backlog than qualifications.

Posted by Marc McMaster, Putting my clients before myself (RE/MAX Centre Realty) over 7 years ago

Andrea,

Last month I had a home that we extended 20 days.  There were moving trucks circling the country.  Wells Fargo made it extremely difficult for all parties.  

Posted by Pamela Smith, Sun City West, Corte Bella, Sun City Grand (Award Realty) over 7 years ago

Having a pre approval letter vs. prequal letter up front with the offer is very wise.  I am seeing more of these extension requests also.  Although, it is not common, buyers can back out of the contract last minute due to issues with the loan and the possibility of this happening so close to a seller's moving day can cause the seller anxiety.  I agree, having a longer time frame is a good idea.  We typically have 30 day close here but my transactions that are 60 day close tend to go much smoother since we have extra time.  On or before works well for me too!

Posted by Patricia Beck, Colorado Springs Realty (RE/MAX Properties, Inc., ABR, GRI, SRES) over 7 years ago

Marc, sellers get very, very anxious. It is a chore to keep them calm about this. It is probably more paperwork, it is just very hard to handle as it keeps the closing date a mystery, among other things.

Pamela, it is one of the biggest issues. How does a seller plan for a closing date? Very difficult part of our process these days and it is happening more and more and more. With Wells Fargo those moving trucks should have been circling them!

Posted by Andrea Swiedler, Realtor, Southern Litchfield County CT (Berkshire Hathaway HomeServices New England Properties) over 7 years ago

Patricia, with pre approval vs pre qual, sometimes the lender is not allowed to issue anything other than a pre qual, the language of the letter is set by their attorneys. Makes our lives more interesting these days and tests us all. 

Posted by Andrea Swiedler, Realtor, Southern Litchfield County CT (Berkshire Hathaway HomeServices New England Properties) over 7 years ago

Andrea, you are right contingency extensions are not uncommon, and they can be for a multitude of reasons.  I have one loan in process that it took over two weeks for the employer to verify employment and this is a CHFA with a DAP loan.  Property issues a lot of times hold things up as well.  But the reason for extensions most of the time is the Buyer not providing all the documents requested, and that is a very good reason for concern

30 days for commitment and 14 to Close is pretty much the norm for us, however, we are normally closer to 21 days for commitment from the time the file is turned in.  There is just so much that is out of the Lenders control, and that they have to wait for, that a shorter time period is not very realistic.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 7 years ago

Andrea, I have been allowing 6 weeks for mortgage commitment and then cross my fingers as there are certain to be hiccups. I have that right now with a self employed buyer, and the checks seem to be double the norm.

Posted by Ed Silva, Central CT Real Estate Broker Serving all equally (Mapleridge Realty, CT 203-206-0754 ) over 7 years ago

It's helpful to have a good relationship with several mortgage lenders.  We have an in-house mortgage consultant, and she does a great job with communication to all parties concerned!

Posted by Andrew Payne Realtor® Richmond VA Homes For Sale~804-938-5257~, Richmond, VA, Real Estate, SRES®, NAR Green (Piedmont Real Estate) over 7 years ago

Yes, I like projecting it out to the 45 days and if it can close sooner, we do!

Posted by Terri Poehler, Coral Springs Real Estate Agent (Realtor) over 7 years ago
In our market, sellers are not considering offer packages without pre-approvals. This isn't a guarantee against loan delays, but it does give the seller some measure of confidence. Property issues often do cause delays though.
Posted by Laurie Martinez, South Orange County Real Estate (Berkshire Hathaway HomeServices California Properties) over 7 years ago

Agents who write a contract of sale with a 30 day or even 45 day closing are just asking for trouble.  This is especially true if the buyer is using any type of down payment and/or closing cost assistance programs where a second level of underwriting or approval is required. 

I want a 60 day close and if pushed by a seller, we may go to 45 days depending on loan type.  30 days is simply unrealistic today. 

