Mortgage Broker Frustrations

March 18, 2009 · 8 comments

Just thought I would take a couple minutes to vent some frustrations, and perhaps solicit some feedback from others who may have some ideas on how to proceed…

The not-so-quick story:

The Second Chance House has been under contract for nearly 6 weeks now, and we’re about 3 weeks past the original closing date. The main reason for the schedule slip is that the mortgage broker forgot to order the second appraisal on the house until nearly two weeks after the first appraisal (and after the original closing date). When we called him out on the mistake, he got very defensive, made up a horrible excuse for why it took two weeks to get the second appraisal, and basically said, “I don’t really care what you think, I’ll schedule the closing for whenever I feel like it.”

Well, it pissed us off, but given that we thought we’d close the following week, we didn’t want to do anything drastic, and let it be.

Once the second appraisal was completed, the broker sent the information to the Department of Transportation to have it processed so they could cut the buyers a check (the buyer’s are getting their down-payment from the DOT because of some weird eminent domain situation). A week passes, and the buyer still hadn’t received a check from the Department of Transportation. We call the broker to find out what’s going on, and he basically again says, “I don’t know, I don’t care, leave me alone and I’ll schedule the closing whenever I feel like it.” It appears he’s still pissed that we called him out on his mistake and is now just trying to piss us off.

Then, last Friday, the buyer’s receive their check from the DOT. They deposit the check, and we expected to hear from the broker this week that the closing is scheduled.

When we didn’t hear anything on Monday, we called the broker, only to have his answering service tell us that he’s out of town for the week. We leave a message for the guy in his office who is supposedly covering for him, but he doesn’t call us back. We drive to their office, but it’s just a store front, and nobody is there. We call the closing attorney, and he tells us that he is ready to close, but is just waiting for the broker to send him the loan package (he apparently talked to the broker a few days ago, but hasn’t heard from him since). The broker is apparently not answering the buyer’s agent calls either.

Given all this, it seem unlikely that we’ll close this deal by Friday, at which point our contract with the buyers expires and we need to extend the contract (or terminate it). It’s worth noting that the buyer is a military friend of the broker (that’s why he was chosen), but the buyer is really pissed as well, as they’re paying rent until they can close this thing. In fact, the buyers have asked us if they can move in prior to closing and pay us rent until close.

At this point, here are some things that I’m thinking about doing (and not doing):

  • First and foremost, I’m not letting the buyers move in prior to closing, regardless of how much rent they pay. Our holding costs are about $250 a week on this property, but I’d rather keep spending that than take a chance on the buyers moving in and then not closing (and having to fix up the property again);
  • Wait for the broker to get back into town and let him schedule the closing for whenever he gets around to it; in other words, don’t rock the boat and risk losing the deal;
  • Demand that the buyers close with our lender instead. This will likely take about 2 weeks from today, which won’t make them happy, and they also won’t be happy having to deal with all the application work again. That said, our lender says it shouldn’t cost any extra money, assuming he can get the appraisals transferred from the current broker (unlikely in my opinion) and the buyers are a bit peeved at their broker right now. The down side to this is that it would cost an extra $500 in holding costs to wait the extra two weeks to close;
  • Charge the buyers or their agent an extra $500-1000 to cover some of our extra holding costs. I’d hate to impose this on the buyers (it’s not their fault), but the agent is ultimately responsible for ensuring a smooth closing from their side, and that hasn’t happened. He’s currently getting a $700 bonus on top of his commission (we offered it as part of the deal), but I’m thinking he deserves a penalty for letting this get out of hand
  • Do some combination of the above;
  • Listen to suggestions from others…hint, hint… 😉

Okay, any suggestions? And if I just wait it out and let the lender take his good ‘ole time, does anyone have any suggestions on how I can retaliate against this lender after the deal closes (I’m okay with anything really, really mean-spirited, as long as it’s not illegal)…

8 responses to “Mortgage Broker Frustrations”

  1. Steve says:

    You are kind of in a tough situation with this. The mortgage broker does not work for you, and even though it is his fault, most solutions punish the buyer.

    1. Oftentimes, we want to force the buyer to commit to the property. It sounds like your buyer is committed, but why not ask the buyer’s agent send an MLS form removing all contingencies making their deposit non-refundable. In the vent they do not close escrow. We had a buyer that needed more time to fulfill their loan commitment, we not only made their existing deposit hard, but we asked them to put $4,000 more into escrow (that was non-refundable).

    2. I would be fair about this, but you could come up with a per diem penalty. Give them 7 days, everyday after that they pay a $100 penalty. Or escrow gets closed. You can negotiated a per diem that comes out of the agents commission, as well. Banks have this in all their offers. You can always wave it later on, if you want too.

    3. Just like RE agents, I think mortgage brokers need to have a broker that they hang their license with. Try to get a hold of the broker… (not 100% sure on this case).

