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Saving the Deal: How to Avoid Financing Fiascoes and Other Real Estate Deal Killers

Saving the Deal: How to Avoid Financing Fiascoes and Other Real Estate Deal Killers

by Tracey Rumsey

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As a real estate professional, you probably realize that no matter how careful you are and no matter what lengths you go to, some deals just seem to "go sour" at the last minute. But is it really just a matter of luck? Is there anything you can do to save yourself and your clients the pain and heartache-not to mention the cost-of a transaction falling through?



As a real estate professional, you probably realize that no matter how careful you are and no matter what lengths you go to, some deals just seem to "go sour" at the last minute. But is it really just a matter of luck? Is there anything you can do to save yourself and your clients the pain and heartache-not to mention the cost-of a transaction falling through?

Using real-life examples, Saving the Deal gives you everything you need to help you cut common-and even not-so-common-problems off at the pass. The book goes beyond the basics, teaching you how to spot "deal-killing" factors before they spin out of control, including situations involving judgments and liens, mortgage issues, divorce problems, home inspections, contract difficulties, loan approvals, and many others. You'll find out how to: Solve, avoid, or handle tricky title complications, Prepare "sour-proof" net sheets, Accurately evaluate a potential buyer through analysis of his or her preapproval letter, Spot problems involving dates and deadlines, Understand the impact that elements such as marital status and bankruptcy have on mortgage loan approval, Help your clients using FHA loans, Get a handle on Homeowners' Associations, Operate in the tricky terrain of HUD homes and VA loans, Use preventative measures to better prepare a property and your seller for the reality of inspection day.

In a perfect world, real estate agents would work only with prospective home buyers who have preapproved financing, sellers who are fully aware of their property's title status, and contracts with every detail neatly worked out in advance. But no matter what comes up in the real world, Saving the Deal gives you solid strategies thatwill help ensure you see each deal through to completion.

About the Author:
Tracey Rumsey is a Mortgage and Real Estate Continuing Education instructor licensed with the Utah Division of Real Estate

Editorial Reviews

From the Publisher
“She’s blunt, but with a humorous touch that helps you grasp the information and appreciate that she’s been in the situation she’s presenting… She’s just a real estate professional who has learned from her own mistakes and wants to share that experience in a quick, casual, easy-to-follow way… Although the book is geared toward professionals, a potential home buyer or seller may want to pick it up to gain some basic knowledge about the business as well as their own ounce of prevention.” —Newsday

Saving the Deal… was written to help real estate professionals make successful sales. But the information and advice presented by the author, often using real life examples, can also make consumers more savvy homebuyers.” —The Plain Dealer

"Here’s a book for Realtors that offers practical tips and advice to avoid losing that deal you worked so hard to achieve." —REM (Canada)

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C H A P T E R 4

Dates, Deadlines, and Details

Logistics is the planning and implementation of the details of

an operation. In the real estate world, this means who does

what when. From response times at the beginning of the

offer process to loan application, inspection, appraisal, and

loan denial deadlines during the transaction, you have a lot

to keep track of when a contract gets written, considered,

and accepted. When it comes down to the wire, you’ve got

settlement, funding, recording, and, most important, possession

to worry about. The smoothest transaction in the world

can end in anger and confusion when logistics are not considered.

Sometimes a transaction never gets off the ground

because of poor logistical planning.

The three primary reasons you, as the buyer’s agent, may

be the target of this anger and confusion are:

1. The buyer’s offer has been rejected.

2. The buyer loses his or her earnest money.

3. The buyer is not able to move in when expected.

While contracts vary and special provisions can be written

in for ‘‘nonrefundable’’ earnest money, some of the deadlines

we’ll be discussing provide an ‘‘out’’ for buyers. This

out allows them to cancel the contract and leave the transaction

with their earnest money in hand. Violate a deadline,

however, and the seller may get to keep your earnest money.

Every state’s purchase contract is different, so I won’t

even attempt to dissect a certain state’s form. I will instead

go through some common deadlines and take a look at how

you can avoid problems as you go. When questions or discrepancies

arise, always consult with your broker and/or

legal counsel.

