CONGRATULATIONS!! After months of searching, the offer to purchase your dream home was accepted. All you need to do is sit back and wait for the closing and get your keys, right? Maybe not.
The Real Estate Transaction
I recently acquired property for first-time homebuyers who I was working with for almost a year. This was our fifth offer on a home, so we knew the process and what to expect. Our team was set, the mortgage broker was referred by their friends, who had used him multiple times, the lawyer was a friend of their family and they had secured a family-friend as a guarantor, assuring financing for the purchase of a home. Finally, the mortgage broker had a private lender who would offer a second mortgage should we run into unforeseen challenges. We were golden, or so we thought.
I always make a point of speaking with the other members of our client’s team, lawyers and mortgage brokers specifically. It helps facilitate a smooth closing if the initial ice between the parties is broken. The first time I spoke to the mortgage broker, things seemed a bit off. The mortgage broker spoke about how he doesn’t typically take on “high-risk clients.” This was a “favour,” he said, and he is getting too old for this much work.
We accommodated a very quick close on offer night; we offered a large deposit and an aggressive enough price that the sellers allowed us, a 3-day financing condition. On the third day, the mortgage broker advised us we could waive the condition. The purchase was firm, AMAZING! We were convinced we got the house; we were all set!!!
Mortgage Application Declined before Closing
Exactly 10 days before closing, the mortgage broker called my client and advised that the bank had pulled the financing because of material changes from when the application was made. The private lender was no longer willing to lend the money. Without getting into details of why and what happened, the mortgage broker said that he could no longer assist, and he would no longer provide services to our client. This is the same broker who 10 days before advised us to waive the financing condition….WTF? So here we were, 10 days before closing, my clients were not only at risk of losing the home they had thought they had purchased, but also the $75,000 deposit which was provided.
What to do?
Thankfully, I have colleagues with whom I can have urgent conversations. Calling a different mortgage broker with whom I had done several transactions, I asked if he could help. He was not overly optimistic under the circumstances but agreed to review the file, which led to his team taking on the file. We immediately got the lawyers involved and communicated with the seller’s real estate agent. Transparency proved to be the key. Thankfully, the sellers were accommodating and worked with us through the challenges.
The Happy Ending
After sleepless nights, long conversations, and persistence, my clients closed on the property. Although they aged significantly throughout the course of a few weeks, they got the financing! Being their first home and given the effort that went into getting it, this home has already created lasting memories. The moral of the story is, always be thinking about the next steps and expect the unexpected. In the case of purchasing real estate, it’s not done until you have keys in your hand!
- Know your real estate agent and their team. Referrals are great, but is the individual doing someone else a favour or acting in your best interest?
- Always discuss and understand best and worst-case scenarios. The team representing you should be having these conversations with you; however, make sure to bring it up if they aren’t, in all steps of your process. When purchasing a home, you need to go in with your eyes wide open.
- Is everyone talking? Is your Realtor talking to your financial people and the lawyer? Remember, it’s great if you’re the one relaying messages the information, but often professionals will organically discuss things you may not be aware of.
- Do your team’s needs match your needs right now? For example, a mortgage broker who prefers to work with high net value, very low-risk clients vs. high-risk first-time home buyers.
- Have a backup. Tap into your trusted advisors to get names of individuals they have done business with and have good working relationships with. Ask this in advance! Advise your team that you will work with (X), but can you please recommend (y) as a back-up, just in case.