We were supposed to close on The Wrong House last week, but it didn’t end up happening…it’s an interesting story, and I still am not sure exactly what happened…
While we were pretty adamant that we wanted a cash buyer, we found an investor (who was also a licensed real estate agent) who offered to pay above asking if we gave her the opportunity to get financing on the deal. She was planning to get a conventional 80% LTV loan from a lender who she said she had worked with on many occasions, and originally asked for 4 weeks financing contingency.
We told her that we’d only give her 2 weeks for financing contingency, and also required a $3000 (5%) earnest money deposit, as we weren’t overly confident about a financed sale. She was happy to reduce the contingency period and increase the earnest money, and also told us that she had the cash to close if need be, so we proceeded.
We didn’t hear anything from her until after the two week contingency period was over; a couple days after it ended, we got calls from both her inspector and appraiser that they needed to see the property. We thought it was a bit weird that she and her lender waiting until AFTER the financing contingency period to get the inspection and appraisal, but that was within her rights.
Ultimately, we didn’t hear anything else until two day before closing, when she called and left my wife a message that there were “title issues” and that she didn’t think we could close. Now, I just purchased this property (with clear title) a month ago, so I know there aren’t any title issues. After several back-and-forths, it turns out her lender finally realized that I had only held the property for 5 weeks so far, and said that they couldn’t fund the deal because of “anti-flipping rules” and the fact that I didn’t do enough rehab to the property to satisfy the loan requirements.
In other words, the title needed seasoning for the lender to be able to do the loan, which is MUCH different than there being title issues. And, had this investor really worked with this lender many times in the past, I would think this is something that would have been figured out BEFORE the financing contingency period.
The investor said she couldn’t close until mid-August, and asked if we’d hold the property until then. We offered to do so, but said that we’d need the entire 20% down-payment put into escrow and made non-refundable, just so we wouldn’t be waiting another 6 weeks with no guarantee of ever closing. She rejected that offer. I asked if she could still pay cash and then refinance. She said she couldn’t any longer. Then I called my lender and he told me he could likely get the deal funded for her. She rejected that offer. Then I offered to owner finance the deal for 6 months so she could get her financing in order. She didn’t even respond to that suggestion (and hasn’t responded to any message from us since).
Ultimately, she tried to keep the earnest money on the basis of it being my fault that she couldn’t get the loan (I didn’t own the property for long enough), but this was an absolutely ridiculous argument. She had two weeks to figure out her financing and didn’t do it — and she’s a licensed agent and investor so she should know better — so in the end, we got the earnest money. Given that I offered several more-than-reasonable solutions to help her get the property closed, I don’t feel bad for keeping the deposit, but am still wondering what the true story is about why she didn’t want to take me up on my offers of using my lender or letting me owner-finance it.