I once sold the same house for the second time. This home is a great home in a nice neighborhood in Gwinnett County. It is not a foreclosure, not a short sale, not a fixer-upper – it is a great home.
The first sale fell through partially because of the appraisal, but mostly because of the Buyers’ failure to follow the basic guidelines during the contract to close period.
First, the appraisal came in way too low for this great home with a lot of square footage. The appraiser used a low square footage number for the size of the home for sale and a large square foot number for the size of one of the comparables. The comparables that were used were bank owned which had deferred maintenance and therefore resulted in a low comparable value to the immaculately kept property I had listed and was under contract on.
The real reason this contact fell apart was the buyer’s agent and the buyer’s lender did not accurately communicate what was involved with buying a house. Evidently the Buyer, when initially applying for the loan listed their high hourly rate by their employer. At the time of pre-qualification, they failed to mention they only work on a limited part time basis and not full time as was assumed in the initial qualification.
In addition, neither the buyer’s lender nor their agent provided any guidance to them about what you can and cannot do during the loan process. From the time you apply for the loan until you close on the loan you should not go and change your spending habits. You should not buy anything that would change your credit score or debt to income ratios. We advise all our buyers of this so that we can have a better chance of closing on the property. Unfortunately, this Buyer chose to go out and buy something on credit terms to the tune of some $300 per month payments.
With more monthly debt from the recent purchase and less income from the part time employment the buyer no longer qualified for the loan. This was all found out 2 days before closing, after they had once extended the closing for 7 days to work out financing. Unfortunately, our Seller had packed and was ready to load the truck and go when these items came to light. The Buyer’s lender kept telling us that everything was still a go up until the very last minute.
The remedy in this situation is, the Seller gets to keep the earnest money. Not much of a concession, but at least it is a little something for their trouble. The challenge however, is the Buyer won’t acknowledge them being the party at fault for the failure to close. So the Broker holding the earnest money has to send a certified letter stating how the earnest money will be distributed. In this instance, they were clearly in default, but we have seen other instances where that is not the case. All in all, the seller would prefer to have the property sold.