One hand certainly doesn't know what the other is doing, or do they?

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Real Estate Agent with Berkshire Hathaway HomeServices New England Properties Licensed in Connecticut

I'm confusedOne hand certainly doesn't know what the other is doing! I read a featured post this morning by Lisa Udy, "High Offers Offset by Low Appraisals - Fair And Balanced? Or Unfair?". Lisa has pointed out a new trend, buyers who want REO listings and put in offers higher than asking price, only to "renegotiate" when the appraisal comes in. I suggest you read this post, it is eye opening as are the comments.

Reading through the comments I saw that some are participating in this tactic and see no ethical issue with this. Others think this is bad business. Many pointed out that banks are on to this tactic and put in the contract that the buyer is responsible to pay the difference if the house doesn't appraise.

I am not here to debate the tactic, I was scratching my head and laughing. It is very obvious that one hand doesn't know what the other is doing. The last 3 transactions I have had with buyers something new popped up with the mortgage. We never really had a clean mortgage commitment, up until closing date. Some banks have added a new requirement to the mortgage commitment. It says that the house needs to appraise at the time of closing. All contingencies were removed, yet this new one was added. What it meant from a legal standpoint?  According to my buyers attorney the mortgage contingency was indeed not really met. In all 3 instances the sellers attorneys understood this was as good as it gets and accepted the fact that it wasn't really ever going to be clean until we closed the deal.

Quesion markSo, in the end it doesn't really matter. If the lender sees the problem they can refuse to lend the money, the buyer will be unable to perform and the contract can say that the buyer is responsible for the difference, however if they can't get a mortgage they can't buy the property. I am obviously not talking about investors with cash.

Tell me, does one hand know what the other is doing? Or do they know exactly what they are doing?

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Show All Comments
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Craig Rutman
Helping people in transition - Cary, NC
Raleigh, Cary, Apex area Realtor

It's all crazy. As banks scramble to figure out how not to get into the mess they created in the first place, the only one being hurt in the end is the consumer.

Reading scenarios like the one you posted here just makes my hair hurt!!!

Nov 04, 2009 11:14 AM #1
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Andrea Swiedler
Berkshire Hathaway HomeServices New England Properties - New Milford, CT
Realtor, Southern Litchfield County CT

Craig, you hit the nail right on the head. They are scrambling to keep out of the mess they have created. And it makes my hair and eyes both hurt.

Nov 04, 2009 11:37 AM #2
Rainmaker
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Paula Swayne
Dunnigan, Realtors, Sacramento (916) 425-9715 - Sacramento, CA
Realtor-Land Park, East Sac & Curtis Park -Dunniga

Hi Andrea!
The more the banks try to protect themselves, the more difficult life is becoming for everyone but the banks.  I laugh at every law that is passed to "protect the consumer". Here in California, we just passed a law that takes affect in January. It now says that the buyer can select the escrow company (some very expensive escrow fees were being charged by the banks selected companies).  This sounds wonderful...until you realize that when the bank gets several offers on their REO's, and one of them has this stipulation, which one do you thing they will select? So much for protecting the buyer!

Nov 04, 2009 11:59 AM #3
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Andrea Swiedler
Berkshire Hathaway HomeServices New England Properties - New Milford, CT
Realtor, Southern Litchfield County CT

Paula, seems the banks are always pulling the blanket on their side. I am always amazed at the lenghts they go to in protecting themselves. And who protects us from them? Uh..... no one!

Nov 04, 2009 12:24 PM #4
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Carla Muss-Jacobs, Principal Broker/Owner
BuyersAgentPortland.com | (503) 810-7192 Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% o... - Portland, OR
Buyer Focused ~ Buyer Results

Wouldn't that be funny if their offer APPRAISED OUT!  Now that would be hilarious.  I did happen to read Lisa's blog and thought it was well done too!  Thanks for your take.  I have had that situation come up recently "buyer to remove all contingenices by such and such date."  However, if the removal of all contingencies is predicated upon the appraisal being completed, and value established, it's a very moot point if the darn thing isn't done by "such and such date."  I won't let my clients sign off on this type of removal of all contingencies without the clause that would allow them to take into consideration the appraisal valuation being received and accepted by the buyer.  They can't waive off on contingencies if those contingencies are out of their control, and need to be performed prior to the removal of all contingencies.

Nov 04, 2009 04:06 PM #5
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Richard Weisser
Better Homes and Gardens Real Estate Metro Brokers - Newnan, GA
Richard Weisser Coweta Newnan Homes for Sale

Andrea...

Excellent, thought provoking post.

Featured in the Group "Whacked!!!"

Nov 04, 2009 08:09 PM #6
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Andrea Swiedler
Berkshire Hathaway HomeServices New England Properties - New Milford, CT
Realtor, Southern Litchfield County CT

Carla, I have heard many complaining about that. But to think that the lenders are adding a contingency to the buyer all by themselves that says the house has to appraise at the date of closing. A desktop appraisal done the day of? Just to make sure in 3 weeks the house didn't drop in value because of the foreclosures that are closing. All makes my head spin.

Richard, oh, thank you! I am glad you liked it.

Nov 04, 2009 08:24 PM #7
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut - Middletown, CT
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Andrea I have not run into this, but I have had Buyers hoping that a property does under appraise, so that they can renegotiate even though they were already getting a good price on the house.

Nov 04, 2009 09:05 PM #8
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Robert (Vegas Bob) Swetz
REALTY ONE GROUP - LAS VEGAS, NEVADA 702.443.7156 - Las Vegas, NV
Commercial & Residential Real Estate Agent
Andrea - Great post and another feature my friend!
Nov 04, 2009 09:11 PM #10
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Claude Cross
Claude Cross-Charlotte NC Real Estate(Homes By Cross, Inc.) - Charlotte, NC
Charlotte NC Homes For Sale

Andrea - Wonderful point ! Apraisal at the date of closing is a twist. Starting to sound like picking stocks. Most of my clients just want a home. Great post

Nov 04, 2009 09:47 PM #11
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Andrea Swiedler
Berkshire Hathaway HomeServices New England Properties - New Milford, CT
Realtor, Southern Litchfield County CT

George, I think that is not uncommon. There is such a mess, from all sides. It is not for the faint at heart, that's for sure.

Dedra, that is what is happening, I was at a closing recently where the other attorney said that he was ready to retire, it was enough.

Robert, thank you!

Claude, thank you. When we saw it the first time we were surprised. Then it came up with the last 2 also. I am mystified. Guess the lenders are worried that all their REO's will cause the appraisal to plummet in the last 3 weeks. Whatever their reasoning's, it just doesn't make any sense. Gives you that shiver right up your spine.

Nov 05, 2009 05:35 AM #12
Rainmaker
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Liz Moras
Harrison Hot Springs, Cultus Lake - Chilliwack, BC
Chilliwack Realtor, Garrison Crossing,Chilliwack, Abbotsford

It's crazy what you guys do don't south there! lol

Nov 10, 2009 11:21 PM #13
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Jim Frimmer
HomeSmart Realty West - San Diego, CA
Realtor & CDPE, Mission Valley specialist

I think there are a lot of people involved in real estate who have so many hands in everything that they couldn't possibly know what they all are up to.

Nov 13, 2009 04:35 PM #14
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Andrea Swiedler

Realtor, Southern Litchfield County CT
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