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) over 7 years ago

Unfortunately many times it depends on how good the loan officer was upfront with getting all the necessary facts from the buyer.  If you get a newbie who doesn't know what to look for, there's probably going to be all sorts of last minute documents needed.

Posted by Tim Maitski, Truth, Excellence and a Good Deal (Atlanta Communities Real Estate Brokerage) over 7 years ago

George, I know you are quick and much is out of our control for sure. It is so upsetting to sellers, their lives are on hold if the dates are not realistic.

Ed, I always check with the lender before submitting an offer. Always. 

Andrew, it does help, but it doesn't help when you are the listing agent!

Terri, on or before, it still upsets the sellers plans. I do everything I can to prepare them for this. 

Laurie, certain lenders, and good ones I might add, (here at least) are only giving out pre quals. 

Lenn, it really is. George says he can do it, he is a man of his word but that would mean the buyer has to be ready to get moving on things too. I have one other lender, a local bank, who is famous for fast closings. Otherwise you can kiss that goodbye!

Tim, it depends on so much. Sellers lives are put on hold because of extensions. 

Posted by Andrea Swiedler, Realtor, Southern Litchfield County CT (Berkshire Hathaway HomeServices New England Properties) over 7 years ago

Andrea:  You (and Lenn) are smart professionals when you ask for the lengthier, further-out Closing dates.  As George pointed out above, there can be a myriad of reasons as to why processing does not progress as you would hope or as it should. 

I'm sure you've seen the news reports of real estate-related companies/Lenders laying-off employees too.  That trickles down as to how fast the requests for info are seen to and processed ... in turn causing more delays.  I don't see it changing any time soon, unfortunately.  Frustrating for all, but best to set a generous Closing date and be pleasantly surprised ...

Gene 

Posted by Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi, 708.921.6331 - 40+ yrs experience (NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656) over 7 years ago

Gene, thanks for the complement. I have also seen sellers and their agents demand an earlier mortgage contingency date, which is foolish at best. These delays cause so many, many problems. 

Posted by Andrea Swiedler, Realtor, Southern Litchfield County CT (Berkshire Hathaway HomeServices New England Properties) over 7 years ago

The loan process has become so tangled that I always try to get 60 days for the mortgage contingency.  That way if it comes in earlier, great.

Posted by Marnie Matarese, Showing you the best of Sarasota! (DWELL REAL ESTATE) over 7 years ago

The market is too hot for a 60 day close, so I ask for 45 days, and the Agents tell me it needs to be 30.  We settle on 45, with a 14 day mortgage contingency.  I'm surprised to read most others are okay with a 21-30 day mortgage contingency ... 14 days is awfully tight and I almost missed the last one.

Posted by Raymond Denton, Veteran Friendly Realtor® (Homesmart / Evergreen Realty) over 7 years ago

The loan condition used to be the real date of loan committment.  This timing was hardlined into California contracts (which could be changed) at 17 days.  That 17 days still glares in the offers we present even though everyone knows that it will likely take longer than that.  I think it may be a time for a change of that hardline date to match the times.  I guess I will go talk to my legislator again...

Posted by Jay & Michelle Lieberman, Creating Calm in the Buying and Selling Chaos (Keller Williams World Class) over 7 years ago

Marnie, I agree, sellers just don't at times. They often shoot themselves in the foot  by demanding a shorter time period.

Raymond, the shorter the dates, the more chance of an extension. Sellers and agents shouldn't be pressuring loan officers into shorter dates. At least in my humble opinion.

Jay & Michelle, 17 days? Wow... 

Posted by Andrea Swiedler, Realtor, Southern Litchfield County CT (Berkshire Hathaway HomeServices New England Properties) over 7 years ago

In our Sales Agreement we have the provision that the listing agent and/or selling agent can contact the lender to discuss non-confidentials.  Of course, this may help ascertain, but it's only available after the offer is mutually accepted.  And yes, a done deal is a closed one!!

