Oakland Real Estate and the Credit Crunch

By: Hamid Grinage

Considering what is happening in the mortgage industry, it's important for us real estate agents to make sure our buyers are going to be able to get financing once they get into escrow. Today, because of the fallout of the sub-prime mortgage industry, lenders have tightened up standards and are examining borrowers much more closely.

One unfortunate result of this is that it can create a situation where a buyer can have their loan "pulled" at the last minute even though the loan documents have already been signed. There was a recent case that involved an invest (who had great credit) made a $79,000 initial deposit on an investment property. After he signed his loan documents at the title company, the lender notified him the they are pulling his loan due to a change in underwriting criteria. Long story short, he had to forfeit his $79,000 initial deposit.

This is an extreme example, but one that is entirely possible in the new world of financing that we have. If you carefully read the loan documents that a buyer signs, it is made clear that the lender has the right to rescind the loan at any time before the close. This leaves buyers in a precarious situation, especially if they have marginal credit and income. The fact that the lenders are experiencing hard times means that they are being much more selective with respect to who they lend to.

So the bottom line is, as Oakland real estate agents representing buyers, we must do what we can to communicate with lenders and try to avoid any surprises. The reality is, if the lender wants to pull the financing at the last minute, there is nothing the agent can do about it. So our job becomes to advise and make sure that our clients are getting financing from large, reputable lenders who are less likely to back off at the last minute.

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