When buyers are looking for a Santa Monica House or a Brentwood Condo, what can they afford to pay? One of the tools realtors use is the pre approved loan letter issued by a broker in the name of a bank or the bank directly.
The pre approved letter has gotten to the point that it sometimes not worth the paper it is written on. The worst part about it is that you may not find out until the day before you are supposed to close that you do not have a loan
Here is a case in point.
I had these clients, first time buyers, looking all over West LA Real Estate for their first home. They came up with the perfect home a beautiful Pacific Palisades Condo. Normal terms in a contract calls for a buyer to release a loan contingency after 17 days. The 17th day came and the mortgage broker said it was ok to release the loan contingency, which we did.
The day before we were supposed to close the bank says they need some back up documents and some new information. This buyer got lucky the seller agreed to a 7 day extension but this may not have been the case. Many sellers have back up offers and they could be for more then you are paying. They are hoping you don’t perform.
With buying clients I now only use the space in the contract the loan contingency will not get released until it is funded. Some sellers will not accept this and I advise my client to move on
What should be done.
Banks and mortgage brokers should not write a pre approval letters unless they are ready to fund the loan. The letter when written should be good for a certain amount of days and non revocable unless there was fraud or something changed with the buyer
