In the frenzied sellers market that we are currently experiencing, there are a lot of new faces in the business, all trying to capitalize on the flow of money while it lasts. These eager but inexperienced real estate related practitioners include, appraisers, home inspectors and loan officers. Sometimes it is difficult to tell the experienced ones from the green horns,…until it is too late.
Recently a buyer connected with a novice loan officer when they needed to obtain financing for the new home they were in the process of purchasing. They talked to the loan officer and provided information to them and thought their loan process was initiated, when in fact the loan officer had not actually started that process officially. The buyer completed their home inspection and the seller completed the well and septic inspections. It seemed like all was in order, except that the appraisal had not been ordered. The time frame for the buyer’s due-diligence-period for obtaining financing came to an end and the seller started to press for a financing update. When the buyer’s agent finally connected with the loan officer, they were told that even though they had been “shopping around for a suitable loan for the buyer, the buyer was not qualified for any type of loan because of poor credit scores.” When the buyer’s agent tried to salvage the buyer’s earnest money (that in theory was protected by the financing contingency), he was told the buyer had never actually made formal application with the lender. This fact negated the opportunity for the buyer to retrieve their earnest money because the purchase agreement clearly stated that they must apply for a loan within 5 days of acceptance.
Even though the buyer thought they had made a formal application, the incompetent loan officer could not document an actual application. The buyer was furious because the communication with the loan officer had been poor and they had no idea what was really going on. They expected to receive the earnest money back, but found they had no recourse accept to never use that loan officer again.
While this may be a unique situation, incompetent loan officers are often the cause of grief in a real estate transaction, even when it eventually ends successfully. The moral of this story is that consumers should be as careful to vet their loan officer as they do their Realtor®! Ask your real estate professional to refer trusted lenders.