    If I was me, I would provide a list of some options to the buyer’s agent:
    1. make deposit non-refundable
    2. per diem penalties
    3. start qualifying with my loan officer
    4. etc

    Let them pick their fate, that way they have ownership in getting the deal closed and they chose the penalty they face if they cannot deliver.

    Obviously, it’s a tough situation because if the deal falls out, you have 3-4 weeks minimum with a new buyer anyways.

  2. bilgefisher says:

    It amazes me how much money people throw away through crappy service. Word of mouth is huge in any industry, but especially real estate. How many thousands of dollars is this guy throwing away becuase he is to lazy to do his job.

    Best of luck getting this one figured out.

  3. ezra says:

    This one’s a no brainer.

    The contract is null and void. I would absolutely risk losing the sale. You’ll be happy to renegotiate the terms to compensate you the extra monies you’ve been forced to shell out. The buyer won’t have to pay a penny more. Make the realtor take it out of his commission.

    Definitely don’t let them move in early. And don’t even think about making them close with your lender.

  4. Steve says:

    Ezra – that sounds all fine and good. But if the buyer walks, which they can (agreed they probably won’t), you lose all the carrying costs anyways and start a minimum of a 4 week process again with someone else.

    Turning properties is key… if they are desperate and you are firm with them, they will eventually close. If you have a willing buyer, with real money, at a profitable price, I’d suggest being firm and patient.

  5. Seth says:

    For me it boils down to how confident you are that you can get the property under contract again, at a price you’re happy with (and I guess how badly you need to get your money invested in this property out).

    If the broker is behaving like this, in the current market, I think you have to write him off as a lost cause. Many brokers would be bending over backwards to get deals done in the current real estate day and age. For whatever reason, this particular broker isn’t motivated at all, and I see no reason to think he’ll get the deal closed even when he’s back in town.

    After writing him off, the deal is essentially dead, so either you start from scratch with the current wanna-be buyers, or you simply just put it back on the market. The current buyers seem pretty motivated, if they’ve hung around this long, and they have some skin in the game, so I’d try to hang onto them.

    Here’s where my two cents differs from what you’ve heard so far, but I don’t think you can penalize the buyers for this situation, when offering them a new contract and closing through your lender. And I’m not even sure their agent should take the full hit, either, as I’m sure he’s done exactly what you’ve done, as far as bombarding the broker with phone calls, etc.

    Again, it depends on how badly you want your money out of this property, but if it were me I’d call the agent and tell him that if the contract expires, you’re willing to offer a new contract to the buyer. And that you feel the buyers’ pain, and that you don’t want to lose them. And that as an incentive to keep them around, you’ll drop the purchase price by $1,000, with $500 of that coming out of his former $700 bonus on top of his commission (reducing it to a $200 bonus) and that you’ll take the hit for the other $500.

    I know you’re looking for ways to recoup the holding costs that you’re out, but I think that’s the wrong way of looking at it, in the current market, with motivated, qualified buyers in your pocket. With holding costs of $250/week, the $500 concession you’d potentially be offering would get eaten up in the property being on the market for two weeks, if you truly started over from scratch, so personally I’d do everything I could to keep the buyers happy, even if it meant seeing more potential profit evaporate, due to the incompetence of the broker.

    It’s easy for people to say to stick to your guns and stand by your product and not give an inch (or a penny) and let the buyers walk if they don’t like it when it’s YOUR money involved, but sometimes you have to live to fight another day. There’s a lot to be said for getting it sold, making a little money, and moving on to the next deal.

  6. ezra says:

    Hey Steve,

    Totally hear what you are saying, but it seems the opportunity to be firm has been lost because the realtor has said piss off. I think J Scott needs to take control of the situation. My idea isn’t to stick it to the buyer’s who are innocent victims, just to punish the realtor. Teach him a lesson and cut his commission.

    However, with the awesome financial news released today, we should see mortgage rates tumble. Given that, I think J could easily sell this place for a greater profit in the coming weeks! (I am of course saying this because I have property on the market:) )

  7. J Scott says:

    I appreciate all the input and advice…thanks guys!

    I’ll follow-up with another post tonight, but suffice-it-to-say, while I’m not desperate to sell this property to these buyers, I see no reason to throw out these buyers when there’s a chance the deal could be salvaged.

    While I have absolutely no intention of making the buyers pay for any of this (though the broker is their friend and they want to stick with him for some unknown reason), I do want to ensure that the buyers have more “skin in the game,” and will do that come Friday when the contract expires.

    Ezra – As usual, you talk a good game, but let’s see what happens when someone low-balls you on the $700K property you have on the market. My guess is that you’ll tip-toe around the buyers, making any effort to get the deal closed. We’ll see… 😉

  8. Mallan says:

    Maybe instead of asking for the $4,000 this extension, half it. Another $2,000.00 this week and if they ask for another extension next week you have the additional $2,000.00 as leverage. This should surely cost their agent something because he should have controlled the situation as much as you should have controlled it. Tell the agent that the holding costs are coming out of his $700.00 and see how fast this deal gets done

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