Also, keep in mind that this book is written from the perspective

of a loan officer, so my major concerns are to provide

you with a look from my side of the fence. This is based

on my own experiences and those of people I’ve interviewed,

usually with mortgage, title, and client service lessons in

mind. While I think you’ll find this information very helpful,

there most likely will be a whole other set of details you have

to consider on every contract that have to do with the internal

processes of your own office: updating MLS listings, getting

contracts to transaction coordinators, sending escrow

instructions, etc. Make sure you understand this internal system

as well to keep all parties in the loop and on course.



I had an agent tell a client once that the response times on

the contract were really more of a guideline, not a true hardand-

fast rule. Those of you out there who’ve experienced a

hot, fast-moving market are shaking your heads right now.

You can tell stories of listings you’ve had with multiple offers

where it was all about response deadlines. Many of you have

probably had a least one listing where the buyer to whom

you made a counteroffer missed out because of an agent who

didn’t move quickly enough.

The other side of the coin is a sharp buyer’s agent who is

fully aware of the impending deadline, but has a buyer who

either can’t be reached or just doesn’t get the urgency of the

situation. Sometimes buyers can be reached by phone and

want to accept the counter, but aren’t available for signature

within the deadline. That’s where your reputation with your

colleagues and knowledge of the standard practices in your

area will determine the outcome. Verbal acceptances with

promises of ‘‘signatures coming’’ can be tricky business.


Hopefully, you are representing a buyer who is fully preapproved

and this is not a worry. The offer you are writing

will always be stronger with a pre-approval letter attached.

If pre-approval hasn’t happened yet, be sure to discuss the

importance of moving quickly. I’ve had many agents request

the name of the client’s preferred lender while they were

writing the contract so that they could call and make the

application appointment right then. If the preferred loan officer

is out of town and won’t be available for ten days, it’s

nice to know. A decision needs to be made on whether to try

pushing out the deadline (not a great idea) or looking for an

alternative lender.


Coordinating home, termite, and septic inspections can be

quite the juggling act. Throw in a water test, if necessary, and

things become even more complicated. The property, local

requirements, buyer’s preferences, and lender requirements

will dictate what the word ‘‘inspection’’ means. This is just

another example of how knowing your area and coordinating

with a lender early can be central to a smooth transaction.

You’ve got to figure out what inspections your client

wants or needs and how long they will take to complete.

Home Inspections

While a professional home inspection is always advisable, a

client may choose not to have one, or may want to do their

own inspection. If they want a professional report, hopefully

you are familiar with the availability of inspectors in your

area and a general turnaround time.

Termite Inspections

Do we need/want one or not? In some areas termite inspections

are an unwritten rule on any property because termites

are a common problem. If a professional home inspection is

done, the termite inspection is usually already part of the

service. Many times your loan type dictates what is required.

Utah is a great example of the term ‘‘it depends’’ when it

comes to termite inspections in conjunction with loan requirements.

While we have termites in Utah, they are not a

common problem and termite inspections are not automatically

requested by a buyer. Typically, if a buyer is doing a

conventional loan on a property, a termite inspection is not

needed. The exception may come when an appraiser notes in

the appraisal that there were signs of infestation. (This

would be a rare fluke because appraisers are not going into

a home looking for termites; it’s not their job. But if they

see something obvious, they are supposed to note it in the

appraisal. Then the reviewing underwriter will want the

home inspected and treated if necessary.)

One other exception would be when an underwriter reviews

an appraisal and notices in the pictures of the home

that there is direct wood-to-ground contact. Many seasoned

underwriters will ask for a termite inspection in this instance.

Veterans Affairs (VA) loans and Federal Housing Administration

(FHA) loans have completely opposite requirements.

This is a new twist for lenders in Utah because VA

and FHA have always been very similar in their property

standards. FHA recently dropped its termite inspection requirement

for Utah. Last year we had to have them; this year

we don’t. Again, unless an appraiser notes a problem or an

underwriter requires one, termite inspections are no longer

part of the FHA loan process. VA loans, on the other hand,

still require a termite inspection.

So, my advice on termite inspections is to know your area

and/or call your buyer’s lender to be sure.

Septic Inspections

For some of you who always deal with properties on public

sewer systems, this will be a great bit of info for the property

that’s somewhere in your professional future and has a septic


Some counties require septic inspections anytime a home

is sold. These are usually conducted by a local municipal authority.

They will be looking at: (1) flow (are the toilets

flushing and the drains draining); (2) any signs of improper

leach field function (standing water/sewage in the yard); and

(3) whether the tank has been pumped in the last five years.

