I wrote yesterday about the difficult situation I’ve been having with a mortgage broker representing the buyers of one of my properties. Between the comments on my post and the comments on a couple Internet forums I frequent, the advice and feedback I’ve gotten has ranged from “You just have to sit back, wait, and hope,” to “It’s all your fault, you should have controlled the deal better…take this as a lesson.”
Personally, I fall into the latter camp. This is my fault. Period.
I should have taken control of the deal from the beginning, and “encouraged” the buyers to use my lender. If they pushed-back on that, at very least I should have put a penalty clause in the contract that required the buyers to have more “skin in the game” should bad things happen with their lender. Unfortunately, at this point, the buyers only risk losing $500 if this property doesn’t close (assuming I don’t sue for Breach of Contract), which doesn’t give me much leverage.
Here’s a quick update on what’s happened since yesterday, and how I plan to proceed:
- The broker still hasn’t returned any calls, neither to me, my agent, or the buyer’s agent;
- We spoke with the buyer’s agent today, and he spoke with the buyers. Apparently, the buyers are “scared” to stray from the broker and are convinced the deal will get closed. I don’t know why they’re scared — perhaps the broker has indicated that he is the only one who can help them get approved — but I’ve made it clear to the buyer’s agent that it’s his job to convince them otherwise;
- The buyers still want to move in early. I’ve made it perfectly clear to the buyer’s agent that that will never happen, at least not until I’m convinced this thing is going to close (which won’t happen until we’re at the table and the check is handed to me);
- The buyer’s agent has alluded to the fact that the buyers had a credit issue that this lender was supposed to take care of, but that the issue hasn’t yet been resolved. He couldn’t give me any details (he didn’t have them), and obviously the broker won’t give me any details, but I’m now wondering if this is the reason things are being held up. It still doesn’t explain why the broker is ducking us though;
So, that’s the update…here’s my plan:
Come Friday at midnight, the contract expires. I know that the buyer’s agent plans to submit an extension, as the buyers still very much want the house. I also know that if the buyers had more skin in the game, I’d either be able to convince them to do what I wanted (i.e., use my lender) or compel them to pay for my lost holding costs. In order to force more skin in the game for the buyers, my terms for an extension:
- The buyers will escrow the entire down-payment (about $4000) for the property;
- The buyer’s agent will forfeit his $700 bonus (it’s only fair that we both lose some money, even if this fiasco closes);
- The buyer’s down-payment is only refundable to them if the seller (me) defaults on the contract (which I won’t);
- We extend the contract for one week.
This way, assuming they accept this take-it-or-leave-it offer, the buyers now have $4500 at risk (instead of just $500), and they have one week to get their broker to make good on the closing. Should we not close next week, the buyers will likely ask for another extension; except that this time, if we don’t come to an agreement on an extension, they will lose $4500.
So, come next week, assuming the buyers don’t want to lose $4500, they will have to submit to my extension terms, which will be using my lender and paying per-diem penalties for additional late closing. (and no, I’d never just decide to take their escrow money and screw them over…I don’t work like that)
While I hate to put the buyers in this take-it-or-leave-it position, I honestly think it’s for their own good. It will force them to play by my rules (rules that will help us all), and ultimately the deal will get closed more quickly and easily this way. And if something really bad happens, I’ll at least have their down-payment to reimburse me for all my holding costs thus-far.