Truth or Good Luck with That? The fly in the residential purchase agreement ointment is the loan.

My previous, birthday post has been resident so long that I think I’ve had a couple more since then. So, in a weak attempt to bury that bad boy and provide myself some much needed group therapy at the end of this most difficult week (one during which I was dangerously close to going postal on Bank of America or joining the circus), let’s play a little game called “The Contract Says.” If you have been a party to a residential purchase agreement recently, you might know this game by its more familiar name, “Truth or Good Luck with That?”

Round 1

The first round will be for ten points and 20% off your next purchase of extra strength Tylenol. (Disclosure: Tylenol is not a client of the San Diego Home Blog. It’s more, like, the other way around.)

Q: My contract says that the buyer must remove all contingencies in 17 days. So, in 17 days, will the buyer remove all contingencies?

A: Good luck with that. Yes, the standard contract language calls for all contingencies to be removed within 17 days, but among the buyer’s contingencies are these creepy, mysterious moving parts we call the appraisal and the loan. The latter requires a lender and the former requires the latter to order the former. And as much as we have whined in the past about the appraisal industry, our appraisals of late have been going quite swimmingly once we can actually get one of those. Rather, it is the latter that is becoming the problem.

It is important to remember here that 17 days is 17 days in contract speak. In lender speak, 17 days is more like 3 hours when you discount weekends, national holidays, the processor’s vacation to Modesto to attend their family reunion, and the week it has taken the underwriter to realize that you had a four-day gap in employment in 1972 which now “changes everything.” So, on Day 17, when the buyer asks if the loan is approved, the lender will say something like, “Well, uh, we are really backed up and, uh, it should be any day and, uh, we are pretty sure this baby is going to sail through, uh, but we have a few more conditions to clear like, uh, like we are going to need a letter from you explaining source of funds for that deposit of $14.82 you made back in April and what possessed you to vote for Dewey.

So, on Day 17, all parties will agree to extend the contingency period for “just a day or two.”

Round 2

The second round will be worth twenty points and a case of blunt objects with which you can repeatedly whop yourself upside the head. This one doesn’t have anything to do with the lenders, but it’s something I just needed to get off my chest. Let’s blame the lenders anyway.

Q: My contract says that the buyer is purchasing the home “as-is.” Does this mean that I won’t be asked to make any repairs?

A: Good luck with that. Oh, sure, you can say “as-is,” and the buyer can agree to “as-is.” Heck, according to the purchase contract, all sales are “as-is.”  Pardon me for going all paralegal, but here is the actual language from that very special Paragraph 9:

Unless otherwise agreed: (i) the Property is sold in its PRESENT physical (“as-is”) condition as of the date of Acceptance…

See? As-is, as-is, as-is. The problem here is that old 17-day contingency thingy, the period during which the buyer will meet a property inspector at your home who will subsequently write a report of “findings.” Findings will include but not be limited to termites, weasels and other varmants in residence, leaking fixtures, broken stuff, stuff that works but is at or near the end of its useful life, and a bathtub that needs caulking. The buyer, now totally freaked out that he is paying too much for your “project,” a veritable deathtrap, will ask that you replace all carpets and cabinets and build a second story addition as a condition of contingency removal.

Feeling short of options, you will agree to a credit of 400 gabillion dollars in lieu of repairs, at which point the buyer will remove all contingencies except loan and appraisal, because the underwriter is now asking for the buyer’s drycleaning receipts dating back to the reign of the Etruscans.

Lightening Round

During this round, worth 40,000 points, one or both lucky parties to the contract may also win an extended stay at the Residence Inn (continental breakfast included).

Q: The contract says I will close escrow on November 15th. Will I close escrow on November 15th?

A: Can you be more specific?

Q: The contract says I will close escrow on November 15th of this-here year, the one we are now living in. Will I close escrow on November 15th of this year, this year being defined as the one I have not yet paid taxes on, the year for which the ball has yet to drop, this one here that I am now setting my clocks by?

A: Good luck with that. The contract is between buyer and seller. The lender is not a party to the contract, so you will close escrow when the lender says you will close escrow. So there.

Q: The buyer’s loan has been approved. Will the buyer get a loan?

A: Good luck with that. The problem here is that it is becoming quite fashionable for lenders to change their minds. It’s not their contract, after all, so they get do-overs. The buyer’s loan officer, Bill, will say that the loan is approved, but Bill doesn’t know that the underwriting guidelines changed while he was at lunch, and only Marge at the review desk knows that the bank has just eliminated your buyer’s particular loan “product.” In fact, the only “product” they are currently underwriting is the one that they have internally dubbed the Warren Buffet loan, the guidelines for which look something like this:

The bottom line is this. If you are a party to a residential purchase agreement, expect the unexpected. The fly in the ointment this week is all about the buyer’s loan. Your agent can manage the process to perfection, they can have an awe-inspiring attention to detail, and they can provide the most professional and competent counsel and service on the planet (assuming they haven’t already joined the circus). What they can’t do is control things beyond their control. The loan is one of those things.

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