Posted by Carla Muss-Jacobs, RETIRED (RETIRED / State License is Inactive) over 7 years ago

Andrea: My last contingency dates have always been "until funding". The loan package hasn't come through until about a week before closing. Usually there were some repairs that were necessary to be done as asked for by the appraiser, etc. I can see that dates need to be extended if they are set for a small time period. Just not realistic.

Posted by Hella Mitschke Rothwell, Hawaii & California Real Estate Broker ((831) 626-4000) over 7 years ago

We don't have to provide a mortgage contingency date, just a closing date. Fortunately, the lender I use acts were quickly. I usually know about financing with 10 - 14 days. I've actually closed in as little as 13 days. My lender can easily close in 30 days.

Posted by Tammie White, Broker, Franklin TN Homes for Sale (Franklin Homes Realty LLC) over 7 years ago

Carla, interesting. Not the case here though. 

Hella, very different, that is interesting. 

Tammie, I am finding this interesting, some of you don't have to put a mortgage contingency date. 13 days, wow!

Posted by Andrea Swiedler, Realtor, Southern Litchfield County CT (Berkshire Hathaway HomeServices New England Properties) over 7 years ago

I'm always amazed when I get a contract with a financing approval date that is before the appraisal contingency date.  You can't get financing approval without knowing if the house appraised yet.

Posted by Cindy Jones, Pentagon, Fort Belvoir & Quantico Real Estate News (Integrity Real Estate Group) over 7 years ago

That is the great unknown-- the mortgage.  Tied to it is the appraisal, and if interest rates spike, it could kill the deal.

Posted by Gary Frimann, CRS, GRI, REALTOR and Broker (Eagle Ridge Realty / Signature Homes & Estates) over 7 years ago

When working with buyers I give them a check list of questions to ask their lender.  Fortunately, in NH pre-approvals are not difficult to obtain.  However, some lender promise commitment letter with so many conditions that I wonder what they think commitment means.  So, I have buyers make it clear that we need a real "clean" commitment letter.

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) over 7 years ago

Things have gotten a little tighter recently and they are going to get tighter as the interest rates rise. Banks are in the business for themselves only but most Americans do not really understand this. They have quotas by types of mortgages. You have to be careful.

Posted by Jimmy Faulkner, The Best Of St. Augustine (Florida. Homes Realty & Mortgage) over 7 years ago

Andrea, I do see these things happening more often now-a-days - both for my buyers and sellers! (Mainly when HOA is involved - it's impossible to get documents in timely manner!)

Posted by Praful Thakkar, Andover, MA: Andover Luxury Homes For Sale (LAER Realty Partners) over 7 years ago

30 days to closing is not a good bet these days but I rarely go beyond 45 days unless it is a foreclosure or short sale transaction.  I call each lender to assess the dates with them and ask about where in their process things can go wrong or take more time.  Then I can talk with the buyers agent prior to P&S and get dates that make more sense.

Posted by John F Muscarella, Broker/Owner, Venice, FL, Florida's Suncoast (RIVER FARM PROPERTIES, LLC) over 7 years ago
Andrea, your post probably strikes chords in many - Realtors, Sellers, Buyers, etc. Nothing like biting nails during the waiting game - loan processing or final loan package. As you, Lenn, Gene and others have commented, common sense says lengthening the time from contract to closing date just decompresses that waiting game and perhaps spares us nightmares.
Posted by Jane Chaulklin-Schott, TeamConnect Luxury Homes - Orlando, Florida, 32836 (TEAMCONNECT REALTY - (407) 394-9766) over 7 years ago

Andrea, we have all had these problems, they exist in every mortgage company, but I think the big banks are the hardest and filled with the most surprises. I had one that closed and we did not fund for 15 days.

Posted by Jack O'Neal (HomeSmart Elite Group) about 7 years ago

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