Dotting the Dots in the I’s
The latest delay in a foreclosure deal where I’m representing the Buyer?
The pre-approval letter from their lender lacked the lender’s signature.
The bank might as well have objected to the font type and size in my client’s offer.
What’s especially annoying is that the bank-owner was sitting on my client’s offer a full two weeks before they decided they needed a signed pre-approval letter. (For the record, the required signature took about two hours to procure.)
Unfortunately, such slow motion, bureaucratic snags are typical in foreclosure deals.
Holding up a deal for want of a would-be lender’s signature is silly, because the Bank could easily have called the lender to verify the Buyer’s financial bona fides (which is what I do when I represent Sellers). It’s doubly silly because everyone knows that pre-approval letters don’t mean anything.
They’re not binding on the prospective Buyer, who’s not obligated to use the lender that generated the pre-approval letter. And they’re not binding on the lender, who’s yet to perform the bulk of their due diligence.
All that really counts is whether the Buyer’s loan gets final underwriting approval from a still-solvent bank, which in turn depends on how strong the Buyer is financially, and whether the home appraises.
But you don’t get to any of those until there’s a signed-off deal.
Which we’re still waiting on.
Squeaky Clean Offers
That’s why my routine advice to Buyers interested in a foreclosed home is to make their offer as simple and clean as possible, to minimize the potential for ridiculous, time-eating snags like this one.
(And no, I don’t think anyone from the bank is reading this blog.)
P.S.: if there’s an upside to any of the perfunctory, deal-by-checklist protocol the foreclosure banks all seem to be following, it’s the “entry barriers” they present to any subsequent Buyers. In other words, flushing Buyer #1’s offer means starting the whole, laborious process over with Buyer #2 (or #3 or #4 or #5 . . . ).
Call it the foreclosure equivalent of “dancing with the one who brung ‘ya.”