proof of financing

deee_gwMarch 19, 2010

We have potential buyers (hooray). Last week they presented us with a contingency offer (need to sell their house first) which we rejected. Now they have come back and presented an offer with no selling contingency BUT they want to close 6/30 and we pay $7k in closing costs. Their agent says that they are approved to carry both mortgages if they don't sell their house during the closing period and that they will put 10% down on our house. We will counter with a much shorter closing period but their financing finangling makes me nervous.

My question is, is there an iron clad document that we can ask for that will prove to us that these people are capable of pulling off the deal?

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Beemer

Yes there is ... it's called an Earnest Money Check.
Up the earnest money amount to compensate you if they don't meet scheduled closing. I'd make it for the amount of 3 month's mortgage you'd pay plus any costs you'd incur if you had to cancel a move. That way, they are very "incentivized" to close -- and close on time.

    Bookmark   March 19, 2010 at 2:43PM
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susana_2006

The earnest money check is a great idea. But be sure to have a real estate attorney draft (or approve) the contract.
When selling a few years ago in California, I had a buyer back out after holding the property off the market for 2 months. My realtor told me that the buyer is well protected in Calif. and that it would have been virtually impossible for me to get the earnest money. Good luck.
Susan

    Bookmark   March 19, 2010 at 3:32PM
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lyfia

Earnest money will be refunded if there is a financing clause.

    Bookmark   March 19, 2010 at 3:45PM
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chrisk327

Every place does these transactions differntly. However, in my area there is still a financing contingency in all documents. That contingency requires the Buyer to recieve a "commitment" from a lender within a certain amount of time from contract.

I did essentially what your previous buyers did, I was able to get the mortgage. the commitment is a letter saying you're actually going to get the loan! now provide 2 pay stubs, proof of insuance and a few other things.

1) you can get a prequal from them with a note that says this is not contingent on selling the home.

2) hope that they aren't screwing with you, b/c it isn't always easy to qualify for 2 mortgages, even with 20% down, which they don't have.

    Bookmark   March 20, 2010 at 10:46AM
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brickeyee

" That contingency requires the Buyer to recieve a "commitment" from a lender within a certain amount of time from contract. "

The banks "commitment" is usually so full of holes that they can get out or actually loaning the money.

You are never sure right up to the closing table, and in some states with 'dry' closings things can even fall apart after the closing.

If you are really suspicious of the buyers ki9ll the deal.

I had a truly obnoxious seller once who backed out right at the settlement table over doubts the sale would close.

I let them see the bank check for the agreed upon price, then agreed to cancel the sale and walked out.

They called for days trying to get the deal back together.
My attorney finally told them (and their attorney) I no longer was interested in the place.

    Bookmark   March 20, 2010 at 12:35PM
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bethesdamadman

chrisk: "the commitment is a letter saying you're actually going to get the loan! now provide 2 pay stubs, proof of insuance and a few other things."

No, it doesn't. The loan officer isn't the one who makes the final decision - the underwriter does.

To the OP: Unfortunately, there is no iron-clad document that will guarantee that these people ultimately will get the loan. And the responses you received about the earnest money making a difference are totally inaccurate. As lyfia pointed out, the buyers will get the earnest money back unless they waive the financing contingency (which would be idiotic on their part).

    Bookmark   March 20, 2010 at 2:31PM
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peteprance

I am self employed so they make me give them my tax returns. it is such a pain to have to do!!!

Here is a link that might be useful: victoria secret

    Bookmark   March 20, 2010 at 10:56PM
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sweeby

I'd look into structuring the deal another way entirely -- Treating a certain amount of money as a non-refundable 'option' payment that is due to you as compensation for holding the house so long, and that will be counted toward the purchase price in the even the deal does close as scheduled. In other words, it's not a 'provisional' down-payment or escrow amount -- it's a straight-forward fee.

A good lawyer should be able to advise...

    Bookmark   March 21, 2010 at 2:14PM
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chrisk327

"No, it doesn't. The loan officer isn't the one who makes the final decision - the underwriter does."

not sure what your point is. The most solid thing you get in the whole process prior to actually exchanging checks is the loan committment letter. It is from the done after underwriter review stating you are approved and you need to provide a small list of items prior to or at closing and if I remember correctly was from the underwriter, not the loan officer.

    Bookmark   March 22, 2010 at 12:41PM
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brickeyee

"It is from the done after underwriter review stating you are approved and you need to provide a small list of items prior to or at closing..."

And if the buyer wants out they just fail to deliver the requested documents.

    Bookmark   March 22, 2010 at 3:15PM
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