If preapproval crumbles, what can seller do?

Your closing is just around the corner and you discover that your lender has gone bankrupt.
Or, maybe because of the chaos in the subprime market the lender has changed underwriting standards so you no longer qualify for the loan for which you had been preapproved.
What do you do now?
A lot of that will be determined by the wording in the contract. "It really depends on the circumstance," says Ron Phipps, broker with Phipps Realty in Warwick, R.I.
Every contract and set of state laws is slightly different, he says.
Crucial pointsTypically, there are a couple of crucial points in the process. After you've signed a contract but before you've gotten your mortgage acceptance letter, you can probably get your deposit back and walk away, if that's what you want. If you want the house but need more time, you can ask the seller to move back the mortgage contingency deadline or closing date.
"In this market, which is in most instances a buyer's market, sellers are willing to work with you," says Phipps.
One exception: If your contract has a clause specifying that time is of the essence, says Phipps. If so, the sellers may elect to go with another offer, if they have one.
If your financing falls through after you've received the mortgage commitment letter and your next stop is the closing table, you're in a more difficult situation. In some cases, the seller could keep the deposit and attempt to require you to buy the house.
Loan terms changeAnother bad situation: During that same period, your lender changes the terms of the loan and the rate is much higher than you'd anticipated.
Most standard buyer/seller contracts set a ceiling on a maximum rate. If it's above that threshold, you can be released from your contract. It's another good reason to read that buyer/seller agreement carefully and make sure that maximum is compatible with your budget.
Phipps' advice: If you hit a snag after you've already received your mortgage commitment letter, consult with a buyer's agent and a real estate attorney who specializes in conciliation (rather than litigation) and try to work out an arrangement with the seller.
You may simply need to negotiate for more time to get new financing at a decent rate. Or, if you've discovered that you probably can't get the financing, you might be able to get back all or part of the deposit.
Before you sign a contract, read through the terms so you know exactly what your obligations are, says Phipps. Pay special attention to the default clauses.
An additional safeguard: Scope out the lender thoroughly, says Phipps. Especially if you're marginal on the financing, he says, "Check the lender out and be sure of the money to make sure you don't get caught in a bind."
Dana Dratch. Bankrate.com 7 June 2007

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DRIVE HOME OPEN HOUSES

Save Thursday night for that house hunt
01:00 AM EDT on Sunday, June 3, 2007
By Christine DunnJournal Staff Writer

Realtor Ron Phipps says the dynamics of open houses have changed in the past 20 years, because of the Internet and other factors, and Sunday, the traditional open-house day, doesn’t really work for today’s market. Phipps thinks the entire state will follow the lead of Thursday open houses.
The Kent Washington Association of Realtors hopes to start a warm-weather open-house tradition on June 7 when it begins a Drive Home Open House tour to be held every Thursday evening through the end of the summer.
Ron Phipps, president of Phipps Realty in Warwick, said the Thursday night tour may work better than the traditional Sunday afternoon open houses in today’s market. He said the board expects that at least 100 houses will be on the tour the first week.
“Regardless of one’s perspective or priority, whether it’s religious, or whatever, Sunday is supposed to be the family day,” said Phipps. And many families today have two working parents, children’s sports activities and other family and social commitments on the weekends.
And, Phipps said, as the price of gasoline continues to climb, the idea of a Sunday drive may become increasingly quaint.
The nature of open houses and the prospective buyers who attend them has changed since the arrival of the Internet and the ability of buyers to view multiple houses, each with its own portfolio of interior photos and, often, a virtual tour, online, Phipps said.
In the past, attending an open house might be the first step of a person who was just beginning the house-hunting process and wanted to get a feel for what was available on the market. For that reason, open houses were often viewed as an opportunity for agents to meet buyers and help guide them through the search process.
“The open house was part of the process of them stepping over the threshold,” Phipps said.
Today, the typical open house doesn’t attract many raw beginners. “A buyer who shows up at an open house in 2007 has probably seen pictures of the house online. There’s an efficiency that the technology has produced,” Phipps said.
The buyer may have six or eight houses they want to inspect personally, and then they may narrow down the search to two or three properties that will get a second look. “It’s a very efficient process,” he said. “Buyers are extremely knowledgeable.”
So, as buyers are increasingly able to search for real estate on their own, the role of the real estate agent has to become more analytical, helping buyers and sellers to make the best financial decisions, he said.
Last summer, weeknight open houses were tested in a number of Rhode Island communities. Jeanne Smith, of Remax Professionals, organized candlelight house tours in the West Bay communities of East Greenwich, West Greenwich and Cowesett. Gayle Flaherty, a Coleman Realtors agent, held weeknight open houses in East Bay.
Phipps said he thinks the Thursday-night open-house idea will be used statewide before long, but just in the summer, when it is warm and light in the early evenings. “It doesn’t make a lot of sense to do this in January,” he said.
“We’ve had a lot of conversations on the board level” about how Realtors should respond to market trends, Phipps said. “It’s necessary to be available” to clients, he said, but “we haven’t balanced the technology with our need to be totally consumer-centric, but also to be human.”
“Regardless of one’s perspective or priority, whether it’s religious,
or whatever, Sunday is supposed to be the family day.” Ron Phipps Warwick Realtor
cdunn@projo.com

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