Following are just a few rules and considerations.
It looks like a long list of things that could be potentially serious problems, but I assure you the full list is far longer. This is just the tip of the iceberg… an iceberg that more than a few people are heading towards or have hit.
Rule#1 – There is no such thing as a ‘pre-approval’.
Not in the sense that you can write a condition-free offer with 100% confidence. Anyone who tells you different does not know their job. So then, what is a pre-approval? It is little more than a glorified rate hold in most cases, perhaps a cursory review of your own personal good standing in very few cases. The missing ingredient from a pre-approval is the property. Without the property details, documents, and appraisal there is nothing to approve or pre-approve.
Rule #2 – Call me to go over the MLS notes, pertinent property details (zoning, construction style, etc) and most importantly, the Property Disclosure Statement (PDS) in advance of writing your offer.
Rule#3 – We need to have direct conversations with each other. Neither of us fully understands the nuances of the other’s job. Realtors are not current on various lending guidelines, and Brokers are not all current on contract updates (i.e., the recent changes around assignment clauses). For this reason it is vital that we are communicating with each other and not making assumptions about what is possible for the other.
For instance, the lender may need to add a guarantor to your contract for your financing, but your real estate contract might prohibit that under the new assignment rules. Uh-oh.
Or the Realtor may negotiate a 7-day completion (happened to me last week) but your only ability to qualify may be through a lender with a 10-day policy. (No completions within 10 days is very common with Credit Unions.)
Rule#4 – Understand that no matter what the Bank says… at NO time are they guaranteed financing simply because your client is super-duper awesome person. And I am certain that they are indeed super-duper awesome. The fact is that until the lender reviews and approves 100% of the related documents, you are at risk of not being approved.
Following is a partial list of reasons a lender will say no to the property, even though they love you.
• Commercial-zoned properties – C1 thru C8 zonings are ineligible with nearly all lenders
• Age-restricted properties greater than 100+ is a case by case exception.
• Condos with ongoing assessments or incomplete repairs
• Live/work or heritage zoning
• Condo conversions
• Rental pools
• Rent-to-own deals
• Past grow-ops… even though the property has been remediated
• Purchases closing outside of 120 days
• PDS references to vermiculite insulation, asbestos, water leaks, septic system failures, non-potable water, large special assessments within the past five years etc.
The list of showstoppers and red flags goes on.
The condition-removal period is where I figure out the solutions to files with various wrinkles.
Without that condition-removal period there is no safety net, there is no filter. You are stuck with whatever you have unknowingly purchased.
Can you think of a better market in which an owner can list and sell a property with various defects, defects that become the condition-free buyer’s problem?
# 1 Rule (the First #1 rule)- Call me BEFORE you write a condition free offer.