If not, that will have to be done.

FHA loans require a septic inspection only if there are

signs of system failure or if an underwriter or local authority

requires it. VA wants a septic inspection if there are known

soil percolation problems, or the local authority or underwriter

requires it. Conventional loans are dependent upon

the individual underwriter, but they are usually required.

If the septic tank needs to be pumped, a whole different

set of considerations enters the picture. This is great dinner

conversation and warrants taking some extra time for a few

fun-filled facts. First of all, it is rare that a homeowner remembers

or even knows that it is advisable to have a septic

tank pumped every five years, especially if the septic system

is older. Newer tanks are much more efficient but won’t be

exempt from pumping if it is a loan or municipality require-

ment. The party really starts when the homeowner realizes

that in order to get the tank pumped, they have to locate the

tank, and, more specifically, the opening to the tank. Nine

out of ten owners don’t even know where their tank is on

their property. Sometimes you can go to the county and the

system will be on record with a plot plan of the tank so you

can locate it. Many times I’ve had sellers out digging up half

their backyard trying to find the septic tank. This gets especially

interesting in some regions in January when the ground

is frozen.

Now for the really good news: Technology has left no

corner of the professional world untouched. It has even

found its way into the septic system business. I discovered

this last year when I had a buyer for whom I was doing a

loan, and who was also selling a property without the assistance

of a Realtor. My client was notified by his buyer that

their loan required a septic inspection and since they had

lived there ten years and never pumped the tank, a tank

pump as well. My client called me to (a) confirm that this

was a normal lending requirement, and (b) lament loudly

about the fact that they had no idea who to call for service,

what it was going to cost them, or where the tank was located.

It just so happened that I was familiar with a septic service

company in his area but couldn’t remember what they

charged. For whatever reason, my client felt too overwhelmed

to make a phone call and asked me to please call

them and find out the cost and call him back. Hey, customer

service, right? So I make the call and during the conversation

was informed that they offered a tank locating service as

well. For a mere $60 they would drop a ball in the toilet that

gives off a radio signal. They would then flush the toilet and

follow the signal out to the backyard until it stopped. Tank

located. But here’s the best part. They offer a $20 rebate if

you’ll retrieve the ball and return it to them. Is that a deal or


Water Tests

A water test could be required on a private water system (a

well) for many reasons. Some jurisdictions require it. Your

buyer may want it or it may be customary to the area.

An FHA loan requires it only under certain conditions,

i.e., mining or heavy agriculture within a quarter of a mile,

underwriter discretion, etc. VA will want it no matter what.

Conventional loans may want it at the underwriter’s discretion

and most underwriters will want one. Lack of potable

water means major problems with marketability and value.


Okay, so now you have all your inspections figured out and

have come up with a reasonable deadline date. Now it’s time

to worry about the appraisal deadline. Time frames can

really vary from area to area. Many areas are saturated with

appraisers and turnaround times are within a week. Other

areas, either because of lack of appraisers or an especially

busy market, are dealing with a three-week minimum wait

for an appraisal. In rural areas, long waits are especially


Wait times can also be lender specific. You would think

that since the lender orders the appraisal, they would just use

whatever appraiser is fastest. Most lenders will only work

with certain appraisers that are on their approved list or ones

with whom they have ongoing relationships. If those appraisers

are swamped, everybody waits. Knowing general

timetables for your area will help, but it’s always better to

check with the lender if you can. One other note is that with

VA loans, the lender doesn’t get to choose the appraiser. The

VA automated appraisal system assigns the appraiser to the

property. While VA has recommended turnaround times for

their VA-approved appraisers, there are no guarantees.


To be practical, this date should be far enough after the appraisal

deadline to allow for what we call final underwriting.

A loan can’t have a final approval without the appraisal, so

the lender can’t go forward with this step until the appraisal

is available. How long for final underwriting? That, too, can

depend from lender to lender. For some it’s three days; for

others it will be two weeks. If you haven’t researched this

with the buyer’s specific lender, you may be creating a deadline

that can’t be met. This would, therefore, put your buyer

at a higher risk for losing their earnest money if something

goes wrong.

