The real estate market has been very active in Palo Alto and the surrounding areas this year. It is not unusual to have a well priced home have multiple offers. When this happens naturally the buyers want to make their offers look as attractive as possible with short contingency periods.
At the same time lenders are under increasing pressure to provide the best rates and terms and in short time frames.
Here is where the problem arrises. If a lender has very competitive rates there will be a lot of business clogging up the pipe line. More files mean slower approval processing times. Your mortgage broker may promise a 14 day approval, but the underwriter has not made that promise and frequently will deliver.
Even when the file is reviewed in time for a 14 day contingency they may say it is approved and then list 25 + conditions that need to be satisfied.
So what does the buyer do?
1. Ask for a realistic contingency period. If there are going to be 4 week-end days or some holidays in the contingency ask for business days, not calendar days.
2. Once preliminary approval is given look carefully at the conditions. If these are things which are easy to provide and do not pose a risk of rejection then it is probably safe to remove the contingency. These would be things like providing documentation of your college diploma, or rent checks from the previous 12 months. If the condition is not one you are sure of, like the seller needs to provide proof that the additional square footage the appraiser found was added with a permit, and you do not have a copy of the permit then it may not be safe to remove the contingency.
3. If you are not comfortable that the loan will be funded then ask for an extension.
The seller may not want to give it to you if they think they can do better with a back up offer, but if you lose the house there will be another one. It is not a good idea to lose your deposit if the loan can not be funded.
The most logical way to solve this problem is for sellers and their agents to realize that lenders are taking a long time right now and not look at an offer with a 10 day loan contingency as being better than one with a 21 day contingency, but unfortunately that is often not the case.
If you have any questions about buying or selling homes in Santa Clara or San Mateo counties, please feel free to contact me.
Marcy Moyer
marcy@marcymoyer.com
650-619-9285
D.R.E. 01191194
Marcy Moyer Keller Williams Realty Palo Alto, Ca. Specialist in Short Sales and Trust and Probate Sales
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