When is a Palo Alto Loan Approval Not Really an Approval

I have been selling real estate Palo Alto and the the Silicon Valley for almost 18 years. I have seen a lot, but this last week was a new experience. I have a client buying a home in Palo Alto. They had a pre-approval letter, and 2 weeks ago got an approval from the bank for their loan. They were specifically told to remove their loan contingency and were given written confirmation of the terms of their loan.

We were then told that loan docs would be ready last Fri. for a Tues close. Last Fri their were no loan docs, and we were told that the underwriter said no and the mortgage broker was trying to get an exception. So of course out question was, why did you send us an approval and tell us to remove loan contingencies if we were not approved?

By Monday still no docs or approval.

On Tues my client walked into the bank and reviewed his file. It turns out there were a lot of mistakes. His file said he makes $1000 a month less than he does, and his student loan payments were $1000 a month higher than they really are. The mistakes were fixed, loan approved on Wed, loan docs in tile on Thurs, signed, and we were able to fund and close today, Fri.

It was stressful, to say the least. So what happened? I cannot answer but I have a hunch.

The Palo Alto market is insane. It is very difficult for buyers with loans to compete with those with cash. Lenders are anxious to get these loans, often for over a million dollars as this one was, and they tend to over promise and rush. When you over promise bad things can happen. When you rush mistakes are made.

My take away from this, when I list a home and a buyer's agent tells me they can get loan approval in 7 days and close in 21 days don't expect it to happen. If I did it would only lead to disappointment. As a buyer's agent don't over promise or believe a lender's over promise. 7 days is not enough time for a true, full approval, period. And when a yes becomes a no, look at the file and don't just accept it.

If you have any questions about buying or selling a home in Palo Alto please feel free to contact me.

Marcy Moyer
Keller Williams Realty
www.marcymoyer.com
marcy@marcymoyer.com
650-619-9285
D.R.E. 01191194

Mountain View Lenders are Taking A Long Time For Approvals

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

Keller Williams Realty

www.marcymoyer.com

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