I can argue for two different approaches to loan denial

deadlines. From the seller’s perspective, dragging out a loan

denial date means that a buyer can tie up the property for a

longer period of time, have their financing denied, and still

get their earnest money back. While a seller’s property isn’t

taken off of the market, the status of ‘‘under contract’’ tends

to scare off any other interested parties. Not getting to keep

the earnest money is sort of like adding insult to injury if everything

falls apart at the end. While no amount of earnest

money is going to make up for a lost sale, at least it’s something.

As a seller’s agent you may want to lobby for as short a

deadline as possible when reviewing an offer with your client.

Buyers, on the other hand, always have the possibility of

last-minute loan denial due to completely unforeseen circumstances.

I’ve had buyers scheduled for settlement on a Monday

who got laid off from their jobs on the previous Friday

afternoon. It doesn’t seem fair to take their earnest money

when they’ve just suffered such a financial blow. To protect

them from losing their earnest money, a loan denial date as

close to the settlement date as possible is the way to go. Then

the question becomes, will the seller accept it?


This is the day when buyer and seller sign documents. Most

of us call this ‘‘closing,’’ but we are usually wrong. Closing

isn’t until the loan has actually been funded by the lender

(and the title/escrow company has the funds) and then recorded

at the county recorder’s office. At that point, the

transaction is actually closed.

Figuring out the best settlement date for your buyer

means you have to work backward. You first have to ask the

question, ‘‘Exactly when do you want to take possession?’’

You have to start with the day (and time of day) your client

wants to take possession and work backward from there.

This is absolutely critical for the buyer who is selling a home

simultaneously and trying to orchestrate a smooth move

from one house to the other. Get this one wrong and you can

have a buyer sitting curbside in front of their new home in a

U-haul they can’t unload and is supposed to be returned to

the rental place in four hours. Not to mention the fact they

have nowhere to sleep that night.

First you consider any number of days or hours that the

seller has requested to retain possession after closing. Example:

In a counteroffer, the seller wants to relinquish possession

48 hours after recording. Now calculate the time it takes

to record. Some escrow companies have the ability to record

electronically, so recording can happen within minutes of receiving

funds. Most escrow companies still have to physically

take the documents to the recorder’s office. Depending

on how they schedule their personnel, this can mean the difference

between a 4:58 p.m. recording on Thursday afternoon

and a 10:00 a.m. recording on Friday morning. That

means instead of moving into the home on Saturday evening

at 5:00 p.m., they have to wait until 10:00 a.m. on Sunday

morning, if the seller is not flexible.

Funding can really foul up a closing—thanks, again, to

your local flaky lender. Every lender handles their funding

differently. You have to hope that whoever is in charge of

doing this funding has shown up to work today, and if she

hasn’t, you have to hope that someone is supposed to be a

backup. I had a funding once that took three days to materialize.

I was a loan officer in a brokerage so I was dependent

upon the funding department of the lender to whom the loan

was brokered. (This was many years ago, and I have since

moved on to be with a mortgage banker that controls our

fundings in-house.) The point here is you need to talk to the

lender, get a time frame, and then pray that it happens.

Funding, recording, and possession practices vary from

state to state. Some states expect ‘‘table fundings.’’ In other

words, the loan money beats the client to the settlement

table. When loans are table funded, buyers can get the keys

to their home that same day. In Utah, loans are typically

funded and recorded the next business day after settlement.

Buyers get their keys then or at the agreed-upon possession

date after recording.

Take special care with out-of-state buyers. If they’ve

bought and sold a home before they often assume that everything

works the same in every state. This is how you and

your clients can arrive at the ‘‘anger and confusion’’ point I

mentioned at the beginning of this chapter. Again, when

writing an offer, don’t ask, ‘‘What day do you want to settle/

close?’’ Instead ask, ‘‘What day do you want to take possession?’’

and work from there.

Once a contract is accepted, be sure that you or your staff

log all of your contract deadlines and follow up on each one.

A good loan officer will be doing the same. By calendaring

these items at the beginning, you can relax and work through

the transaction, confident that you are representing your

buyer brilliantly!

Meet the Author

Tracey Rumsey (Kaysville, UT) is a Mortgage and Real Estate Continuing Education instructor for the Utah Division of Real Estate. She has more than 10 years' experience as a mortgage loan officer, and serves as chair for the Utah Mortgage Lender's Association Education Committee, where she selects and develops curriculum for their education conferences.

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